SaaS Offers More to Manufacturers

Software-as-a-service (SaaS) offerings continue to expand at a dramatic pace. According to a recent analyst report issued by Deutsche Bank, the SaaS market will increase from $3 billion today to $30 billion by 2013. This will represent 50 percent of all applications being purchased by organizations. Deutsche Bank states that the trend has been under-realized, as the number of vendors has increased at a very rapid pace. Furthermore, they report that 44 percent of CIOs intend to implement SaaS solutions, versus only 8 percent responding positively in 2006. The news for high-tech and industrial manufacturers is SaaS solutions are now available for applications that are complex, or requiring integration with master data. As SaaS becomes more established, with the success of applications such as Salesforce.com, the usability of the on-demand model is being extended into applications that offer manufacturers robust end-to-end solutions. These include applications for complex product configurations and quoting, demand forecasting, inventory control and lean manufacturing, human resource management and compensation planning. Historically, these applications were only available as traditional on-premise software, but now software vendors are introducing the same applications in on-demand environments. The suppliers find the applications are easier to maintain and upgrade, faster and easier to install, and offers their customers more flexibility. These solutions can be integrated to ERP systems to the extent needed, and concerns on ERP integration or data exchange, is no longer an issue. Furthermore, a number of companies are introducing ERP in on-demand models. Notable among these is Workday, started up by the founders of Peoplesoft. In a short time, on-demand ERP has been successful in the mid level market, with pilots being conducted by numerous Fortune 150 firms. SAP has also recognized this trend and has introduced on-demand ERP for mid-level markets. The advantages for high tech and industrial manufacturers can be significant. There is no investment in software, hardware, or network support. Upgrades are automatic and free, with no costly patches and associated downtime. Traditional on-premise software maintenance fees are frequently equal, or greater than, the annual license costs of on-demand applications. On-demand applications are noted for their responsiveness to changing user needs, and ease of set-up and configuration. An important note for capital intensive high tech and industrial manufacturers is the fact that SaaS applications can be treated as a maintenance expense, not requiring capital outlays. Furthermore, SaaS implementations can occur very rapidly, reducing up-front costs. The success of a range of SaaS applications working well together can benefit from capable consulting and implementation companies who build seamless integration between the applications. This is much less difficult in an on-demand environment, as many of the vendors are cooperating to make sure their offering integrates well with others. SaaS applications can provide the robust, complete solutions that high tech and industrial manufacturers are seeking -- extending from the back office to the front office and into the customers-facing applications.

About the Author Douglas Timmel (DougT@Bluewolf.com) has over 30 years in a manufacturing environment having experience in ERP and CRM implementations. He currently works for Bluewolf (www.bluewolf.com), a leading consulting firm specializing in software-as-a-service implementation and integration solutions. Bluewolf is based in New York and San Francisco with regional offices throughout the U.S. and Europe.