By Krishnan Subramanian on November 15, 2010

ERP has been considered the last frontier for SaaS and we have seen tremendous resistance from even organizations who were otherwise open to the idea of SaaS. Part of the reason was that SaaS ERP offerings were not robust enough for deployment, unlike say CRM applications. The most important reason for the resistance is that many organizations consider ERP to be too strategic to let go of the control. A recent report (well, not recent but two weeks old but still important for our readers) by Aberdeen Group finds increasing interest towards SaaS ERP solutions.

Some background

A report released by Aberdeen Group last year found that SaaS ERP is yet to take off even as other SaaS applications are finding considerable traction among the enterprises. Their study found that SaaS ERP adoption in large enterprises were at 3% compared to 11% adoption of CRM for Salesforce Automation or Talent Management. Clearly, SaaS ERP was lagging behind other categories in the enterprise space. Their research found that 55% of the surveyed people in 2009 felt that ERP is too strategic to running their business followed by 51% who cited security. See the graphic for a more detailed look at the concerns. Clearly, in spite of attractive TCO and other advantages, SaaS ERP has remained a distant last in enterprise adoption, confirming the assertion by pundits that SaaS ERP is the last frontier for enterprise SaaS adoption.

Current Trends

According to the recent report released by Aberdeen Group,

*39% of respondents to Aberdeen’s 2010 ERP survey are willing to consider SaaS ERP implementations. This is a 61% increase in the willingness to consider SaaS from 2009 to 2010
*Not just that, there is a decreased willingness to consider the traditional licensed on-premise option, which dropped by almost 18%
*79% of survey respondents are considering SaaS because of the lower total cost of ownership. They are also considering it because it reduces the cost of upgrades and because they have limited IT resources and no interest in building IT staff

Conclusion

These data clearly points to increased SaaS adoption among the enterprises when the economic climate continue to be dull. The positive interest towards SaaS ERP coupled with the declining interests towards traditional ERP applications is a clear indicator that the coming year could be the year when the last bastion of resistance towards enterprise SaaS started to crumble. If you are in enterprise and have a take on this topic, feel free to add your thoughts.