SAP Business One, will now also be offered as a Software as a Service (SaaS) or cloud solution as SAP Business One OnDemand. This is in line with recent trends for ERP implementations reported in my report, SaaS and Cloud ERP Trends, Observations, and Performance 2011. Currently, 17% of ERP implementations in small businesses (organizations with under $50 million in annual revenue) are delivered in the SaaS deployment model. This is compared to 8% in mid-sized organizations, and 2% in large organizations. Clearly, current trends show that SaaS ERP is most attractive to smaller organizations. This is combined with the trend we've witnessed for organizations of all sized over the last few years where every year an increasing number of organizations are willing to consider SaaS for their ERP deployment while at the same time the willingness to consider traditional on-premise solutions is declining. SAP has noticed this trend and had taken strides to appeal to these factors with this recent announcement as well as its continued success with SAP Business ByDesign for mid-size organizations.
But why is SaaS so attractive to smaller organizations? Most of the reasons cited concern costs and speed and ease of implementation. SaaS a service is attractive to organizations with limited IT resources that must rely on the IT support of their ERP vendor. A major benefit of ERP is in its ability to help the organization uncover efficiencies. Growing organizations often have the need to make the most out of available resources, before more resources can be attained. SaaS ERP implementations average 6.7 month from installation to first "go live" milestone, compared to 11 months for on premise. SaaS ERP, offered on a subscription basis, allows organizations to recieve the benefits of ERP without making a large up-front capital expenditure. The reasons that organizations are willing to consider SaaS ERP are as follows:
75% lower total cost of ownership
52% because it lowers the cost and effort of upgrades
49% lower up front costs
44% perceived ease of implementation
Of course there are reasons that organizations are not yet willing to consider SaaS as a deployment model for ERP. These include security concerns, downtime concerns, and a desire to control the upgrade process. For these reasons, SAP will still be offering Business On on-premise. This is just another option to help small businesses recieve the benefits of ERP in a form that is digestible for their needs.
As I expand my research on what ERP can do for small businesses this year, I am excited to track the increasing prevalence of SaaS solutions such as SAP Business One OnDemand. For an expanded take on this topic, please read SaaS and Cloud ERP Trend, Observations, and Performance 2011. To help inform my research on the ERP implementation process for small businesses (whether SaaS or on-premise), and receive free data in the process, please take my ERP Selection, Implementation, and Training survey.