On-Premise vs. SaaS ERP Applications – "They're exactly like Houses"

Note to reader – upcoming blog content will utilize a Human Resource specific ERP implementation but same model in any other scenario.

Before we move on to what most organizations “hang their hat on” the case to implement a new ERP application – business process improvement, let’s do some education on the difference between ERP Models. Let’s step back and discuss the difference between an On Premise and a SaaS application in its simplest form.

Okay, stop furrowing your brow to figure out what I mean by the title of this blog – let me explain.

In the 90’s when ERPs took a major step forward in business operations, all the applications were On-Premise. You had your own world to play in and that also meant that you would plan, blueprint, build, validate, move into and work on your “Customized House” (or On-Premise ERP) – and you owned it. This could be expensive, time consuming, requiring lots of people and can be pretty stressful if you go with the wrong builder (ERP implementer).

This also meant that once you moved in, you had complete responsibility for the maintenance and support for everything in that house – power, plumbing, walls, windows, floors, ceiling, roofing, stairs, basement, paint, heck even the security system. Great from a control perspective and getting exactly what you want but, expensive because you needed “experts” in those “trades” and you had to keep them on staff because the government might add a new wrinkle to make things interesting or even if you ever needed to do the roof again – just because the business said it wanted to change the colour of the shingles..

Bottom-line – Customized Houses (On-Premise ERPs) are great but very expensive.

As you can appreciate this proved to be too costly for the vast majority of companies and they went down a different route of stand along best of breed solutions – but over time the software and hardware companies came up with a better model – Software as a Service (SaaS).

In a Software as a Service or SaaS Model you are leasing an application that comes structures and standardized functionality already built in making it more universal for companies and "easier" to implement.

Hey, doesn’t that sound just like what residential builders do in suburb communities. They design and build quality homes using standardized layouts and then let purchasers pick from a prepackaged set of functions, features and fixtures that can be incorporated into the home - and you are renting it – they do all the heavy lifting regarding maintaining your “house”, but you are accountable for all the minor modifications or configurations you make to your environment (I’ll expand on this item in a future blog).

As are result, in a relatively short period of time, using as smaller set of trades people (ERP projects call them consultants 😊) you can move into a quality “Standard House'' (or SaaS ERP solution) and it will be exactly like the one across the street, in another city or another province, because they are using the same template and methodology to build homes.

However, it does mean that you need to conform to the vision and design of their master architects, so business process reengineering may not be as evolutionary as you think.

Hope this helps demystify ERP application models that are available in the marketplace.

If you need to do a more extensive review of the difference between scenarios or specific applications that you would like to investigate, my team is ready to help you ensure that you are getting the right solution for your organization that will work – now and in the future.