SAP Watch

Mar 18 2010   1:58PM GMT

SaaS scores lower than on-premise in business benefits

Mperkins Matt Perkins Profile: Mperkins

Panorama Consulting just came out with its annual ERP report.

Not surprisingly, when it comes to timing and costs, traditional on-premise ERP implementations are taking a back seat to Software-as-a-Service (SaaS) and hosted/on-demand offerings. SaaS is implemented in less time (11.6 months) and at a lower cost (6.2% of sales) than traditional on-premise ERP solutions (18.4 months and 6.9% of sales, respectively), according to Panorama Consulting Group’s 2010 ERP report.

SaaS may seem like an ideal alternative to on-premise, but the road ahead isn’t free of potholes.

Implementing SaaS is likely to result in delivery of fewer business benefits than expected — only 23.5% of implementations realize at least 50% of the benefits (on the flip side, 42.9% of traditional ERP solutions deliver 50% or more of the benefits expected), according to the report.

The report attributes those drawbacks to unrealistic implementation expectations, as organizations might fall victim to hype from SaaS vendors. As such, those companies underestimate the time and resources needed to come out with a successful implementation.

Late last year, SAP expressed its vision for hybrid on-premise, on-demand deployments at large companies. The vendor is also planning to finally release SAP Business ByDesign, its SaaS offering for small to mid-sized companies. SAP is also trying to have it both ways when it comes to on-premise versus on-demand business intelligence (BI).

It has continued to stress how serious it is about on-demand, and that on-demand software would be a big focus for the vendor this year with applications such as on-demand supply chain management (SCM) software as well as a host of other SaaS offerings.

Will the vendor be able to deliver the best of both worlds — quicker implementations and more tangible business benefits — with its applications?

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