Cloud Computing – SaaS Solutions by SAP ERP

SAP ERP Cloud Computing – SaaS Solutions

SAP is the world’s largest used enterprise resource planning solution that provides solutions for business process automation based on industry best practice standards. Given the IT service industry shift from Shared Services to Utility based ICT services, SAP has come up with two suite of SaaS solutions.

SAP Business By Design

SAP Business by design is focused on providing large organization’s subsidiaries and small & medium enterprises a full application suite that can help automate their idea to market, market to order and order to cash business processes while still paying based on usage instead of huge deployment costs. It gives them flexibility to configure functionality they need including Analytics and reporting that complete the full suite.

SAP Business One Cloud

SAP Business One Cloud is focused on providing small organization’s an application suite that can help automate their marketing, sales, delivery and service processes while still paying a low fees based on usage instead of huge ICT costs. The suite is preconfigured and ready to use for small size organisations. Being a cloud based solution it allows small businesses to become flexible and IT ready while giving them scalability to ramp up usage based on need.

CONCLUSION

Cloud Computing has started in past decade as a natural transition from ICT Shared Services to ICT Utility based services. The use, need and availability of Internet has made ICT traditional services transition to Cloud Computing service even more faster.

Cloud Computing Service benefits are now out weighing the issues faced and most the issues faced are by and large overcome by service providers. Cloud computing services are being adopted by most organisations and the adoption continues to increase every year.

Its clear that cloud computing services and specially SaaS solutions would continue to grow as this allows the organisations to become agile in adopting new solutions while reducing ICT investments and paying for use only.

The existing SAP ERP SaaS solutions are targeting and meant for use by SMEs and Smaller organisations.  SAP has to look into how it can create an offering for even the large size organisations traditional SAP ERP solution to SaaS SAP ERP solution. Delay in doing so could result in lost opportunity e.g. in saleforce.com is a fast growing SaaS offering for CRM solutions and many organisations are adopting it.

Lastly Cloud Computing Services open a vast opportunity for service providers to build and offer new internet based services and solutions that can help organisations achieve their goals.

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Software as a Service (SaaS) Service Model – Benefits and Issues

Benefits of SaaS Service Model

Cloud Computing SaaS Model offers the full stack of ICT service and full stack means it delivers an IT Solution for the organisation. The key benefits of SaaS service model can be listed as follows,

  1. One Standard Solution: SaaS solutions are made using industry standard best practice business processes for making them adaptable and fit for entire industry. The SaaS solution offering is standard and available across the whole organisation for use based on needs. This gives the organisation real time usage across the world and more importantly saving ICT costs of duplicate or different solution at different locations.
  2. Self Service Model: SaaS solution offering works on self-service model where by the business users can choose and pick the services options they need. The solution support issues are also self-service based making the business users to check and receive support from one central support.
  3. Pay for Use: SaaS solution offering allows organisations to pay for use, it means organisation do not incur or worry about ICT additional costs as they pay only for number of users using the specific service(s).
  4. Reduced Costs: SaaS solution offering allows organisations to reduce their ICT capital expenditure costs as the solution is ready to use and minimal to no upfront investment required to start using the SaaS solution. On the other hand as there is no ICT Infrastructure and other components ownership, the organisation only incurs the usage costs and has ease of ramp up and ramp down usage, thus allowing higher flexibility.
  5. Faster Time to Market: SaaS solution offering reduces the time for preparation and deployment to the lowest possible as the solution is available for use and requires minimum configuration, setup and user training time to start using the solution. As the whole organisation uses only one solution any changes or new functionality can be also introduced in one go to the whole organisation.
  6. Standard Interfacing: SaaS solution offerings are used by multiple organisations so these are made using industry standard best practices processes and ICT standard for cross system communications and message exchanges. This makes organisations to connect with their customers and consumers in a standard and easy to use way.

Issues of SaaS Service Model

Cloud computing and SaaS service offering by service providers is still evolving. The key issues of SaaS service model can be listed as follows,

