November 18, 2010, 5:04 PM — When purchasing ERP software, companies today have a plethora of critical decisions to make. They must consider the differences in vendors' features and functionalities, support and license costs, TCO and ROI estimates, underlying technical architectures and future roadmaps, just to name a few.
But just within the last several years, the decision of whether to go with a software-as-a-service ERP vendor versus the traditional on-premise ERP model has become part of many companies' evaluation criteria.
Make no mistake: SaaS ERP rollouts today are still the exception rather than the norm, as Aberdeen's ERP expert and research fellow Cindy Jutras writes in her latest report, SaaS ERP: Trends & Observations 2010.
But what has changed dramatically since Jutras began surveying ERP decision makers in 2007 on the topic is that SaaS ERP is getting more consideration than at any point in the past. "In mid-2010," Jutras writes, "we are seeing an overall 61% jump in [survey respondents'] willingness to consider SaaS ERP."
Those unwilling to go with a SaaS strategy voice most of the same concerns today as back in 2007: fears over security, downtime, customization and not having core ERP apps within the company's four walls.
But the 2010 data also shows a significant disconnect concerning ERP upgrades among those surveyed: While desire to control the upgrade process was the number-one factor in preventing consideration of SaaS ERP, the second most-appealing consideration of SaaS ERP was that it reduces the cost and effort of upgrades.
In other words, how your company feels about the upgrade process will likely play a part in whether it favors an on-premise or SaaS ERP package.
Let the record state that on-premise ERP upgrades can be painful, expensive experiences. Which is why "most businesses and IT execs put off upgrades as long as possible to avoid costs and minimize business disruption," noted Forrester Research's Paul Hamerman, in a CIO.com article.
Aberdeen's ERP research states that upgrades are typically performed every 3.5 years. The top reasons for delaying them: Budget and time constraints, as well as a lack of apparent value.