Hosted ERP, sometimes called SaaS (Software as a Service Benefits) ERP, on-demand software or utility computing, basically refers to the solution where Enterprise Resource Planning (ERP) application are provided as turnkey solution by a third party application service provider.
It could be a very good alternative ERP application if your company considers minimizing large initial costs and complexity of IT infrastructure. It also permits companies to dispose of the software without large sunk cost investments if the software fails to provide value or otherwise meet expectations.
Analyst firms IDC classify ERP systems as SaaS if they meet the following criteria:
- Remote access to commercial off the shelf (COTS) business applications
- Centralized software accessed by multiple parties remotely over the Internet
- A one-to-many application delivery model (sometimes called the multi-tenant model)
- Centralized maintenance and management of software
The popularity of these hosted products has gained immense momentum within a very short period. This is because of the number of advantages that this system gives to its users.
- Lower Total Cost of Ownership. The more logical and believable TCO forecasts prepared by IDC, Aberdeen, Forrester and other reputable analysts, generally show a lower TCO with SaaS ERP solutions over a five year life for most business scenarios.
- Immense Flexibility. This is very much evident in those companies that go through consolidations, closures or when the office moves. Thus, this system gears you to meet the changes that come in your business with time
- Outsourced skills and expertise. Outsourcing the IT (Information Technology) management of ERP systems and related business applications to experts allows internal IT spend more time & resources on IT innovation and strategic objectives. It is very much advantageous to those companies who have a limited number of IT staff
- Spend less time managing availability, performance, security, problems and changes
But hosted ERPs also have some disadvantages :
- Security. I believe that all vendors have own security policy to secure his customer database but anyway, the most valuable information asset, such as: customer, products, prices and orders not protected behind your own firewall, but rather accessible through the Internet. As the data travels back and forth from your hosting provider to your users, there is no way for you to monitor what happens. If your hosting provider is hacked, your data is at risk
- Customization on hosted ERP will more difficult than on local server because hosting providers run multiple instances of different companies on a single installation so that the code running the core ERP system is shared between instances
- Internet connectivity dependence. You must have reliable internet because if your link is down, your business is down. There are things you could do to make things better, such as using 2 different lines from 2 different ISPs, but downtime due to lack of Internet connectivity is inevitable
So, are you interested?
All three disadvantages are not show stoppers in the real SaaS world.
Particularly a major player like NetSuite.
Certainly would be a better solution than MS GP or Dynamics or a home grown system!
Check them out
Thank’s for your comment.
Maybe the disadvantages are valid in my country where internet connection is still expensive.
Cheers.
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