Software as a service or SaaS ERP software applications started over a decade ago the internet as hosted software applications. The software app is provided as a service and hosted and maintained by a service provider via the web. The benefit of web-hosted software applications is that they are considerably easy to implement and deploy. There are no legacy systems to integrate with and hosted software does not require significant in-house IT resources to implement and maintain. However, the key driver for the rampant popularity of web-based ERP solutions is that they are affordable both from an initial capital outlay and on-going maintenance fee perspective.

A simplified example of a web-based hosted application is Microsoft’s Hotmail and Google’s G-mail service where a user simply logs in to a hosted site and can begin to use the application immediately. When the user is finished using the application, he simply logs out. No complex ERP software resides on his computer or the company’s network. If there is a problem with the software, the service provider is on it, 24/7 removing the user from unpleasant, costly, time consuming bug fixes. The pain in the neck and costly maintenance and upgrading of the software application is also handled by the service provider as well. For these reasons, SaaS ERP solution providers/solutions are also named hosted management, applications service providers (ASP) and software on demand (SOD) solutions.

SaaS solutions offer affordable, robust enterprise solutions to a new ERP software market, the SMBs or small and medium sized businesses. Historically small to medium sized businesses were not able to afford the ERP software applications available to the market that were developed for the Fortune 100 industry giants. However, with the pay as you go pricing model offered with web-based solutions a company only pays for what is used. This flexible pricing structure is also flexible to scale up or down to a businesses’ demands. These cost drivers are a key for many SMBs particularly in managing and maintaining their IT systems and applications. Accounting firms are a good example of this. After employee salaries, the highest expense for accounting firms are software implementation, integration and maintenance costs. For these SMBs, the quick and easy deployment, low IT resource requirements, zero maintenance costs, zero upgrade costs, higher flexibility, low upfront investment makes SaaS solutions and web hosted ERP software solutions in general a critical tool for increasing performance and profitability.

Although there are challenges with full enterprise wide enterprise systems that are web-based, the delineation between vendors offering on premise and web based applications are becoming less rigid. ERP vendors offering a company-wide enterprise resource planning software solutions are also beginning to offer a SaaS ERP software version or ERP module as well, and visa versa.