  1. Security: Security is the key concern for all organisations that think of SaaS Service adoption. This emerges from the fact that everyday unsecured internet sites and at times even the highly secured internet sites are hacked and data is stolen. SaaS service offerings are internet based and concerns organisations have is about securing their identity and organisation data.
  2. Standards: Cloud computing and SaaS offerings are still evolving and along with them the standards for such services are also still evolving. Type of clouds and mashing of multiple providers e.g. SalesForce.com offering Saas Channel CRM solution while using Amazon IaaS / PaaS service to host it.
  3. Big Data: Data Management is a growing concern for all organisations and its specially an issue for SaaS service solution as the organisation does not own any solution component and pays only of usage of the services. The concern is how the data captured can be stored in organisations data warehouse with ensuring that the data is encrypted while exchange and securely stored as well as usable for generate reports and insights required for decision making.
  4. Change: While adoption of SaaS service is fairly simple, the concern and issue is of switching from one SaaS solution to other and how the transition as well as underlying information exchange from one vendor to another vendor to be handled.
  5. Strategy and Governance: For Cloud Computing Service adoption organisations must have a clear strategy and governance structure and processes. Strategy will help identify in what areas what types of cloud services can be adopted while governance will help ensure clear understanding of roles and responsibilities, compliance and risks.

Cloud Computing Service Evolution and Predictions

Cloud computing is opening doors for businesses and organisations to have IT services available as utility service with predictable cost and quality as per customer needs and pay for use models while still allowing flexibility of needs based selection of SaaS, PaaS, IaaS service and its components.

IT is becoming an essential part of companies DNA and Fabric as organisations realize that ICT services and solutions will give them a competitive edge to achieve their growth using real time information and insights as well as making products and services available using digital presence. Organisations are awakening and becoming to redefine their strategies to become a real time company, at the core of this is IT but now its not just another IT project but a business transformation enabled with word class IT solutions and services.

In most organisations ICT services are already served as Shared Service Model for past decade and organisations have become mature in having ICT services delivered using shared service model. The move from Shared Service Model towards Cloud Computing is a natural progression where organisations go from Shared Services to Utility Services model.

Internet and the need for doing things online and real time is now well embedded in most organisations as well as consumers. This is leading towards having ICT services being available through internet around the clock and in a secured manner. Could Computing Services and Service Model is fulfilling this need.

Forrester Research white paper of he Evolution Of Cloud Computing Markets” of july 2010 shows that organisations are spending around USD 2.4 Trillion for ICT services. Cloud computing is opening up a new space where the organisations will transition towards. A big part of the overall ICT spending would be moving towards cloud computing services. A macro shift of services already began from year 2009 and its expected to grow rapidly in coming year.

The report from delloite consulting of year 2009 suggests that cloud computing services would grow to the size of USD 1 Trillion in current decade and would continue to grow further. Cloud Services offerings from major players like Microsoft – Office 360, Azure and SAP – Business By Design and Business One Cloud and Amazon EC2 and S3 will lead the transition of Traditional ICT services and solutions to Cloud SaaS, PaaS and IaaS services.

Cloud Computing Services are on number 4 position of IDC’s Top 10 Predictions report of 2012. IDC report suggests that Spending on public and private cloud services, and the building of those services (the “cloud arms dealer” opportunity), will reach USD $60 billion. Amazon will join the $1 billion IT vendor club, and the strategic focus in the cloud will shift from infrastructure to application platforms and the race to build the largest portfolios and ecosystems around those platforms.

Cloud Computing Basics

The term cloud computing came in existence is last decade while the concept and types of cloud computing services existed in one or the other form for past two decades. The name cloud computing is given to specify that organisations don’t have to worry about where there IT Infrastructure and Application Software are hosted, instead organisations can focus on the IT services they need to meet their fast changing customer requirements.

In past three decades business process automation has gone to the extent that IT has become a key part of all business transformation initiatives to help automate and enable the organisations to achieve their goals. IT services are more and more seen similar to utility services that are reliable, scalable and paid by usage. Cloud computing is also focusing on provide IT services as utility while keeping in mind that utility service needs vary from organisation to organisation. E.g. The power supply and water are the generic utility services and full fill basic need of electricity and water for the customer. But as the need for customer varies so the utility services vary and accordingly the service costs. The need of an industrial organisation is different to the need of an individual customer.

Cloud Computing focuses on providing IT services as utility services and has three types of service offerings which are briefly explained below,

SaaS – Software as a Service : SaaS offering covers the full stack of IT from the hardware all the way up to the software application service. The service is focused on pay for use and generally operates on the pay per use based on number of users and duration of use. E.g. Microsoft Office 360 costs $30 per user per month for online office application software usage.

PaaS – Platform as a Service: PaaS offering covers the IT stack up to providing a platform that business can use to build / manager their own applications. This service is also focused on pay for use and operates based on type of platform and number of applications to be run on the platform as well as any value added service additions. E.g. A company offering PHP and My SQL platform that can be used by organisations to build and host their own applications.

