Will new SaaS ERP options lure more manufacturers into the cloud?

New SaaS ERP offerings could entice discrete manufacturers to run their heavy-duty ERP in the cloud – and some small manufacturers say they’re interested.

A flurry of new initiatives by software vendors suggests that full-featured, customizable ERP might be moving more decisively into the cloud, providing new Software as a Service (SaaS) ERP deployment options to manufacturers, a segment that has been largely bypassed by the cloud computing juggernaut. Some manufacturers report they are enthusiastic about using the technology to extend ERP to remote locations.

The June 16 announcement of Indianapolis-based Consona’s acquisition of Compiere, a San Mateo, Calif., maker of SaaS ERP and customer relationship management (CRM) applications, is the latest example of an on-premise ERP vendor making a major investment in cloud computing. Two weeks earlier, San Mateo-based SaaS vendor NetSuite announced its new Manufacturing Edition, a consolidation and upgrade of a previous offering that paired materials requirements planning (MRP) from Rootstock Software with NetSuite OneWorld ERP. The new version targets midsized global manufacturers that need to run ERP across multiple locations, NetSuite said. Next month, SAP plans to release major enhancements to its Business ByDesign on-demand ERP for small and midsized manufacturers. 

SaaS ERP potential expands across manufacturing?

Until recently, SaaS ERP was mostly limited to light manufacturing and distribution deployments, but that appears to be changing, according to analysts. “Companies like Plex, NetSuite, Rootstock, and Epicor have shown that manufacturing in the cloud can be not only cost effective but also advantageous,” said Ray Wang, partner for enterprise strategy at Altimeter Group, also in San Mateo. "Case studies from these SaaS ERP vendors have started to show others that this is now a viable deployment option." 

But Wang said SaaS ERP vendors must address shortcomings in master data management, business intelligence, and mobile devices to make their products more viable as replacements for on-premise ERP.

The Consona and NetSuite news signals that true ERP has finally arrived in a market where SaaS deployments were mostly limited to supply chain and CRM, said China Martens, senior software analyst at the 451 Group. “Now, financials and accounting are where people are moving more and more,” Martens said. 

Jeff Tognoni, Consona’s chief executive officer, said Consona plans to beef up the manufacturing features in Compiere, which he described as distribution-oriented ERP with manufacturing features that are “not anywhere as deep” as those in Consona’s product, Intuitive. “We’re [never] going to stop having an on-premise version,” Tognoni said, adding that Consona will probably release cloud versions of Intuitive and Made2Manage, an ERP system for custom manufacturers, in the next year or two.

One Intuitive user expressed interest in a cloud computing option. “If they can take the existing flexibility of our on-premise ERP software and make it cloud based, that would be a great performance boon for us, for both our remote users and remote offices,” said Craig Cormier, IT manager at Anderson Power Products, a manufacturer of high-power electrical connectors in Sterling, Mass. “Currently, we’ve only implemented SaaS for our email filtering and journaling. We haven’t seriously looked at it for any other purposes.” Cormier said he would only consider a complete SaaS version and would test it in parallel with the on-premise version.

SaaS ERP challenged by customization, upgrade issues of manufacturers

Technology advances such as virtualization and Amazon Web Services (AWS) have helped SaaS mature to become viable for manufacturing ERP, an especially complex kind of software that serves an industry with widely varying needs, Tognoni said. “One of the problems with SaaS is you’re doing multi-tenancy, which means you’re using the same big app for everybody,” he said. “This all is fine if you’re using the system like you’re using Google search.”

Such generic applications aren’t a good fit for manufacturing ERP, Tognoni said, because of the customizations that are often needed to support unique needs. Even though some SaaS applications allow custom configurations, there can be complications. “The upgrade schedule of the vendor causes breakage to your customizations,” Tognoni said. Consona wanted the Compiere technology, in part, because of its ability to give each manufacturer a private, customizable instance of the software, an architecture he likened to AWS. “[Compiere] has a technology embedded in it that allows you to upgrade those customizations so that they’re automatically updated,” Tognoni said.

But Roman Bukary, a NetSuite industry marketing spokesperson, called the SaaS upgrade issue a red herring, noting that on-premise upgrades also happen on the vendor’s schedule, often causing implementation hassles and service disruptions. “It’s true that in the early days of SaaS, the amount of configuration was limited,” Bukary said, but today’s versions are easily configured, especially by power users. “The modern SaaS player can give you as much configuration as the on-premise guys,” he said, adding that NetSuite guarantees that customizations will be “infinitely upward compatible.” Customers can also use the SuiteFlow tool to build their own workflows and the SuiteFlex toolkit to develop custom applications, he said.

NetSuite OneWorld works seamlessly with Rootstock MRP and forecasting tools from NetSuite partner Adaptive Planning, said Ian Elliott, chief executive officer of CertiCell, a cell phone refurbisher in Brentwood, Tenn. Recent updates of OneWorld haven’t disrupted links to third-party applications, and Elliott says he expects an upcoming Rootstock upgrade to be uneventful.

CertiCell, which also runs a homemade shop-floor application to manage nearly 300,000 serial numbers, implemented an earlier NetSuite ERP product when it opened for business five years ago. “To invest in an on-premise ERP and have an IT staff just wasn’t an option,” Elliott said.

The company upgraded to NetSuite OneWorld in February, implementing it in several U.S. locations, plus Hong Kong and the Philippines to manage financials across three countries and a complex supply chain, Elliott said. "For various reasons, we were not able to deploy the NetSuite OneWorld module within the legacy environment, mainly because of the way we had set up the inventory locations and our use of the classes to manage the financials of our foreign subsidiaries. As a result, we had to migrate out of our legacy NetSuite environment into a brand new OneWorld environment. This was time-consuming and labor intensive." 

Elliott said CertiCell has successfully used NetSuite scripting tools to customize OneWorld. “NetSuite gives you access to the back end to really do a lot of custom stuff,” he said. His one complaint: OneWorld often bogs down in mid-afternoon. “That’s frustrating,” he said. “It’s something that they [NetSuite] are working on.”

The analysts agreed that SaaS ERP might provide an affordable entry point for small to medium-sized manufacturers that have never had an ERP system or must deploy software across global locations. 451 Group’s Martens said: “Lower down the market, it is really the first kind of formal ERP that small manufacturers are taking onboard.”

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