Cloud ERP System or ERP as SaaS? Which is more suitable for your business.
By Stephan Hablutzel, Last updated: 2021-08-16 (originally published on 2019-09-11)
ERP Systems in the Cloud or as SaaS?
Cloud-based ERP systems are 30% cheaper than on-premise server based solutions.
So it is no surprise that in the year 2018 only 15% of ERP (enterprise resource planning) systems were in-house. Interestingly, the same statistic shows that of the remaining 85%, the vast majority adopts the SaaS (software as a service contract) model (64%), whereas only 21% are solely Cloud ERP.
It is hence clear that there must be something very compelling about the SaaS offering.
But before starting, there is something I’d like to make clear at the very beginning: this blog does not replace a detailed evaluation process for the selection of a particular solution. There are compelling arguments for both going for a Cloud based system or opting for an SaaS model. However, I would like to focus on the advantages of the emerging and fast moving SaaS industry foremost, as it is simply the way forward in my opinion.
The problems with traditional ERP systems are well documented: project delays, cost overruns, rigidity in the processes and vocabulary. These ERP further come with a high degree of complexity and require extensive process changes to the existing way of doing things. The training is thus comprehensive and tests the capabilities of any user team. The going-live is a big bang and hence risky.
Taken all together, ingredients that can lead to outright failures.
When moving in the direction of SaaS solutions, there are systems which are kind of in-betweeners. They reside on the Cloud but still follow many of the traditional ERP characteristics. One such solution is Netsuite. Whilst it’s focus is on a seamless integration it still incorporates the one size fits all mentality and bears the risk of varying degrees of competency in the different functional areas that it covers.
In the SaaS world on the other hand, smaller specialised providers create solutions for individual markets. These offer continuous improvements and add new features all the time. Given the nature of SaaS ecosystem, the Company is completely in charge of deciding which Apps to implement, and at what speed. It can hence slice the introduction of an ERP in portions and match the readiness of its organisation.
SaaS are also having a laser sharp focus on user–friendliness. They emphasise the ‘customer journey’, a concept that seemingly completely escapes the broader corporate world. This starts with the landing page on the web, intuitive user interfaces, and extensive support sections. Many of them populated with short, crisp video clips, user-based support communities, free training webinars and much more.
The continued engagement and focus is driven by the fact that SaaS models are subscription models. The realisation that subscriptions can be cancelled any time guarantees perpetual improvements. But there is an additional benefit for the subscriber. If a better solution is emerging, they are able to switch quickly and stop the subscription without having to face write-offs of legacy investments.
Of course, there are also problematic areas: bugs, supplier risks in terms of financial stability (of startups) and fluctuating speed of development/improvements, differences in quality of providers in different markets, and lack of transferability of data are probably the most common ones.
A careful managing of the risk is certainly recommended given these exposures.
There has been an interesting trend in the last 3 years. SaaS solutions, that started with addressing one particular pain point, are now expanding the breadth of their solutions. This results in an increase in their usability. One particular trend across different sectors was the introduction of collaboration features. These of course foster the support of team work. But this development also leads to increased complexity and negates some of the initial advantages of easy-to-use and ad-hoc deployment.
In view of this changing Apps landscape, guidance and selection criteria are sometimes hard to come by. One way to help out and to bring some organisation into the chaos is, for example, Xeros’ so called App Marketplace. It lists more than 600 solutions that easily communicate with Xero and allow a seamless integration.
These Apps sometimes address pain points in singular functions such as accounting (Xero itself), financial reporting (Spotlight Reporting), POS (shopify) or HR (Talenox). Others are solving problems across several functions such as logistics (Cin7), CRM (Pipedrive, HubSpot) as well as ancillary areas such as legal (Zegal), expenses (Expensify, Receipt Bank) or project management (WorkflowMax). Alternatively, there are also verticals where solutions for entire industries are available. Examples are restaurants (Revel), architecture (WorkflowMax), or even manufacturing (Cin7).
Nevertheless, in a cost conscious corporate world the day-to-day business sometimes leaves no resources to cope with even smallish projects. There are specialised providers that have recognised that companies need help to get over the hump without compromising the daily business. They offer efficient and affordable support with the implementation of SaaS and the ensuing transition management.
Not only does the evolving SaaS space and the emerging connected support industry represent the future it offers already today exiting solutions for SME.
Fresh Accounting in this regard offers accounting services using Xero, it also helps with the tailoring and implementation of complementary SaaS solutions that can be bolted on to Xero easily.
Stephan Hablutzel is Chief Operating Officer at Fresh Accounting Ltd. Prior to starting with Fresh Accounting Stephan has for over 25 years resided and worked in Hong Kong and Singapore in regional roles as CFO and COO from startups in LegalTech to multinational groups in the fashion and lifestyle industry. He held numerous directorships and sat on various Board of Management. Besides finance related expertise, he brings in-depth experience in legal and international tax matters, corporate governance, restructuring and project management. Stephan holds a degree in Economics from the University of St. Gallen in Switzerland and holds the rank of a captain in the Swiss army.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.