Gartner Research: SaaS ERP Suites "Still Immature"

By: Jeff Myhre, Chief Editor  (8/25/2008)

Denise Ganly of Gartner Research has just published a report that will steer large businesses away from SaaS ERP suites.  She point blank says, “Except for use in two-tier ERP deployments, large organizations should ignore this space.”  She acknowledges the hype surrounding SaaS ERP but offers convincing reasons why this segment has yet to mature.

First of all, the impressive growth rate of ERP SaaS is deceiving.  She points out that the growth here is going to be driven by “adoption of human capital management SaaS and financial SaaS point solutions.”  Her expectation is that 2011 is the earliest the market can expect “mature robust solutions” in SaaS ERP.

Also, these suites are not “instant on,” she writes.  Yes, you do just flip a switch, but then, the business needs to be “re-engineered, processes redefined, integration points defined and so on."

Total cost of ownership is another difficulty.  The TCO is higher with SaaS ERP and may not stack up against on-premises solutions.  “The multitenant architecture needed for SaaS ERP suites results in high internal efforts and costs for the initial setup and the ongoing maintenance and upgrade of the system.”  She cautions, “beware of unexpected 'hidden' costs, such as sandboxing, testing and development, storage and integration.”

Additionally, there are security concerns especially regarding privacy and financial data.  She writes, “Vendors must prove to organizations that are considering SaaS ERP adoption that their security and privacy concerns are unfounded through super low-cost or no-cost, proof-of-concept trials, encouraging early adoption through value pricing and getting early adopters to share their success stories.”  Easier said than done.

Gartner Dataquest forecasts that SaaS will have just 16.7% of the total ERP market in 2011.  Ganly explains, “SaaS ERP will continue to grow, particularly at the administrative level.  However, the complexities of integrated ERP suites, along with a lack of credible vendor interest in this segment, means that truly integrated offerings (such as SaaS ERP suites) for large enterprises are unlikely to emerge in the near future."”

To see the $195.00, 7-page report, visit

http://www.gartner.com/DisplayDocument?ref=g_search&id=735716&subref=simplesearch

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