Are you bothered with the “enterprise software vs SaaS” choice? You want to know which is better and what will work best for your company. Here are the answers!
What is enterprise software?
Enterprise apps are tools focused on solving business issues. They provide such services as information sharing, accounting, automated billing, project or customer relations management, etc. Usually, the types of enterprise tools are categorized by the above-mentioned functions.
Technopedia defines enterprise software as any program/system used in large government or business companies. The prime objective of ERP is to enhance work effectiveness, control, manage data within an organization, etc.
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What are ERP options?
When talking about ERP solutions, we should distinguish the following options:
Traditional, on-premise ERP which is characterized by the following features:
- ERP hosted on-site
- the company “owns” the ERP software
- ability to configure and modify as needed
Software as a Service (SaaS) which is characterized by the following features:
- subscription-based ERP
- hosted externally
- less flexibility to customize the software
- similar to leasing vs. buying a car
Reasons for implementing ERP
According to Financeonlene, the most frequent reason for implementing ERP is replacing legacy systems (16%) followed by the positioning company for growth (13%), improving business performance (13%), reporting/regulatory compliance (10%). 10% of organizations consider that enterprise software makes employees’ jobs easier. The same percentage of organizations implemented ERP to standardize global operations. The other reasons for implementing enterprise applications are reducing global operations (8%), reducing working capital (8%), appeasing parent company/stakeholders (5%), better serving customers (5%), integrating systems across locations (2%). 1% of organizations develop and implement ERP just because other companies have this kind of software.
What is enterprise SaaS?
Whalts defines software as a service as one of the major 3 types of cloud apps (others are IaaS and PaaS) hosted by a third-party provider. It is accessible for users over the Internet. SaaS is considered to be a good alternative to traditional tools used by organizations as these apps are easy and cheap to implement.
SaaS is for anyone. Some experts think that the scope of who can benefit from it is getting wider every day. Curtis Forsyth, a senior technical manager, defines a SaaS as any software that exists as a “cloud” platform for which the business pays a monthly fee to use, but does not manage or own the infrastructure needed to host the service. He considers SaaS to be a good fit for small and mid-size businesses because it’s extremely cost-effective.
Reasons for implementing SaaS
According to Financeonlene, the most frequent reason for implementing software as a service is replacing the operational costs of IT management (52%) followed by improving IT service quality (47%), reducing the capital costs of IT management (45%), and increasing flexibility and agility (33%). 28% of organizations implement SaaS to enable disaster recovery and business continuity, 27% develop and implement cloud apps to reduce the complexity of IT management, 21% – to free up resources for strategic projects. The other reasons are enhancing security or risk management outcomes that make 20%, expanding revenue channels by reselling cloud services (13%), enhancing regulatory compliance (12%), and other reasons (1%).
As you can see, enterprise saas companies share almost the same reasons for implementing the software that helps them operate and run businesses effectively.
You should also know that there are hybrid solutions that are characterised by the following features:
- a single, company-specific instance of ERP software hosted on an external site
- combines the flexibility of on-premise ERP with the “outsourced” model of SaaS
- has the ability to move instance in-house at a later date, or vice versa
- many traditional ERP software vendors are providing these types of solutions to respond to interest in SaaS
Enterprise software vs SaaS: What do you need?
While you see almost no differences among the reasons for implementing ERP and SaaS, there are some features and things contrasting these two types of organizational software. Let’s compare and contrast consumer technology vs enterprise technology.
Below is a table introduced on Chaotic Flow, demonstrating the core differences in product design, business, and operations between SaaS and ERP.
|Enterprise Products||SaaS Products|
|Unique solution||Uniform commodity|
|4 Ps loosely coupled||4 Ps tightly coupled|
|High Price||Low Price|
|Low volume||High volume|
|Niche focus||Mass customization|
|High Labor||Low labor|
|Low capital||High capital|
|Methodical growth||Organic growth|
|Quality control||Total quality|
Comparing packaged software vs SaaS, we should distinguish on-premise company resource planning systems and SaaS-based. Each of them has its own advantages and disadvantages which are presented below.
On-premise enterprise software advantages and disadvantages
Often, companies choose to implement enterprise software because it has no subscription fees which is one of the core benefits provided by this type of software for business. You pay the one-time fee to use the software as much time as you need. However, you will need to make a new purchase when a new version is available. Besides, if you use ERP, data is stored inside your organization, and hardware can be shared with other internal systems.
Speaking about the cons of ERP, we cannot but mention that hardware upgrades and maintenance required. Besides, it is less secure than most data centers. Mobile synchronization requires additional software and is often costly.
