Even with all the buzz about SaaS ERP solutions, there are still arguments about why it makes sense to maintain a traditional, on-premise software approach. One of the strongest arguments revolves around customizations. Do the benefits of a SaaS approach to ERP outweigh the apparent advantage of traditional solutions?
When an organization goes with a SaaS solution, their ability to customize the software to meet their specific needs may be more limited than it is with software they maintain on-site. While all SaaS offerings provide the ability to customize some of the product, it is usually more limited. By definition, companies are renting a service, and that service is being offered to multiple companies at once. Companies can almost always add new custom fields as needed, but more complex customizations may not be available.
But let’s look at the cost of these customizations – they are not limited to the initial investment of making the customizations. There is the cost of maintaining them too. In fact, upgrading is often a big advantage that SaaS has over on-premise implementations. To gain access to new software features as they become available, an on-premise solution must go through the tricky process of installing the new release of the software without breaking the customizations. Inevitably, they need to bring the third-party consultant back in to ‘re-apply’ the customizations. Meanwhile, SaaS features are available on a rolling basis and are much easier to implement.
An additional cost that some forget about is training for the new software features. On-site software most often means on-site training, whereas SaaS software training is often times available on-demand in webinars, which saves money. Yet another ‘hidden’ cost of customizations is the testing of any new features that are implemented. The software provider cannot predict how their product will interact with the customizations that companies have made to the earlier version of the software, and therefore the testing done on the product before its release simply does not suffice. The company who has implemented the on-premise product with customizations will have to perform their own extensive testing when the new version is adopted.
Speaking of cost, it remains perhaps the biggest selling point of SaaS offerings, especially for small to mid-size organizations. There is a huge difference for smaller companies, for example, between having to invest $150k upfront for a traditional, on-premise implementation and paying $30k for the first year of a SaaS product. That kind of savings often outweighs the additional functionality that may be available in a traditional implementation that can be highly customized. Ultimately, an organization might find that they simply cannot make a SaaS offering fit their unique business processes. But when making their decision, they must consider the extra costs associated with on-premise customizations, especially during upgrades.
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