Many organizations are turning away from resource-intensive on-premises ERP systems and are instead opting for SaaS ERP -- and for good reason.
Cloud ERP options, especially SaaS ERP, offer organizations a host of benefits that CIOs and their IT teams can consider.
What is SaaS ERP?
SaaS ERP is a category of cloud-based ERP software that vendors sell through a monthly subscription on a per-user basis. It is distributed as a subscription service over the internet. Vendors host the software on their servers and take care of administration and maintenance, including pushing out updates. Less expensive to set up than on-premises or even more customized versions of cloud ERP, SaaS ERP comes standard, and vendors typically do not offer customization options. Users access it online.
Here are eight benefits of SaaS ERP, along with some potential disadvantages.
1. Lower costs
Companies using any kind of cloud software, including SaaS ERP, save money on hardware because the vendor hosts the software. Organizations don't need to purchase and possibly replace hardware. Also, smaller companies can typically save money by using SaaS ERP because they may require fewer modules and they don't need to pay for a lot of users. SaaS ERP gives them capabilities they wouldn't have otherwise.
In addition, a company using a multi-tenant SaaS ERP system shares some costs, such as maintenance, with other companies. This can lead to further savings.
However, company leaders should consider various factors before choosing SaaS ERP, because savings aren't guaranteed. If an organization has already bought on-premises software with a one-time purchase, it is taking on a new expense by purchasing an indefinite SaaS ERP subscription. If a company adds more users than expected, SaaS ERP could be more expensive than on-premises software. A systems integrator may need to help with the move to a new ERP platform, which is another expense. In addition, if companies need to migrate a lot of data, implementation costs can rise.
2. Automatic upgrades
A multi-tenant SaaS ERP vendor handles virtually all aspects of system upgrades, so IT leaders don't need to worry about when to deploy them or learn how to do so like they would for on-premises systems.
However, companies that may need to postpone updates -- for example, an update scheduled for the holiday season, when the organization is particularly busy -- should probably avoid multi-tenant SaaS because the vendor decides when updates occur. Single-tenant SaaS software usually offers more control over timing of updates, but IT takes on some of the responsibility for implementing them.
3. Easier maintenance
Multi-tenant SaaS ERP vendors handle maintenance, so IT departments have less responsibility.
In addition, adding users is usually easier with SaaS ERP software.
4. Modern user interface
User friendliness is key to today's digital employee experience. Vendors selling multi-tenant SaaS ERP focus on simplicity out of the box. As a result, this type of ERP typically reflects that focus on user experience. That means it's usually easier to navigate than customized cloud or on-premises ERP.
However, companies typically can't customize multi-tenant SaaS ERP, so organizations that need to add to or modify their ERP system should probably select another software type.
5. Data security
However, companies still need to handle their data and security governance, user access issues and other critical aspects of security.
Vendors usually promise that multi-tenant SaaS ERP data is safe, despite multiple companies sharing one instance of the software. However, if data protection is paramount, an organization should probably opt for a single-tenant system instead of multi-tenant.
6. Easier data sharing
Because SaaS ERP software is accessed online, employees can more easily log on from anywhere and send company data to vendors or customers. On-premises software is more difficult for employees to access remotely because they usually need to do so via a third party. Companies often need to implement security checks for employees remotely accessing on-premises software.
Employees having the ability to easily share data could improve vendor communication and customer service.
7. Faster, easier deployment
On-premises ERP implementations are difficult and costly, and companies run the risk of failure for a plethora of reasons, including cost overruns and lengthier timelines than projected.
In contrast, IT teams don't need to install SaaS ERP systems locally, so this deployment is theoretically much easier, although legacy ERP issues can complicate this.
8. Access to modern tools
Newer technologies like AI and IoT can benefit companies in various ways, including better data analysis and customer service. However, AI requires a lot of data storage and computing ability, and if a company has on-premises software, IT may need to add hardware. Cloud software, including SaaS ERP, can provide easier access to these capabilities.
In addition, many cloud vendors provide plug-and-play AI cloud services, so companies can get started more easily.
Molly Driscoll is an associate site editor at TechTarget and covers HR and ERP software. She has worked as an editor for marketing company Skyword and as an editor and reporter for the Christian Science Monitor.