There still needs to be more clarity over cloud ERP and SaaS delivery models. The more discussion I see, the cloudier the issue becomes. Many use “cloud” and “SaaS” interchangeably, but they are different. The distinction is quite simple and need not be over-complicated:
- The cloud refers to access to computing, software, and storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company. Still, your access is through the Internet and, therefore, through the“cloud,” whether private or public.
- SaaS is exactly what is implied by what the acronym stands for, Software as a Service. Software is delivered only as a service. It is not provided as files to be installed on your own (or another’s) computer. It is accessed over the Internet and is generally paid for on a subscription basis. It does not reside on your computers at all.
Using these definitions, we can confidently say all SaaS is cloud computing, but not all cloud computing is SaaS.
What About Hosted ERP Solutions
Vendors sometimes use the term SaaS to describe hosted deployment models. Still, it’s important to note that not all hosted models are SaaS.
If a vendor’s partner holds a software license, hosts it in their data center, and offers it to you as SaaS, then it is considered a SaaS environment. However, if you license the software and have the ERP vendor or another party host it for you, it is not SaaS. In the past, this was called Application Managed Services (AMS).
This distinction is important because whoever owns the license to the software takes on an added level of responsibility.
For many years of researching preferences for ERP deployment options, I have carefully distinguished between SaaS and hosting. Of course, I can’t guarantee my survey participants read the definitions carefully, but I can try! Here are the options to choose from:
- Software as a Service (SaaS): Software is delivered only as a service. It is not delivered or downloaded as a software package to be installed on your computers.
- Hosted and managed by your ERP vendor: Software is licensed by you, but you pay your ERP vendor to manage and maintain (host) hardware and software.
- Hosted by an independent 3rd party: Software is licensed by you, but you pay another party to manage and maintain (host) hardware and software.
- Traditional licensed on-premises: You license the software and are responsible for managing and maintaining it on your own premises
- Hybrid: Some parts are licensed and maintained on-premises, while others, like add-on modules, are provided as SaaS.
Nowadays, many ERP software vendors promote their cloud services, and some of the most prominent vendors claim to be the best in the market. However, many business users blindly follow this trend without fully understanding its consequences. As a result, they may miss out on some benefits and make uninformed decisions.
Many solutions that were once only available as traditional, licensed deployments (on your own computer or a trusted service provider’s) now offer a choice. But some of these“cloud” choices are hosted solutions, contributing to the confusion.
Other solutions that were born in the cloud may only be offered through SaaS. It is essential to understand the difference between cloud and SaaS and the different flavors” of SaaS (multi-tenant and multi-instance or single-tenant SaaS ERP).