When powerful ERP applications are needed by growing businesses today, SaaS ERP is being looked at more and more as a viable option to traditional complex, expensive and labor-intensive packaged ERP suites. And while SaaS ERP is still young, in the right setting and with the right users, it's offering some eye-opening real world gains for a variety of organizations.
Two cases in point: Brown University and the City of Sanibel, Fla. are each in the midst of SaaS ERP projects that are slated to improve their operations, simplify their reporting functions and streamline and replace tired, old work processes that date back several decades.
"Because we were still back in the mainframe code days, we didn't have a lot of needed functionality," says Michael Pickett, the CIO at Brown University.
For years, the school has been running a hodge-podge of individual homebuilt and proprietary applications for payroll, human resources, purchasing, budgeting and other functions—all on a 25-year-old IBM mainframe. "Our reporting was rudimentary. There wasn't a lot built in, no document management. We were using very ancient tools to try to manage a modern university."
When the economic downturn hit, it gave university officials even more of an incentive to make needed changes. Suddenly, they didn't have the staff resources they needed to manage that existing, outdated infrastructure, Pickett says. "That was a driving force."
The idea of SaaS ERP came up in discussions with the school's Board of Trustees. Two board members worked at companies that were using SaaS ERP from vendor Workday Inc., Pickett says.
Brown did deep research, talked with lots of analyst and experts, and brought Workday in for the project. "For a smaller institution that doesn't have a large IT staff, it's compelling," he says.
So far, Brown is halfway through the first HR phase, which is expected to be completed in about 12 months. The finance pieces will be finished in two years. Normally, SaaS isn't such a long process, but in this case there's lots of intricate work needed to rewrite old mainframe code and functions that were written in the old COBAL days, Pickett says. "So we have to do a big redesign and introduce new functions and workflows that didn't exist before. It's a massive rewrite of old to new. It's a process that we want to get just right."
Using Workday, the school's SaaS ERP systems will be on cloud servers that also handle accounts and data for other Workday customers in a multi-tenant environment. The multi-tenant environment doesn't trouble Pickett due to the prevalence of security audits and other controls used by the vendor. "These guys have done this before. Those are the kinds of things that you look at and you ask questions about. Nothing is risk-free, but this is something that a reasonable professional can live with."
Meanwhile, in Sanibel, Fla., finance director Sylvia Edwards says that city officials had similar considerations when they began looking to replace the city's aging ERP infrastructure. Sanibel had been using ERP from SunGard since 1995, but decided this year to move to SaaS ERP from Tyler Technologies due to lower costs and less demands on the city's five-person IT staff.
Moving to the cloud provided the city of Sanibel with an extra and unanticipated disaster recovery benefit. "We're on a barrier island, so if there are any storms that approach, we have to evacuate the island," she says. "This works hand-in-hand with SaaS ERP. If you have to evacuate, you just take a laptop and you can set up anywhere."
The SaaS product will offer many new functions, including document imaging and filing, at a lower cost compared to the city's old server-based systems, when it is all online by September 2012, Edwards says.
Jeff Kaplan, an analyst with THINKstrategies , says that ERP SaaS products are a second wave of services that follow on the heels of applications like Gmail and Google Apps, which showed web-based software could work for businesses.
"It's motivated by frustrated users of on-premises products and by the economy because companies can't afford those anymore," Kaplan says. "They're finding that SaaS ERP may be more reliable and secure and cost effective than those old legacy apps. There's a bunch of vendors who are emerging and they are seeing rapid growth."
Ron Bonig, an analyst with Gartner Inc., says that a growing number of small to medium colleges are exploring SaaS ERP due to cost savings and increased features, but that larger schools aren't yet jumping in en masse. Some larger schools are, however, using SaaS for a few functions, such as payroll.
What's happening is that some schools are recognizing that they can now put together various applications in a best-of-breed approach, rather than bringing in an all-in-one ERP suite. "The opposition to this approach is loosening," Bonig says. "People are trusting it more, so they're willing to put more things out there."
Todd R. Weiss covers Enterprise Applications, SaaS, CRM, and Cloud Computing for CIO.com. Follow Todd on Twitter @TechManTalking. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Todd at email@example.com You can also join Todd in the "CIO Forum" group on LinkedIn.com to talk with CIOs and IT managers about the things that keep them up at night.