As someone who's written about the potential of ERP software delivered as a service to steal at least some market share away from on-premise ERP software, I was interested in the seemingly lukewarm showing of ERP on a list showing growth among SaaS applications, part of a report issued by Gartner that predicts robust growth for the overall SaaS market over the next few years.
According to Gartner, ERP SaaS revenues were fairly flat from 2008 to 2009, while other categories saw stronger growth. I contacted Gartner Research Director Sharon Mertz for her thoughts, and she offered several observations.
She said the SaaS model does not lend itself well to various ERP categories, including asset management and capital management, in the manufacturing industry because many of its processes are highly customized and involve robotics and other sophisticated gear. She's not alone in that view. Aneel Bhusri, co-founder and co-CEO of SaaS ERP provider Workday, said as much in a podcast interview with Dana Gardner, stressing that services companies rather than manufacturers are the target market for Workday applications beyond human resources and payroll accounting.
With existing ERP suites, many companies are reluctant to remove the installed software and start over with SaaS because they've already invested considerable resources, not only in upfront costs but continued spending on customization and support, she said. SaaS ERP adoption is higher among SMBs, but it's a highly fragmented market. SaaS ERP providers are beginning to move upmarket, by pitching their products for departmental deployments, but companies don't typically think of purchasing ERP software that way.