IQMS Blog for Manufacturing ERP Expertise

There is no “O” in SaaS – IQMS Reflects on TCO and The Cloud

Posted by Glenn Nowak on Thu, Oct 11, 2012 @ 10:57 AM

CloudIQMS attended the Precision Metalforming Association (PMA) ERP Conference last week in Cleveland. The event was held in an interesting format in that the ERP suppliers were allowed to give a brief overview of their software and company, followed by a case study opportunity for a customer to discuss their success with the supplier’s ERP system. While IQMS was not able to have a "live" customer attend, we were able to show a video from one of our customers:  Gill Industries, Inc., a full service provider of engineered assemblies and metal stampings in Grand Rapids, Mich. [Click here to view the video of Gill's IQMS Manufacturing Success Award finalist nomination]. Feedback from the attendees at the show indicated that they could really relate to IQMS’ presentation as it showed a real company using its manufacturing ERP software in action.

The conference also featured three keynote speakers: Cindy Jutras of Mint Jutras, Scott Holter of Meaden & Moore and Frank Scavo of Strativa, Inc. A majority of the presentations focused on "The Cloud" and Software-as-a-Service (SaaS). I particularly liked Jutras's clarification of SaaS versus Cloud when she said, "All SaaS is Cloud, but not all Cloud is SaaS."

I think a lot of people are not clear on the difference between SaaS and Cloud and often confuse the two. With SaaS, the company operating the software does not own the software but just uses it on a subscription basis (typically based on monthly payments). This is contrasted with purchased/owned software systems (think buying a house versus renting a house). The Cloud refers to where the software resides (the servers typically are in a data center that is owned by the software supplier or a third party). Therefore, you can have SaaS solutions and also purchased/owned software solutions running in the Cloud.

I did not, however, agree with Jutras when she stated that the Total Cost of Ownership (TCO) of ERP software was lower for a SaaS-based system. Last time I checked, there was no "Ownership" in SaaS. With a hosted solution, you do not “own” anything. As noted above, it is essentially like you are leasing or renting your software. In many cases, your data does not belong to you and if you stop paying your subscription fees, you could be immediately cut off with no access to your system. Also, in most cases, if the operating cost calculations are done over an extended period of five to 10 years (which should be the minimum expectation for an ERP purchase), the costs to operate a non-SaaS ERP system will be significantly less than a SaaS solution.

At the end of the day, I think that everyone at the conference agreed that there are advantages and disadvantages to the Cloud. If you are looking for new ERP software, you should investigate a Cloud option as part of your due diligence. IQMS is primarily an on-premise solution, but we do have many cloud offerings, such as our tablet and smart phone apps, our RTStation and our WebDirect customer and vendor portals. We also have many clients that are hosting their data on the Cloud or using our managed services option. Given that it sounded like all the ERP companies at the event have a Cloud strategy or offering, it makes sense for ERP selection teams to explore all options.

Holter summed it up best in his presentation by saying that hosting solutions of the Cloud, SaaS and on-premise are just software delivery models. And while delivery models are important, it is the fit and function of the software for your business that should be the major decision criteria. IQMS wholly agrees with Holter’s statement. As a company, we have made the decision to focus completely on providing ERP and MES software – we are not in the business of providing a hosted service. We choose to focus completely on our software solution. Because if the software doesn't fit or work well, who cares how you access it?


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Tags: manufacturing ERP software, IQMS, ERP Selection, Mobile ERP Software, Trade Shows