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SaaS continues to spur midmarket adoption of enterprise apps  [ Info World ]
June 11, 2008 02:15 AM
By Ephraim Schwartz
June 10, 2008

Microsoft's launch of Dynamics AX 2009 last week in an on-premise version only -- at announcement there was no indication of a future SaaS version -- has stirred the debate once again over what midmarket companies are demanding from CRM and ERP applications and how that demand will shape the future look of business software.

Dynamics AX is Microsoft’s backend ERP offering. The Redmond giant also offers Dynamics CRM for the front end, this time in both SaaS and on-premise versions.

Vendors experiencing huge growth in SaaS for midmarket
Most  ERP and CRM midmarket solution vendors such as Intacct, NetSuite, Sage, and define the midmarket as companies with anywhere from 10 to 1,000 employees or divisions of large companies with a similar employee makeup.

Intacct, a SaaS ERP vendor, is experiencing in excess of 100 percent growth year over year according to Dan Druker, senior vice president of marketing at Intacct. NetSuite, one of the few vendors that offers an ERP/CRM business suite of SaaS services is reporting a 62 percent growth. Sage, a huge UK based business software provider with both on premise and SaaS solutions and a whopping $2.3 billion in revenue last year is reporting a 30 percent increase year over year.

Microsoft is also hitting all of its numbers, with growth in the triple digits, according to Josh Greenbaum, principal at Enterprise Application Solutions.

“They’re getting some very big deals, especially by working with Avanade as a reseller.”

ERP SaaS adoption is trailing
Although many vendors are riding the crest of a huge wave for SaaS CRM solutions, there is no similar sales tsunami as of yet on the ERP beachfront.

Companies appear to be moving at a more deliberate pace before replacing current ERP solutions that are so central to their existence.

Paul DeSaro, senior operations officer, IT, for Wilmington Trust uses Sage CRM but he said going outside the firewall for an on-demand ERP solution “is a  [security] concern.”

Nevertheless the ERP vendors are seeing growth and NetSuite’s Druker is extremely confident that midmarket companies will come around to SaaS for ERP.

 “Nobody wants to change a core system of record, but at some point they have to make a transition. You simply run out of steam with QuickBooks.”

Economics and innovation drives midmarket adoption
Economics is driving the adoption process for SaaS in the midmarket across almost all business applications, according to Denis Pombriant, principal at Beagle Research. He says the two economic drivers are price point and the fact that business users in the midmarket understand the value of investing in a solution that will allow them to compete with companies much larger than their own.