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What’s the Future of SaaS in Relation to ERP Systems?


There is perceived value to be achieved from cloud-based solutions that are less costly, can be implemented rapidly, and will scale with the needs of the business.


by Casey Curtis,
January 2014

While organizations have spent billions of dollars on software, services and infrastructure to implement and maintain enterprise-wide enterprise resource planning (ERP) systems, a growing number of organizations are investing in cloud solutions instead of implementing comparable functionality within their ERP systems. In fact, IDC projects that the cloud software/Software-as-a-Service (SaaS) market will grow from US$23 billion in 2011 to over US$67 billion by 2016—accounting for one dollar of every five dollars of software investments.

curtis-spotart

Benefits of SaaS 

From what I have seen working with clients, those that have implemented SaaS solutions or are considering them are doing so because:

  • SaaS solutions can usually be implemented more quickly, thus providing business benefit faster. Users can’t afford to wait up to a year or more for IT to install a new module in the ERP system.
  • The upfront costs of implementing a SaaS solution can be quite a bit less expensive than implementing a new module within an ERP system. 

SaaS vs. on-premise ERP in the real world 

It would be tough to argue that there is any SaaS solution on the market today that can completely take the place of today’s modern ERP system. I think it’s safe to say that there will likely not be one for the foreseeable future. However, there is perceived value to be achieved from cloud-based solutions that provide needs-specific functionality, for a relatively low cost, that can be implemented rapidly and will scale with the needs of the business. As a result, SaaS solutions are quickly establishing their place in the enterprise information ecosystem as point solutions. 

One of the most important issues to plan for up-front is what you’re going to do when the solution grows and becomes the repository for critical company information that needs to be integrated with your core systems.

Still, despite some inescapable upfront financial benefits, SaaS may not always be the best option in the long run. One of the most important issues to plan for up-front is what you’re going to do when the solution grows and becomes the repository for critical company information that needs to be integrated with your core systems – especially your ERP system. Consider that:

  • Significant value is being missed by having critical information stored outside of the core enterprise ERP systems. This may not be an issue up front, but could evolve into an issue as use of the SaaS system grows.
  • Vital business processes are spanning disparate systems that are difficult to integrate.
  • There may be concerns about data privacy. For example, some European countries have regulations that require certain data to be located physically within their boundaries.

In a recent white paper entitled Cloud Integration – A Comprehensive Solution, Oracle referred to this phenomenon as the “Accidental Cloud SOA Architecture.” It typically occurs because SaaS subscription models make it easier for lines of business (sales, marketing, etc.) to bypass IT best-practice planning. As a result, you end up with information and business processes in a best-of-breed, cloud-based, external system that you need to integrate with your core systems. 

But, isn’t all this leading us to a de-facto best-of-breed model that we spent millions of dollars on our ERP systems to avoid? What about the significant value in effectively and efficiently managing business processes across the enterprise and having mission-critical information accessible from one system?

Answers to integrating E-Business Suite with cloud solutions

As organizations start to deal with the issues of mature SaaS applications and how to handle integration requirements, technology is evolving to provide answers.

For one, new tools are available, such as Oracle’s Cloud Integration solution. Additionally, ERP software itself is being improved. This is the case for Oracle E-Business Suite, which is migrating to the Fusion Middleware platform in R12.2. As a result, the tech stack will allow us to open up Oracle E-Business Suite to integration with cloud solutions.

Thought Leader


casey headshotCasey Curtis is a senior project manager at SmartDog Solutions, an Oracle Platinum Partner.

Future focus

More than likely, the ERP system of the future will not be a single system. Instead, it will consist of a composite applications architecture that integrates large-scale core ERP systems, like Oracle E-Business Suite, with point SaaS applications to handle functions such as sales, HR, recruiting, procurement and/or logistics. These applications will need to work together as if they were a single system, and must offer real-time availability for functions like e-commerce and customer service.

Of course, financial implications will permeate these decisions as SaaS subscription costs, the costs of the technical components required for integration, and the costs of implementing new ERP functionality are considered. 

 
 
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