Software As A Service
What Is ERP Hosting?
Hosting is a software deployment and subscription model in which an application resides on the software provider’s remote servers, rather than the customer’s onsite servers. The application is delivered via the Internet. With a hosted delivery model, the solution provider assumes responsibility for configuring, upgrading, maintaining, and supporting the application.
Since its inception, hosting has been referred to by many different names, including application service provider (ASP) solutions, software on demand, and, most recently, software-as-a-service (SaaS). Although there may be some minor variations among these terms, the underlying principle is largely the same: under a hosted ERP delivery model, applications are housed in a remote location and delivered directly to end users as a service via the Internet.
The Advantages Of SaaS
Clearly, it is important to consider the business advantages of each potential solution before deciding. Let’s take a minute to consider all the advantages of SaaS as a solution. SaaS offers certain business advantages to small and mid-sized businesses that other potential solutions do not:
Financial Value
• Time to Value – SaaS is quickly installed and more quickly made part of the work process when compared with on-premises software. Often it is possible to self-provision a trial use, or “try before you buy,” a SaaS solution to get a feel for how it looks, feels and operates. Typically, once licensed, a SaaS purchaser is up and running much quicker than with traditional vendor software. As a consequence, the SaaS purchaser can begin to realize the business benefits earlier. The payback period is much quicker, and the ROI is significantly better than with vendor software.
• Minimized initial investment – Because the solution is purchased as a service, hosting replaces large upfront expenditures and long, often complex implementations, with predictable, regular monthly pricing for the customer – usually calculated on a per-user, per-month basis. Using hosted ERP systems, today’s small and midsize businesses are often able to achieve a rapid return on their software investment, a lower total cost of ownership, and the many business benefits associated with using a software solution previously available only to large enterprises with more substantial IT budgets. This allows smaller organizations benefit from a level playing field and often neutralizes the technological advantage that their larger competitors have enjoyed for years. Studies comparing the total cost of ownership of SaaS versus on-premise vendor software consistently show approximately 30% lower costs with SaaS, whether the implementation is for 30 or for 300 users.
New Technology
• Continuous Innovation – On the application software level, the SaaS provider ensures a continuous stream of ongoing upgrades to the business solution, all behind the scenes. Unlike in an on-premises software setting, the new releases and functional upgrades are all included in the “per-user, per-month”. There is no annual maintenance surcharge of 20% of the list price of the vendor software.
Improved Operations
• Access – SaaS provides employees with instant access from anywhere. Because they can be
• Easier to Implement - You don’t have to install the software, it is already installed and ready for you to use. You don’t have to manage the hardware, the software or the network. Especially, you do not have to manage the people, the technicians, or hire or train them. The SaaS provider manages all of this data in a remote data center infrastructure for the SaaS customer.
• Customization – It has become increasingly easy to adapt SaaS solutions to fit the needs of small and mid-sized enterprises. Some SaaS solutions enable customization by programmers or system integrators. Other SaaS solutions target end users with easy-to-use configuration capabilities that allow non-programmers to easily modify their look-and-feel or their business processes. For many businesses, configuration may be a more appropriate approach, due to its simplicity and lower cost (no programmer required).
• Expandability - Hosted ERP solutions are easily scalable and flexible to meet changing business requirements. Adding or removing users can be done on demand and will simply change the monthly subscription fee. This flexibility is particularly beneficial for growing, seasonal, or cyclical businesses that need to quickly change their user base to meet their unique business requirements. In fact, that may be the most significant unstated and unexpected benefit of SaaS. It is a completely scalable business resource that does not require large capital expenses at any time.
The Disadvantages Of SaaS
• No direct control of the data - One of the biggest hurdles to get over is the control of the data. Specifically, what happens when things go wrong? Every company trying to sell a product will tell you that things can’t go wrong and that they will be there to support you for years to come. It is important that you ask the difficult questions. How safe is my data? Will I be able to download it? Can anyone else host the application and my data? Stories of companies going belly up are not uncommon, and not only for SaaS companies, but for traditional software companies as well. The only difference is that when a traditional software company goes under, the most you might lose is the years of support you were expecting from the vendor. When your SaaS provider goes under, deeper implications surrounding your vital business data must be considered.
• Internet connection required - Not many businesses run without an internet connection these days. Nonetheless, it could affect your operations if you need to access an application and the internet connection is down. Software companies are trying to solve this problem by allowing their applications to continue to work in a disconnected fashion for a period of time but at some point you will need to sync back up to the server. If this is a big concern, make sure that your provider can address this need.
