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Have We Reached the Tipping Point in SaaS ERP?

5/1/2012

In Malcolm Gladwell’s seminal book The Tipping Point , he defines a tipping point as “the moment of critical mass, the threshold, the boiling point.” For Software as a Service (SaaS), the traditional barrier to attaining the momentum implied by the tipping point has been ERP . Companies have been amenable to having applications that surround or extend ERP reside in a SaaS environment, but they have been less likely to place their most critical enterprise records in an environment they did not directly own or control. This is changing.

According to a recent study by Mint Jutras, an independent research-based consulting firm that specializes in analyzing the business impact of enterprise applications, “Today…as many weigh the pros and cons of SaaS ERP , the advantages appear to be winning.”

Why? Why now?

In Q3 2011, Mint Jutras surveyed over 1,000 individuals knowledgeable of and involved in ERP implementations, in companies ranging from small ($25M annual revenue) and lower-midsize ($25m - $250m annual revenue) to upper midsize ($250m – $1b annual revenue) and large ($1B annual revenue). The survey’s responses give a strong indication of why we may have reached the tipping point. Here are a few of the principal ones:

  • Acceptance as a deployment option
    SaaS deployment is now more likely to be considered than traditional hosting options.Even more stunning is the decline in the willingness to consider traditional on-premise deployments. This has fallen on the order of 40 percent in just a few years.
  • Acceptance at all enterprises
    SaaS ERP is not just a “small-company” option. In fact, the willingness to consider SaaS ERP increases as companies grow, with the highest level of interest from large enterprises. Further, those companies with the most successful ERP implementations are most likely to consider SaaS deployments.
  • Powerful cost considerations
    When survey respondents were asked about what they found appealing about SaaS ERP, cost factors rose to the top of the list. More than half cited lower total cost of ownership (TCO), while nearly half also noted lower startup costs. In a global economy where capital concerns have been rising, these are powerful drivers.
  • Accounting advantages
    With on-premise solutions, the default accounting is to treat the ERP implementation as a capital expense (Capex); but because SaaS solutions are generally paid for through subscription, they provide the alternative of being categorized as an operating expense (Opex). This ability is often associated with lower risk, and in any case the flexibility is generally perceived as an advantage.
  • Distributed environment growth
    Operating across a distributed environment has become a way of life for a large percentage of businesses, even smaller ones; this may be providing an additional incentive to consider SaaS ERP. The level of distributed environment helps explain at least in part why large enterprises are so willing to consider SaaS ERP, because of the control of standardization of solutions and processes through SaaS deployment.

Posted by the Epicor Social Media Team

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