SaaS enterprise tools pros and cons
The main pros of “as a service software” include reduced upfront investments, reduces the need for hardware as a vendor provides servers, and less IT staff needed. This type of business software can be launched on any computer via the Internet and what is very important nowadays – it is available on many mobile devices. Besides, if you have any doubts, you can try a demo version for free in most cases. All updates are automatic – that means you won’t require any technical support or extra fees to update the system. Your employees will be able to work from the latest versions. Mobile synchronization may require an additional app which is often free.
Among the disadvantages of SaaS are reduced control of systems, Internet connection required. You should bear in mind that you will lease, not own, the software. To use SaaS you will have to pay a subscription fee.
The most frequent challenges met by SaaS solutions are as follows:
- Customization. Many solutions provide limited ability to customize
- Integration. Integration of the existing legacy systems can be rather challenging and oftentimes limited
- Data security can be an issue for most clients. Customer must try the vendor’s security system
- Operational transparency. The customer doesn’t have clear visibility into the system’s health
- Long-term costs which include additional fees for extra bandwidth and storage; annual subscription fee for the most on-premise software. Besides, software licenses represent less than 25% of the total cost of ownership of a typical ERP implementation
- Business complexity. SaaS can be challenging when expanding to multiple departments in a large corporation. Cost savings of a SaaS model may not be as evident as in complex departments
- Organizational Change. The software is rarely the hard part of an implementation process. Changing an organization’s business processes and people is the hardest part of any implementation. At the end of the day, SaaS, or not, ERP implementations are difficult to manage. Relative inflexibility of SaaS magnifies organizational change management challenges
What services does SaaS offer?
Typically, organizations benefit from the variety of services provided by SaaS. Below are the most frequent you can also benefit from:
Platform Strategy. If you gonna develop your own SaaS solution, together with the developers you will need to determine your requirements. Usually, the SD companies conduct in-depth research of business and provide their customers with a clear strategic plan that will help the latter to achieve their goals.
Design and architecture. Any employee wants to have an app that is easy to work with. People who design and develop SaaS solutions know how to make the software that will have a user-friendly design so that every single member of your organization can easily and quickly learn how to use the system.
Testing and Quality Assurance. When you contact a software development company to develop a customized SaaS, you may be sure that your product will be tested and checked for different bugs and errors. Testing is what is provided by every professional software engineering company.
Deployment. A final product will be also deployed by your vendor so you can rest assured you get the high-quality software.
Usually, SaaS vendors offer the following benefits for their customers:
- guaranteed uptime
- faster and easier deployment
- faster return on investment
- reduced IT resource needed
- lower cost of ownership
- less disruptive to business
How to pick up the right app: SaaS vs ERP?
The ERP market has grown to include a variety of delivery models and solutions, adding cloud-based and Software as Service offerings to a bunch of premise-based ERP solutions. Currently, smaller niche vendors offer ERP software alongside industry titans like SAP and Oracle. Companies of all sizes now have greater choice when it comes to ERP and legacy systems fall short when compared with current offerings. Despite the money and time invested in an existing ERP system, some organizations need to switch to a new solution. ERP deployments are notoriously complex, and jumping into a “rip and replace” scenario can be even trickier than installing ERP for the first time.
When it comes to choosing SaaS or ERP, there are no universal solutions that fit any business. That’s why we collected some questions for you to answer before making up your mind on one of the software options. Take a closer look at the following checklist:
- Do you require a highly-customized solution?
- Do you want to integrate a new app with existing legacy software?
- Can you define the scope of the deployment?
- Do any features miss in the app of your choosing?
- What is the timeline for the deployment?
- Is the vendor you chose experienced providing out-of-the-box apps?
- Does your IT infrastructure need to be upgraded?
- How big are the changes you will face after implementing new software?
Below are possible answers that may help you choose the right solutions:
|Business processes||Simple or undefined business processes||Complex and well-established business processes|
|Employees||Low tenure||High tenure|
|Business model||Stable, needs little changes||Volatile and constantly changing|
|Organization size||Small and mid-size businesses||Mid-size, large, and global businesses|
|IT skills||Little skills to none skills||Sophisticated|
|IT infrastructure||Little to none||Well-established|
|Integration with legacy apps||Little to none||Needs to be integrated with existing apps|
|Control||Little need||Requires to be managed|
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Both SaaS and ERP applications can be a good option for you but these are not for everyone. The business application is not about software but about business processes and the people involved in these processes. Adapting to new platforms and processes can be rather challenging. Consider all options, ERP and SaaS, while selecting new ways of managing your company, resources, and employees. Don’t be short-sighted, bear in mind that you need to protect your company in the long term.
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