• Dependence on an outsider- With SaaS, you are trusting an outsider to help you run your business, and if they are not keeping their end of the bargain it can really affect you. To keep it in perspective, these people are out there to stay in business, and they do this for a living, so arguably 95 out of 100 times they can do it a lot better than you could in house. This does not mean that you shouldn’t be aware of the implications so we’ll make sure to ask the tough questions.
• Security awareness – We need to consider how “secure” you feel with SaaS. You will be trusting your data to someone else. This can be a painful reality to accept, but most security breaches occur because of disgruntled internal employees that end up selling or releasing the data when they are fired or when they quit. Having your data managed and stored by an expert is not a bad idea, as long as they take it as seriously as you would. Again, it is in their best interest to do so, but make sure you trust your provider the same way or more than you would trust your internal IT department, and we must ask the tough questions!
COMMON MISCONCEPTIONS ABOUT HOSTED ERP SOLUTIONS
In recent years, hosted ERP solutions have steady inroads with small and midsize organizations. As is often the case with any new or transformational technology, many myths and misperceptions have surrounded the concept of hosted ERP solutions. Let’s take a look at some of these myths and attempt to set the record straight.
Misconception: “Hosted ERP Solutions Provide Only Basic ERP Functionality”
Early hosted solutions did provide relatively narrow functionality, mostly focused on customer relationship management (CRM) and payroll applications. In recent years, however, the concept of hosting has broadened significantly to encompass the full range of ERP functions. Hosted ERP providers now provide standardized software offerings whose functionality rivals that of the rich functionality provided by onsite deployments.
Misconception: “Hosted ERP Solutions Can’t Be Customized”
Hosted ERP providers understand that a one-size-fits-all approach does not work when it comes to meeting the information needs of small to midsize organizations. Most hosted ERP solution providers are readily able to customize the hosted solution to ensure it meet the needs of the customer, including adapting it to the unique processes of an industry. Easy-to-use configuration tools allow even nonprogrammers to modify the look and feel of their software or readily adapt it to meet their unique business processes.
Misconception: “If the Internet Goes Down, Our Business Goes Down”
Because hosted applications are delivered to end users via an Internet connection, some organizations worry about Internet reliability and the potential of service outages. However, in the past several years, the stability of the Internet has improved dramatically, both in reduced numbers of outages, and shorter outage durations. Many hosted ERP providers help safeguard against outages by contracting with two or more separate ISPs. In addition, most hosted ERP contracts have provisions for minimum up-times, with guaranteed standards that often reach beyond 99%.
Misconception: “With a Hosted ERP Solution, Our Data Isn’t as Secure as it is Onsite”
The Questions To Ask
If you are considering a hosted ERP solution, be sure to ask potential solution providers the following questions:
What is your privacy policy?
Your potential solution provider should have a well defined and clearly articulated privacy policy that spells out exactly who has access to various types of information. It should also describe the organization’s standard operating policies and procedures for ensuring privacy. Your prospective vendor should voluntarily provide you with a copy of this policy information.
What level of security do you use to ensure the safety and integrity of critical data?
To safeguard your data onsite, your prospective solution provider should use a combination of intrusion detection system (IDS) and intrusion prevention system (IPS) products and apply anti-virus at various network layers. It should also utilize deep packet inspection (DPI) or an application-level firewall technology that scans all levels of packet transmission. Finally, it should also use secure socket layer (SSL) or https-encrypted transmission to ensure Internet security.
Is your production equipment housed in a state-of-the-art facility?
Your prospective vendor’s data center should be secure, free of windows, and built with cement or steel fortifications. It should also be located somewhere that is not prone to inclement weather.
Please describe your facility’s physical security arrangements. Are they in place 24 hours a day, 365 days a year?
Similar to its privacy policy, your potential hosted ERP solution provider should have well-defined and robust security arrangements that are in place at all times.
Do you contract with an independent organization to conduct periodic vulnerability scans?
In addition to maintaining an intrusion response system and a prepared response plan, your prospective solution provider should frequently commission both routine and unannounced security audits.
How often do you back up data, and where are the backups stored?
Your potential hosting provider should have in place a rigorous program of data backup and offsite storage in a secure location remote from its main data center.
Do you offer full hardware redundancy to avoid the negative consequences of a power failure? The data center and backup location should have redundant power supplies, such as battery and diesel generator backups, to avoid the negative consequences of a power failure.