IaaS – Infrastructure as a Service: IaaS offering covers the IT stack upto the Infrastructure layer, in simple words up to Operating System level. The service is also focused on pay for use and operates based Infrastructure usage like hardware and storage. E.g. Hosting providers like Rackspace, Amazon and T-systems offering standardized, virtualized and secured infrastructure hosting that individuals as well as organisations can use for hosting their application platform and application software solution.

Software as a Service and ERP Systems

Software as a Service

SaaS means Software as a Service has started picking up in last decade as Internet presence and usage continue to increase. Software as a Service is based on pay as you go concept. It allows enterprises to get software as a service and pay for their usage only and thus making it affordable to smaller and medium enterprises.

More and more SaaS is offered using Cloud services means the application is hosted in an internet enabled data center and can be easily scaled based on enterprise demand. The costing model for SaaS normally is usage based comprising of number of users, resources they would use like number of days, number of transactions etc. SaaS based systems can be accessed using web browser (thin client) and not PC installed fat client software hence saving any maintenance, update and client software costs for enterprises.

As per Gartner Group report of 2011, SaaS services revenue has reached $10 billion by 2010 and it’s forecasted to increase to $21 billion+ by 2015. TOP 3 ERP vendors SAP, Oracle and Microsoft have also invested and offering SaaS based ERP solutions.

SAP’s SaaS Offering – SAP Business ByDesign

SAP is one the Key ERP vendors with high market share. In second half of 2007 SAP announced launch of SaaS based offering addressing small and medium enterprises. It is called SAP Business ByDesign. In August 2010 SAP Business ByDesign 2.5 was released to the market which offered further improved scalability and flexibility of choices.

Key offerings

  1. The solution is hosted by SAP partner and managed by SAP.
  2. For use by small and medium size enterprises having less than 500 users.
  3. Even companies requiring a low as 10 SAP Business ByDesign users can subscribe and monthly subscription ranges from $89 to $149 based on type of offering selected.
  4. The Solution has built in business analytics as well as application support and services.
  5. The offerings cover wide range of business areas. The areas covered are, Marketing, Sales, Service, Sourcing, Purchasing, Product Development, Supply Chain Planning and Control, Manufacturing, Warehousing, Logistics, Project Management, Cash Flow Management, Financials, Management Accounting, Human Resources and Employee Self Service.

Modules

  • Customer Relationship Management: Includes supports processes that cover marketing, sales and service activities.
  • Financial Management:  Provides single, up-to-date view of financial condition by integrating core business processes and financials that cover Financials, Management Accounting and Cash Flow Management.
  • Project Management:  Contains an integrated project management solution.
  • Supply Chain Management: Includes Supply Chain Setup Management, Supply Chain Planning and Control, and Manufacturing Warehousing and Logistics.
  • Supplier Relationship Management:  Focuses on relationships with suppliers, procurement processes to perform self-service procurement.
  • Human Resources Management: Covers Organizational Management, Human resources, and Employee self-service.
  • Executive Management Support: Helps management with better decision making. Its customized real time data analytics allow managers to accurately track the most important aspects of business.
  • Compliance Management: Focuses on helping enterprises maintain compliance with changing laws and regulations and to meet regulatory standards.

Flavors

CRM Starter Package: Consists of tools that help sales people in the enterprise and covers market to order business processes. Covers marketing and sales business processes areas.

Financial Starter Package: Focuses on core financials functionality that includes cash flow management, financials and account management, Human Resources and Project Management.

Professional Services Starter Package: Focuses on offering most of Market to Order and Order to Cash business processes. It does not cover Idea to Market processes and modules. Areas covered are Marketing, Sales, Sourcing, Purchasing, Project Management, Cash Flow Management, Financials, Management Accounting, Human Resources and Employee Self Service.

Configured for your business: This option makes all modules and functionalities available and is configured by SAP based on business demand and needs.

All in all SAP Business ByDesign offers complete business process integration and automation solution to small and medium enterprises at lower costs of ownership and faster implementation, expansion and use.

Small and Medium Enterprises and ERP Systems

Introduction

Enterprise Resource Planning (ERP) Systems have been around for more than four decades now, during each decade the ERP system needs and feature continued to evolve and become more user friendly and widely used by majority of enterprises.

On one side ERP systems continue to evolve and on other side the business needs continued to change we moved from industrialization economy to information economy and from information economy to entrepreneurs’ economy.

Entrepreneurs’ economy means it’s an era where generation x and generation y; who  want to work more independently and have their own businesses are taking entrepreneurial path of becoming entrepreneurs’ coming up with their own businesses.

This is leading to flourishing of small and medium business enterprises. These enterprises open a big window opportunity for simple and effective enterprise resource planning systems.

