December 5, 2012

Is SaaS right for your Supplier Management Initiative?

A recent report from Gartner Inc. conducted in June and July 2012, took the pulse of 556 organizations in 10 countries within four regions (Asia/Pacific, Europe, and North and South America). Given its relative nascence  and fervor to the world of IT, it is not surprising to see  77% of respondents expected to increase spending on Software-as-a-Service (SaaS).  At the same time, 71% of companies from this same study have been using SaaS for less than three years. What does this tell us?

If you look out there today the discussion about the cloud is everywhere but it is still relatively new.  Regardless, anyone involved in computing today needs to consider how to approach it for their enterprise.

SaaS offers substantial opportunities for organizations of all sizes to shift the risks of software acquisition by reducing the investment in hardware and resources in managing them.  However, just because you can add SaaS to your IT infrastructure is not by itself a reason to do it. There have to be  viable business reasons to use it, and the ability to satisfy all the stakeholders that will be involved in sharing the data.  This means having options in the deployment of any enterprise applications that provides SaaS.

In some application areas like CRM, SaaS seems to have become the dominant approach and based on research continues to be the largest market for SaaS.  Consider a key player like SalesForce that was revolutionary in defining SaaS for CRM and creating a platform for developing cloud apps. SaaS also has noted benefits for supplier facing areas like finance, procurement or supply chain. In fact, there are a handful of providers that have even taken an exclusive 100% SaaS approach in areas like eSourcing, eProcurement, Contract Management, eInvoicing, and aspects of Supplier Management.

Yet based on the experience here at HICX,  the acceptance of SaaS with regard to “supplier management” per se is not as as absolute as other areas like CRM or other areas in the source to settle area.  The problem with only offering a 100% SaaS only approach is a matter of meeting the complex needs of most enterprises when it comes to supplier data and processes like on-boarding and workflow.

In some cases, organizations do not have the option of going to SaaS given the heavy investments in on-premise solutions in areas like ERP and/or homegrown  systems. Moreover, different industries have different requirements as it relates to the how they use supplier data. For instance, highly regulated industries (e.g. aerospace, financial, pharmaceutical) have highly sensitive data requirements and often do not leverage the cloud for certain enterprise needs today.

In fact, based on direct discussions with some recognized technology players known for developing their own SaaS technology, there are major concerns over using a SaaS platform internally for supplier management, driving the need for any provider of supplier management to also deliver an on-premise option.

CONSIDERATIONS FOR SAAS

Given the needs of business vary from one industry to the next, here are some considerations to make when going with SaaS for supplier management –

Political considerations.

  • Sometimes, the decision to go to SaaS can be cut off by resistance from within an organization, if important people insist that certain functionality remain internal, under the control of IT; other considerations therefore become unimportant.

Technical considerations.

  • SaaS applications typically provide some flexibility for customer configuration, but this approach has its limitations particularly in a multi-tentant models.  This is critical as it relates to  customizations, the potential of forced upgrades, integration, data security for internal standards/legal requirement and the potential need for re-architecting an enterprise to meet the needs for the SaaS platform.

Financial considerations.

  • Consider the total cost of ownership (TCO) of a SaaS application, compared to that of an equivalent on-premise application. Although the initial cost of acquiring software capabilities through SaaS is normally lower than that of on-premise applications, the long-term cost structure is not as certain over time like the licensed users and customizations needed to manage the enterprise over time.

Legal/Industry considerations

  • Some industries are subject to regulatory law in different parts of the world, imposing  reporting and record-keeping requirements. Consider the regulatory environments in all the different jurisdictions in which your organization operates and how they affect your application needs.
Approaches to SaaS
  • Furthermore those that decide to do a SaaS will need to consider an approach – that is single tenant v. multi-tenant.  While each option has its pros and cons,  consider the following chart as an example of how these two approaches differ –

 

More often than not, SaaS is considered in the multi-tenant format and is what is most frequently discussed.  So understanding the benefit of single-tenancy can help alleviate some of the traditional concerns of security and performance in going to SaaS.  As a provider of a single-tenant supplier, the view is that supplier data is too sensitive to risk being deployed in a multi-tenant environment.

Ultimately, the flexibility in the “delivery model” for a supplier management is needed to meet the needs of the most complex enterprises. So offering both SaaS and on-premise approaches, or even a “hybrid SaaS-On-Premise” approach, gives organizations the option for choosing the best deployment option, and not be offered a dictate to have to go entirely to the cloud.

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by Grant Watling

Chief Customer Officer

Grant has 11 years management consulting experience specialising in supplier data and analytics advisory services. Grant holds a Master’s Degree (MSc) in International Business, is a Prince2 practitioner and holds certificates from the Institute of Financial Services and the Chartered Insurance Institute.
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