SaaS ERP

The business of making good SaaS…that’s good for business

With 55 employees and light-manufacturing operations, NetSuite was an ideal enterprise software choice for GestureTek when it deployed the SaaS ERP application four years ago. But having worked with SAP at a previous employer, Gerry Sylvia, the production and logistics director, gladly would have thrown the vendor into the mix –if he knew they had a product.

“I had no idea what a NetSuite was from a hole in the ground,” said Sylvia, who was charged with picking new software. “But I’ve used Oracle, I’ve used SAP. If they had a similar product, I would have more than likely gone that way.”

The Tier 1 vendors still don’t have a true widely available SaaS ERP. SAP seems to be the closest — with Business ByDesign, the product it trotted out and then yanked from the market about two years ago, citing functionality concerns. It now says 40 customers have gone live with it, and another 40 will be online in the coming weeks.

There’s no doubt in my mind that the engineers at SAP can make, or even perhaps already have made, Business ByDesign work. The engineering prowess lies in making it as profitable as SAP wants, or needs, it to be. It’s something SAP itself admits.

The question of whether SaaS is a profitable business model seems largely to have been answered for the niche vendors. Salesforce.com achieved a profit margin of between 6% and 7% this year, up from 4% a year ago. NetSuite is also pulling in a profit, and today, NetSuite acquired QuickArrow to advance its creation a cloud-computing application suite for services-based companies.

But that question hasn’t faded for SAP, Oracle or Microsoft, which are used to margins up around the 30% mark.

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