SME Defined

SME stands for Small and Medium Enterprise. The definition varies country by country based on every countries economic status. For Singapore SME’s before April 2011 were termed as companies that have net fixed assets of more than SGD 15 million in manufacturing area and for non-manufacturing companies with employee base of less 200 staff.

From April 2011 the definition is changed and updated to be companies that have annual sales turnover of not more than SGD 100 million or have employee base of less than 200 staff.

If we look at SME’s definition for other countries then it varies based on what suites as SME for the respective country. Although the deciding criteria remains number of staff, annual sales, net asset investment in most cases the absolute numbers differ per country. For some countries SMEs are further broken up in definition as small enterprise and medium enterprise.

Why ERP systems for SME’s

Enterprise resource planning systems have been around for more than 4 decades. In past four decades ERP systems have evolved a lot and so does the vendors offering ERP solutions evolved. From several vendors the market share came down to handful which acquired several other smaller vendors to be the vendor of choice. The big 3 names are SAP, Oracle and Microsoft.

Most of the MNCs and Big size companies have already implemented ERP solution from one of the top 3 vendors. This is leading to saturation of further implementation of ERP systems and it turns to more upgrades and managing the customer accounts.

A study of market share shows that SAP, Oracle and Microsoft are leading in market share of up to 53% in year 2010 while the remaining 47% is shared by other smaller ERP vendors. This leads to the need of firstly evolving ERP systems that fit small and medium enterprises by efficiency (simpler and faster to use) and effectiveness (low cost and scalable).

The other solid reason for ERP vendors to move in the direction of SMEs is due to the fact of growing number of SMEs. Millennium decade is the decade when Generation X are reaching their late 30’s and early 40’s leading towards becoming entrepreneurs while Generation Y phasing in and having the need to work independently leading to initiate their own businesses.

The Enterprise profile statistics report of Singapore (published on 10th July 2009 by Singapore Department of Statistics) based on data of year 2003 to 2007 shows that Singapore has 160000 enterprises and 99% of these enterprises are small & medium enterprises (SMEs). Only 1% of enterprises are non-SMEs (large size businesses). These SMEs value added to Singapore economy between year 2003 to 2007 have increased up to 49% and theses SMEs are employing 60% of workers in the country. This shows that at least up to 49% of Singapore businesses have potential for ERP vendors to deliver meaningful solutions to.

Above statistics is just for Singapore and if this is checked worldwide then in opens up a huge market space which ERP vendors can target to deliver meaningful solutions. Given that number of SMEs will continue to grow ERP vendors are targeting to capture the market share of SMEs.

For ERP vendors there is also another plus point of entering this market and that is related to mergers, acquisitions and disentanglements. The fast changing pace of business changes lead to faster and faster acquiring, merging and disentangling of business divisions by various enterprises. In doing so if ERP vendors have suitable solutions they would be able to help transform these businesses much more smoothly and hence keep the market share growing and their customers satisfied.

ERP Systems Implementation Barriers for SME’s

ERP systems are by their nature wide ranged covering various business processes in an enterprise. As ERP systems integrate various business processes and automate them, they are seen as complex in nature. For ERP systems to be implemented and used by SMEs the biggest barriers are following.

Costs

Cost of ERP Systems from initiation to whole life cycle management is number one barrier for implementing ERP systems in SME’s

  1. Small and Medium enterprises are generally cash poor with low information technology budget and spending power.
  2. Generally an ERP project implementation has lot of one time implementation costs in the area of Consultants, Project Mgmt, Software Licenses, Hardware – Hosting and PCs, and User Trainings.
  3. Additionally the ongoing maintenance and support costs of good ERP systems are very high for small and medium enterprises.

Time

ERP systems require a long time for implementation and changes. Time is number 2 barrier in ERP Systems implementations. Generally full implementation of ERP systems could take from 6 month to 1.5 years depending on size and complexity of enterprise and customization and integrations requested. Small and Medium Enterprises does not have so much of time to get the ERP systems implemented. Also more the time and complexity it leads to more costs which is already number one barrier for ERP systems implementation.

People (Resources)

ERP systems implementation requires various skilled resources to correctly and smoothly implement the solution. From SMEs it requires skilled business resources that know the business process very well and able to spend time with the project time during entire project life cycle. SMEs are generally small in size and its resources are multi hated (play multiple roles) leading to no or very little time to spend on ERP systems projects. This is one of the key barriers which can lead unsuccessful ERP systems implementation.

