To SaaS or Not to Saas. Not to SaaS, For Now

Cloud ERP

Think Before You Leap Into The Cloud

Industry Week recently published an article by Pete Zeppell, VP of Zilliant, ‘To Saas or Not to SaaS’ . The article spoke about the top five key reasons why people should make the shift to a SaaS, or cloud, model for their business performance software.  While I don’t believe the article was intended to address all manufacturing verticals, it did take a general approach where people in small to mid-sized manufacturing companies could get the wrong impression.  The purpose of this blog article is not to discredit Mr. Zeppell’s, but rather to address those philosophies as if they were speaking about ERP (enterprise resource planning) software directly. 

To remain consistent from the previous article, here is my list of 5 reasons to be wary of jumping on the cloud bandwagon when researching a new ERP.

1.  Less resource cost

Yes, there is no argument that the upfront cost of implementing a SaaS or cloud system is one of the top attractions for those models.  But, what happens after 6 months?  A year?  You are still paying monthly perpetual maintenance and service fees, while implementing a new ERP is implementing a new ERP whether it is done on-site or locally.  Small to medium manufacturers can often see an ROI of a year or less on the initial cost of installed software, yet SaaS implementations are a never ending cost.  Your users will still require the same training services.  It “may” be more cost effective from an IT infrastructure standpoint since maintaining the servers and performing updates are completed by the SaaS vendor.

2. Access To Information

When speaking to the manufacturing market, their number one concern with the cloud is the ability to access their information, its security, and overall reliability.  On the cloud, your information is stored in a data center outside of your control. You are now relying on their system, your internet provider, and a host of other variables.  If something, outside of your control happens, natural disaster somewhere else, power outage, etc. you are subject to be locked out of your information.  You are dependent on their system redundancy being what you signed up for.  While this can also happen at your facility, this model simply increases the risk.  Next item is security.  In most cases you can secure access to the server running your ERP solution simply by controlling access from the outside world and strengthening your firewalls.  In some cases there is no access allowed to mission critical system servers other that through your intranet.  Simply by the nature of accessing your information via the web your data is exposed.

A separate question to ask: will customizing your ERP in the cloud allow you to seamlessly upgrade to future versions or will it have to be done on a case by case basis?

Also, when a new version comes out on the cloud model, will you be forced to upgrade to changes and modifications before you are ready?  If you do have customizations what cost will you incur to insure they work properly in a new release?

3. Focus on Customer Success

First off, this is a referral business.  As selecting an ERP is a very big decision, you will need a collection of strong referrals in many different areas: our industry, local ties, recent implementations, 5-year customer, and long-time customer, to name a few of the most common requests from prospects looking for customer referrals.  In other words, whether cloud or installed, your software has the same financial incentive to turn you into a happy customer.  Yes, there is yearly maintenance, there has to be, otherwise the software cannot grow and continue to provide you with the latest advancements you desire.  Don’t let cloud fool you, you’re paying for maintenance in your monthly “fee”, or however they position it.

On the IT side, one of the benefits of the cloud is there will be some savings since you will only need someone capable of maintaining your internal network infrastructure.    On the flip side, this also leaves you very vulnerable if system issues do come up that may require a certain expertise, forcing you to pay IT premium services to resolve the problem.

4. Importance of Implementation

Similar to the first point, whether you are on a cloud or whether your service is on-premise, your implementation and training are the most vital steps to ensuring the success of a new system.  Regardless of whether there is an installation done on site, or whether you sign up on the cloud, the training process should not differentiate.  You will still need to learn how to build an item master, plan and schedule, conduct various accounting procedures, uploading master files and data, and all the other vital areas to your business that will be handled within your new system.   Additionally, whether you are actually customizing the core software or just writing your own reports, the flexibility to do so if needed is important.  SaaS implementations may not offer the ability to customize at all, and most do not even provide you access to your own data for the purpose of as needed queries or reports.  You are often limited to the report generator provided by the software which does not offer the flexibility you need.

5.  Ability to test drive… and further drive YOUR system.

If you were in the market for a new car and you really wanted to spoil yourself, of course you would want to test drive that luxury vehicle to ensure it was the fit right with your every movement.  Fast forward 12 months from your purchase and you noticed something was wrong or you wanted an upgrade to a certain area of the vehicle.  I’m assuming you would want your dealer to have the ability to accommodate to these requirements, correct?

Same is true with a manufacturing ERP vendor.  Again, I’m not sure if IW’s article is meant to cover the entire manufacturing industry, but testing the system on many levels is a crucial aspect to the success of any implementation (might I add every implementation is a major undertaking for these companies).  Specific to ProfitKey’s philosophy, not only should the vendor provide their prospects and customers with a test database, or a sandbox, but the first stage of training should be done right in the heart of the system, with the customers own data, bills of materials, routings, etc., all before the full implementation process has even begun.

In addition, while it is nice when the market/vendor provides you with a new set of bells and whistles, what is most important to you, is going to be what areas can be improved or modified that are specific to your growth needs.  A true ERP vendor will be customer-driven.  What I mean by that is, they will have a firm understanding of their market and customer base which will dictate what advancements will happen.  Why pay for things you don’t care about nor will ever use?

While the cloud is rapidly growing and no longer in the infant stage, including in the manufacturing industry, there are still many uncertainties hovering over it. This is especially true when you are talking to the robust functionality that many of the long-standing hosted vendors can provide.  They, too, realize this shift of focus and the benefits that the cloud and hosted models can and will provide.  Simply put, for a project that will help shape the future of your company, and sometimes re-shape the risk of this platform for small to mid-size manufacturing companies is too high right now.

Posted by Jason Rourke, Marketing Manager, Profitkey International

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