Why old ERP wine can’t be bottled in SaaS

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There is a fundamental shift that is happening to ‘enterprise apps’ in the SaaS world when compared to the On-premise ERP world. I tried to google for ERP vs SaaS and found articles like these:

While, there is nothing wrong with these articles – I wasn’t able to find one that addressed what I feel is a much more fundamental shift in the way the SaaS applications are / will be built.  This thought has been running in my mind for quite sometime now and I indeed talked about this to Zinnov Research in a long research interview around 4 months ago. They did produce a great slide based on our discussion – more on that later in this blog. So, as I didn’t find much success in locating articles or blogs in the direction of my thoughts,  I decided to blog it myself.

In my view: A piece of enterprise software is defined by the three high level boundaries or dimensions below

  1. Application Context
  2. Geography / Regional Context
  3. Industry / Vertical Context

Let me explain this a bit.  ‘Lease Management’ system (Application Context) for ‘Real Estate’ companies (Vertical Context) in ‘Middle East’ (Geographical Context) is fundamentally different from the one that is needed in ‘India’ and surely different from the one that is needed in ‘United States’. And, most certainly ‘Lease Management’ for ‘Automobile Leasing’ is quite different – I don’t have to elaborate this.

ERP Suites such as SAP are fundamentally built on the premise that there is a common super set domain model which encompasses the variations for all  of the 3 different dimensions of described above. These domain models are either configured – for fitment cases and customized -for non-fitment cases which is what happens mostly for large deployments like Unilever et. al. And, it takes for ever in the customization route and many times the ERP implementation fails.

If you have a step back and look at this approach – the fundamental flaw is close to obvious. No wonder there are industry specific templates from the ERP Suite Vendors to manage this mess. Obviously those have be portrayed as additional capabilities and sold to customers rather than fixes for the fundamental issues.

On the other hand, SaaS takes a point solution approach for each combination for Application – Geography – Vertical.  Kishore is CEO of  ImpelCRM and my best friend says that CRM – even though a horizontal application is quite different for ‘Indian’ market and they are winning deals against ‘SalesForce.com’ and other competitors because their software understand the Geography very well.  If this is true for Horizontal Apps such as CRM – the issue around vertical apps is much more.

So, this leads to great opportunity for applications for potentially every combination of Application – Vertical – Geography; leading to potentially a mushroom of SaaS ISV growth. SaaS will lead the transition from an ‘Umbrella Solutions’ to  Specialized – ‘does one thing very well’ type – ‘Point Solution’. This one slide from Zinnov Research sums it all for you – which I mentioned earlier in this post.



What is your POV?


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6 Responses to Why old ERP wine can’t be bottled in SaaS

  1. prkralex says:

    Even small and medium-sized businesses need enterprise resource planning ERP suites, and this selection of software proves that you don’t have to be a big player to get access to serious tools.

  2. Suresh, I wrote a post about which is slightly different in its approach but tackles the same problem – http://www.prudentcloud.com/saas/on-premise-to-saas-road-less-traveled-03032010/. This was after I heard many a incumbent claiming they are now both SaaS and On-Premise.

  3. Pingback: Why old ERP wine can’t be bottled in SaaS | OrangeScape Official Blog

  4. Pingback: Why old ERP wine can’t be bottled in SaaS | OrangeScape Blog

  5. Sanjay Narang says:

    Suresh I do agree with your thoughts and sincerely appreciate the efforts invested in this analysis in fact the solution or the message is present in your informative blog content itself. If “Why old ERP wine can’t be bottled in SaaS” then as the current flow goes and momentum states “A SOA enabled ERP wine can be bottled in SaaS” as it’s going to cover all the boundaries & dimensions which were stated:
    1. Application Context
    2. Geography / Regional Context
    3. Industry / Vertical Context
    Generalizations of applications are must to get rid to these boundaries in today’s world and in order to be complaint for SaaS models vendors have to little more aggressive in the market to grab the opportunity. The dimensions listed are definitely a bottleneck if vendors are not flexible enough to customize their products in order to achieve re-usability and service based approach to work around DEC (Delay, Efforts and Cost) for reduction. The industry templates referred under ERP are still a step forward in this direction itself.

  6. History of “ERP Implementation” failures could be the reason. When fear factor takes priority, very little room for innovation and exploration of possibilities.

    After all, old wine gives the best kick…

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