User Trainings and System Friendliness

ERP systems are wide and complex in nature and generally have too many screens, options and features. This means users need to be well trained and continued to be trained for effective use of ERP systems. SMEs being small in size have less number of users to be trained but the same users could have multiple hats leading them learn and remember several options, steps, features to successfully use ERP system. This leads to information overload and user resistance. Additionally SMEs being small in size also have faster staff change rate as very often staff joined in will learn and leave for working in bigger size organisation. This leads to continuous need for trainings of new staff.

Business Process Management

For effective configuration and installation of ERP systems, business processes of the enterprise must be well documented, maintained and owned. For SMEs the business process management is most of the time not formally documented and maintained. This leads to ERP systems configuration and implementation barrier. It also leads to higher costs of firstly documenting business processes for the enterprise and then applying the same for ERP systems implementation.

IT Department and IT Infrastructure

ERP systems require robust infrastructure and IT supporting department to be able to implement ERP solution. In SMEs IT department is generally very very lean or nonexistent. Also the IT Infrastructure for hosting and support of applications is nonexistent leading to hiring of outside service provider resources which leads to higher IT costs and as vendor resource may not have all SME IT systems knowledge could lead to unsuccessful ERP systems implementation. The barrier even continues post implementation during ERP systems upgrades and maintenance.

Strategies to Overcome Implementation Barriers

ERP Systems Implementation barriers for SMEs are Costs, Time, People, User Trainings, System Friendliness, Business Process Management, IT Department and IT Infrastructure. For overcoming these barriers ERP vendors have to come up with ERP systems that are optimized for following areas,

  1. User Friendly System with e-learning training options for self-learning
  2. Optimized system features, options and steps to meet the core business needs only. So only must have features enabled, rest disabled/removed to reduce usage complexity. This would lead to lesser time for training and system knowledge acquisition by enterprise staff.
  3. Well documented business process management overview specific to industry segment with link to system functions/configurations which will help enterprise to see the end to end business process overview and how changes would impact configurations. This would help in reducing amount of time to be spent by enterprise staff on business process management. Also in many case SMEs could easily see the end to end process and choose to go with out of the box setup.
  4. Pre-defined and success proof ERP Systems project implementation methodology that would reduce the time required at each step of the project and hence increasing the speed of implementation and reducing the costs of implementation.
  5. Software offering where IT hosting, system maintenance and support is take care by ERP vendor itself. This would lead to internet based ERP solutions that would be readily available and can be easily accessed using standard web browser (thin client). This would address SME’s need as they generally don’t have IT department or have very very lean IT department and infrastructure. This would save huge IT investment costs of ERP Systems implementation. By managing the ERP Systems IT Infrastructure and Support, ERP vendors can offer ERP systems with lower costs of ownership to SMEs.

ERP Vendors have to come up with product offerings for SMEs that help address the implementation barriers. The products offered must be,

Internet hosted

  • Save Client Implementation and Maintenance Costs
  • Can be accessed using standard web browser (thin client)
  • Use standard internet protocols and messages for communication and data exchange

Out of the box

  • Standard Industry best practice business processes used in the tool
  • Pre-configured for businesses to allow them to start using within days
  • Configurable flexibility for businesses that want some parts to be configured

Low Cost

  • Installation is ERP vendor hosted and managed means no IT Infrastructure costs to SMEs
  • Pay for Use based on number of users subscribed in every month and functionality/modules they use

Above can be achieved using Software as a Service (SaaS) technology concept and ERP vendors are starting to offer products and services using SaaS technology.

Conclusion

ERP vendors are well aware of the growing number of entrepreneurs and SMEs. They also know the opportunity and growth potential in this area. ERP vendors like SAP, Oracle and Microsoft have come up with solutions that could fit SMEs. As the opportunity is seen by all IT vendors there is a lot of competition and new entrants in ERP Systems for SMEs.

For more SMEs to adopt ERP Systems its essential that ERP Systems are internet hosted, out of the box and low cost. The need and use of ERP Systems will continue to increase for SMEs till the time the systems are low cost and faster to implement and easy to use meeting SMEs’ needs. The challenge for ERP Systems effective implementation and use in SMEs still remains in below areas.

Lift and Shift

ERP Vendors have to continue to think and come up with plug and play ERP Systems. By plug and play its meant lift and shift of ERP Systems. SMEs are often acquired by other larger SMEs or larger enterprises and for such cases ERP systems and data used by SMEs should be easy to lift and shift or easily portable to other enterprise’ ERP System.

Mobility

ERP vendors also have think about SME solution to be compatible and light enough to access from mobile devices and tablets. Given the growing power of mobile devices and growing use of tablets for business this is an essential must to be brought in place.