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Calsoft Systems

What Is A SAAS ERP Solution?


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SAAS, Cloud, Hosted, On Premise what do they all mean? And which one(s) are right for you?
Let me try and clarify this as simply as possible. I’ll focus on the definitions as opposed to the benefits of the various options. If you’re looking for guidance on which is better for you then I recommend reading Article 5, Cloud ERP vs On-Premise ERP – Which Is Better? (Click Here).

Here’s how the (Cloud vs On-Premise Options) are structured:

Cloud or On-Premise?

1. With Cloud, there’s either SAAS or Hosted.

a. SAAS (Software-As-A-Service) is a “Lease it” option.

b. Hosted (Your ERP system is hosted in a hosting center) – You can “Lease It” or “Buy It”.

i. Buy It – buy the hardware and/or the software. And pay monthly recurring charges for it to be hosted and monthly recurring charges for the IT services to maintain it.

ii. Lease It – pay monthly recurring (per user) charges for hardware, software, IT services.

2. The On-Premise option is pretty much a “Buy It” selection.

a. Buy It – buy software, hardware and IT services (if needed).

b. Lease It – Not really available for an On-Premise solution. However, getting a loan for the project would offer cash-flow that would be more similar to that of the SAAS/Hosted options.

Here’s A More Detailed Explanation Of The Above Options

Cloud-based or On Premise – Two Deployment Options for Business Applications (ERP systems)

I. Cloud-Based Solutions – Both the software and hardware (i.e. servers) are located “offsite” of your company. Thus the ERP application resides outside of your network infrastructure.

A. SAAS (Software-As-A-Service) – Basically you’re leasing the software and hardware instead of buying it.

1. Software License – You simply pay a monthly (per user) charge to use the system.

2. Implementation Service – Often times with SAAS solutions a basic system is already set-up and available to be assigned to a company to start using it. This can save about 2 weeks of time (when compared to an on premise solution).

There is still the one-time implementation charge (usually paid upfront, as opposed to paying it gradually over a period of several years, to configure the system) but once the system has been set up and implemented then only the recurring monthly charge needs to be paid.

3. Annual Enhancement Costs – No annual software maintenance costs. But you may need to sign a contract for 2 or 3 years.

4. Additional Monthly Recurring Costs – No separate line item expense on the monthly recurring charges. However, most of the time bundled into the monthly recurring per user charge, you’re also paying for IT services and support to maintain those systems (i.e. installing service packs, installing software updates, performing hardware updates, assistance with technical support issues, etc).

B. Hosted – Your software and the hardware is stored outside of your company network in a hosting center. You can either buy the hardware and software or you can pay a monthly recurring (per user) charge to lease it.

1. Buy It
a. Software License – Pay for the Software and hardware upfront.
b. Implementation Service – Pay for the ERP implementation services upfront.
c. Annual Enhancement Costs – Pay for the first year of annual software maintenance upfront and pay annually.
d. Additional Monthly Recurring Costs – There will be a Monthly Recurring Charge for the hosting services and probably also for the IT related services to manage the systems for you.

2. Lease It
a. Software License – Pay a monthly (per user) recurring fee to lease the hardware and software and have it stored in a hosting center. i.e.Microsoft Dynamics GP & Dynamics NAV are available in a SPLA license (Services Provider License Agreement).
b. Implementation Service – Pay for the ERP implementation services upfront.
c. Annual Enhancement Costs – No annual software maintenance costs. But you’ll probably need to sign a contract for 2 or 3 years.
d. Additional Monthly Recurring Costs – There will be a Monthly Recurring Charge for the hosting services and probably also for the IT related services to manage the systems for you.

II. On-Premise Solutions – Both the software and hardware (i.e. servers) are located “On -site” of your company. Thus the ERP application and the related hardware reside inside your network infrastructure.

1. Buy It
a. Software License – Pay for the Software and hardware upfront.
b. Implementation Service – Pay for the ERP implementation services upfront.
c. Annual Enhancement Costs – Pay for the first year of annual software maintenance upfront and pay annually.
d. Additional Monthly Recurring Costs – None.
(If outsourced IT services are needed) then pay for the IT services as required.

2. Lease It (Not Really Available For The On-Premise Option)

The closest “Lease It” option for an on premise solution would be to get a loan (i.e. from Microsoft financing) to pay for the project. But pretty much everything for an On-Premise solution needs to be purchased.

A loan would simply offer an On-Premise solution a cash-flow that is closer to the cash-flow (i.e. payment terms) of a Cloud or Hosted solution.

by Calsoft Systems

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