The other day, I was intrigued by an interesting article about cloud ERP systems. In the commentary published earlier this year, the author suggests that Google may become the next big vendor of cloud ERP systems. The rationale suggests that since smaller organizations have a higher propensity to shift to cloud ERP at this point in time, Google could be a perfect candidate to shake up the market.
More specifically, the author points to Google’s aggressive and small-business-friendly pricing as a key reason why it is likely to make a splash in the cloud ERP arena. The article also presents the hypotheses that Google will piggyback on its progress in providing productivity software to smaller organizations, by providing its customers with a single vendor for ERP software and other solutions.
While Google has demonstrated interest in a variety of diverse solutions in recent years, it’s hard to know for certain whether or not Google will also become an ERP vendor. Either way, this potential theory lends additional credibility to the momentum of the cloud ERP movement. In fact, the research outlined in our 2013 ERP Report shows that 26% of companies implementing ERP systems in the last year deployed either SaaS or hosted cloud solutions. Most of these organizations are small- to mid-size organizations, which are right in Google’s sweet spot.
Assuming Google does enter the market, it begs the question: how will they fare in an already red ocean of competition? SaaS ERP vendors such as Plex Systems, Netsuite, Workday and Salesforce are already gaining strong footholds in various niches of the ERP industry. In addition, traditional ERP vendors such as SAP, Oracle and Microsoft Dynamics are solidifying their cloud deployment options – along with providing pure SaaS offerings as well – which helps explain why these Tier I vendors were able to recapture lost market share in the last year (also outlined in more detail in our 2013 ERP Report).
That being said, we are still finding that many of our clients have legitimate concerns about the viability of SaaS ERP software for their organizations. Perceived security issues, lack of flexibility and less control over workflows and business processes are all obstacles to greater acceptance of SaaS ERP systems, whether from Google or any other ERP vendor. In addition, uptime and access is also a very real – although somewhat unfounded – concern among CIOs and CFOs. Even if a system has 99.99% uptime, executives are scared of that tiny fraction of time that the system is down. Never mind that fact that very few internal IT departments could only dream of that sort of reliability.
Our take? SaaS is a very real trend and one that is very lucrative for the successful ERP vendors in this space but it’s not for everyone. Even Google can’t change the fact that complex engineer-to-order manufacturers, for example, have unique requirements that may not be adequately addressed by a multi-tenant SaaS ERP system. In those types of cases, traditional on-premise ERP systems are more likely to fit the bill.
In other cases, however, SaaS ERP does make sense. Smaller companies with less complex or less defined business processes are good candidates. In addition, larger organizations are good candidates when they can migrate just one functional area over to a SaaS solution (think Salesforce for CRM or Workday for HCM). In addition, companies of all sizes are good potential candidates to migrate their traditional, non-SaaS ERP systems to a third-party, cloud or hosted provider, depending on their longer-term IT strategy.
The bottom line: companies need to cut through the SaaS hype and determine what’s best for them. Their business processes and organizational needs should determine the right solution, more so than the Google brand name or anything else, for that matter.
Learn more by downloading our white paper, A Comparison of Five Leading SaaS and Cloud Vendors.