ERP and SaaS – Services companies should re-assess

Service sector companies should consider assessing ERP SaaS solutions when reviewing their systems portfolios.  We recently undertook a review of the ERP market for a client and it is clear that the market has changed significantly in just a few years, driven in no small part by new SaaS entrants like Netsuite. The market, since it became established in the early 1990’s, had been generally characterised until quite recently as delivering monolithic systems which rarely delivered full benefits. It could be argued that on premise products had became somewhat bloated on rich but complex  functionality which many companies had struggled to exploit. Whilst the traditional target markets of manufacturing, distribution etc. benefited from these systems it would have been a brave CIO that recommended ERP for service sector companies implementing an on premise solution and from the top two vendors.

 

Our findings from our research can be summarised below: –

 

  • The market dominance of SAP and Oracle continues but their market share is declining with a small number of other vendors hot on their tails. From the traditional on premise vendors, Microsoft, Sage and Infor are worth mentioning
  • Whilst sluggish growth is predicted in the on premise market, significant growth is predicted for ERP SaaS implementations @ 17% per annum to 2020
  • Emerging SaaS only solutions are unencumbered by legacy systems enhancements/investment and are moving fast in terms of breadth and depth of functionality and are forming strategic partnerships that target service companies
  • Most major ERP vendors now offer multiple deployment options and pricing is becoming more standardised between the implementation options
  • SaaS functionality, from traditional ERP vendors, is typically less sophisticated than their on premise equivalents and likely to remain (deliberately); Oracle and SAP have definitely learned some major lessons here
  • Some small studies are showing significant differences between Total Cost of Ownership when comparing on-premise and SaaS costs at a ratio of 2:1
  • ERP software will no longer be limited to ERP! Gartner defines this as “Post-modern ERP”. And PwC as “Hybrid” ERP. ERP is now merging with CRM, HCM etc. and CRM /HCM vendors are moving into the ERP space through strategic partnerships and investments e.g. Salesforce and Workday are worth mentioning, both companies are broadening their core functionality with either strategic partnerships or third party vendors that offer full support for service companies
  • There are some question marks over future road maps for traditional on premise ERP systems e.g. JDE
  • Integration and solution architectures are becoming increasingly important and SaaS vendors in particular are being pragmatic about hard baking tight integration with other vendor solutions into their products. We were particularly impressed with Netsuite’s integration with Salesforce and Oracle Financials; Infor is not far behind with a great range of API’s
  • Implementation partner selection criteria are considered as important as product selection criteria
  • SaaS costings need close scrutiny. Whilst per user subscription pricing can appear very attractive many SaaS offerings have a plethora of add ons, storage etc. which can easily double or in some case quadruple the annual costs
  • As technical architectures become more open, ERP is becoming more federated, and in service businesses fully integrated with CRM, HCM and e-commerce
  • Some ERP vendors are wholly targeting their products on the service sector, Unit4 being worth a mention

 

Gartner’s assertion that the ERP is becoming more fragmented and less monolithic just about sums it up. The ERP market is changing incredibly quickly and some serious offerings are now available for service companies without having to bend, through heavy customisations, functionality and workflows to support service companies’ processes, integration points and stakeholder requirements

 

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