Many companies are interested in web based ERP software as an alternative to the traditional on-premise licensing model. Web-based ERP software is reputed to be less expensive, easier and quicker to implement, and easier to maintain. Similar interest applies to web based CRM software and web based accounting software for the same reasons. Web based manufacturing software, web based CRM software, and other web-based software products are often referred to as Software-as-a-Service or SaaS offerings. SaaS refers to the licensing model used. With traditional on-premise software, the buyer company must buy or license, install, and support the computer hardware and the application software at their own facility. With the SaaS model, the user company pays a monthly fee that includes hosting of the applications and the license to use them. There is little or no up-front capital expense. SaaS solutions may or may not be offered on the cloud.
WEB BASED ERP SOFTWARE ADVANTAGES AND DISADVANTAGES
The primary advantage of a SaaS or web based ERP software solution is the low up-front cost. Another advantage is that there is no need for a local infrastructure with staff technology experts to maintain and support the systems. Software suppliers often tout a faster time-to-benefit because there is no need to buy and install all the hardware and software; all that’s needed is a browser and a web connection. The majority of ERP software implementation is still required, however, including data conversion, user training, etc.
A disadvantage of web based ERP software is that monthly fees will eventually add up to an overall higher cost (total cost of ownership) than locally supported systems. Understandable, of course, because the vendor bears all the costs to host and maintain the systems, plus it needs to make a profit. Economies of scale help reduce the overall cost for individual user companies but total cost of ownership will be higher for SaaS applications over time.
While every company engaged in ERP software selection should consider SaaS as an option, it should not be the first consideration. Nearly all ERP solutions on the market today are available as either on-premise or hosted (SaaS) implementations, with the exception of some solutions that are SaaS only.
When completing your strategic ERP software planning, solutions should be evaluated first and foremost on the functionality and fit for your business needs. Deployment options—on-premise or SaaS—are a secondary consideration after you’ve found the best software fit for your needs.