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Evaluating Hosted ERP Systems in the Middle East

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Examining Hosted ERP Software

Software as a Service (SaaS) ERP Systems Expected To Be The Next Growth Phase

IT analyst Ben Pring of Stamford, Conn.-based Gartner Inc. hears plenty of Enterprise Resource Planning (ERP) frustrations from his customers. "I literally speak with people from five to six companies a day," Pring noted. "They are trying to run these big software packages and are frustrated and disillusioned" and asking how to escape the messes they are often mired in within their corporate walls.

What he's hearing lately from those customers, he said, is lots of interest in new ERP delivery models. No longer is buying a big bulky software application and signing a long term support contract the only game in town. There's new exploration around hosted, Software-as-a-Service(SaaS) and cloud vendors.

That's quite a change from just a few years ago, when companies considering ERP systems only considered purchasing them outright, deploying them in-house and maintaining them on company computer equipment with internal IT staff. With concerns about information security, data privacy and system reliability, ERP just wasn't something you had someone else run for you. ERP systems are mission critical systems, and can be the difference between business success or failure on many levels on any given day.

However, software technologies, pricing models and delivery options have changed and SaaS is the lone high growth category among all types of business software systems, whether customer relationship management (CRM) applications or ERP systems. Now, said Pring, who covers outsourcing, including outsourced ERP, the customers he talks with are much more open to the idea. "I continue to see a very strong demand and interest among our clients," he said. "There's been a very noticeable spike in the last 18 to 24 months."

So where did this new demand come from and why have attitudes been changing among many corporate IT decision-makers? A big factor in this developing transformation is that by handing over the administration and management of an ERP system to a specialty company, it relieves businesses of the day-to-day worries and hassles and ongoing complexity and management of a tremendously demanding application, Pring said.

"They just kind of throw their hands into the air and say 'there must be a better way than us trying to do this for ourselves,'" Pring explained. "I think it's even more noticeable on the Oracle side than on the SAP side here in U.S., and in the high-end of the mid-market," particularly with retailers and light manufacturing companies.

Cost savings is another big reason for the growing interest in hosted and outsourced ERP, but that's never a guaranteed certainty with any outsourcing project, he added. "We never say that there's a 100% guarantee that it will be cheaper." Although in many cases, the total cost of ownership (TCO) is materially lower when hosted.

And what about businesses who see the potential benefits from outsourcing their ERP systems, but remain concerned that their data and control will be taken from their hands? "If somebody feels worried about putting their ERP systems into an outsourcing arrangement, I don't try to talk them out of it," he acknowledged. "Analysts like me, we are kind of like doctors. We only talk to sick people," so he mostly hears from businesses that are already having big problems with their ERP applications and are looking for answers, options and advice. "With a lot of these companies, there's an element of that population who are exploring ERP outsourcing scenarios."

Still other corporate leaders believe the idea of hosted or outsourced ERP systems make sense because it means moving a traditional back office function to someone who's expert in it, which frees your business up for more creative and profitable activities related to the company's mission, Pring said. "Those people ask whether they should be spending all their time and money to manage these kinds of business software applications because they're not winning their sales deals based on their back office activities."

Outsourced ERP systems are still only a small segment of a larger marketplace, but the concept is growing. "About 70% of the U.S. market still does ERP in-house," Pring said, so the discussions are still being played out across many segments of the business world. The Middle East is historically a technology laggard. However, with a fluid IT staffing market and big pressures on cost savings, several Middle Eastern companies are exploring both hosted ERP and software-as-a-service ERP systems.

Analyst Pring acknowledge IT staffing challenges in some parts of the world. According to Pring, sometimes it's just difficult to find qualified, skilled and available IT staff members to fill your ERP requirements. "Skills can be a big part of it, particularly outside of big metropolitan areas. It can be pretty hard to find an SAP architect who's willing to relocate."

"That's a benefit of the outsourcing option, when you can't find or recruit" needed ERP technicians or consultants to run your systems for you, he said. "With outsourcing, you can bring in improved skills."

So what's your company to do? Carefully consider and weight all your options. Talk to both hosting and SaaS ERP vendors. Talk to consultants. Talk to others who are already outsourcing their ERP applications. Talk to companies that chose to leave their ERP in-house.

Whatever you do, it can be a revealing process to at least explore an alternative and determine if these options may benefit your company. If they make sense for your business, great. If they don't, then at least you gave it an objective review, discarded the idea for now and are up to speed on a global IT growth movement. What doesn't make sense today could become your future tomorrow.


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