How SaaS should change the way you approach your next ERP upgrade

Now that we have a growing number of companies offering cloud-based software, it is a good time to consider a new approach to procuring these systems. Over the past decade, more and more agencies have tried to combine all of their software requirements into a single procurement effort. The idea is to develop a single RFP and ask for the “moon” and then settle for the closest solution that you can find from a single vendor or a large system integration firm. Given the fact that the companies that offer a comprehensive solution and a track record, are highly invested in proprietary technologies, you may be missing-out on the best solutions available.

The fact is that any modern software solution should be easy to integrate with other modern systems. When a vendor charges $10-20K for an interface to an appliance or to mobile technologies, this should be a “red flag”. The time has come for customers to demand that industry leaders make their systems more open. You should avoid any vendor that does not provide Web Services integration that is available to any 3rd party.

Buying software as a service (SaaS) should provide you with the ability to “test drive” a system before making a multi-million dollar commitment. Any vendor that requires you to purchase a minimum number of ‘seats” or make a long-term commitment is not serious about SaaS. They are simply taking their license model and allowing you to spread the cost over a longer term. Remember, you don’t own SaaS so you shouldn’t pay as much as if you were purchasing a license. If the monthly charge is simply the purchase price divided by 36 (with a minimum 3 year term), you are buying the software and you will be forced to buy in again after 3 years.

Another factor is the implementation cycle. If your new SaaS system won’t be in full production for 18-24 months, why would you purchase “seats” for everyone who will ultimately be using the software when only the project team needs access during the transition. Managing “seats” is a great way to avoid risk and to minimize overlap in costs of the new system and the software that is being replaced. As the “seats” increase on your new system, there should be a corresponding decrease in the maintenance on your old system.

Finally, anyone considering the replacement of an ERP system, should immediately start looking for 3rd party support. Once you have determined that a vendor is no longer strategic to your organization, the focus should shift to the most economical means of maintaining this system as you invest in a replacement. Im many cases, 3rd party support can save enough to cover the cost of a “pilot” for a replacement. This also preserves your options should the new system not meet your expectations. When customers make a large up-front commitment to a new ERP, they are usually stuck with that system for at least five years. Most agencies don’t litigate and vendors are experts at placing the blame for a failed implementation on the customer.

Hopefully, the availability of true SaaS solutions and better integration will allow customers to try some of the new companies that provide better value and more responsive services.