Why The Slowdown In SaaS ERP Adoption Is Nothing To Be Worried About

According to a recent report published by the Denver, CO based Panorama Consulting, the adoption of SaaS based ERP systems has fallen for the first time in the past four years. Their study shows that only 15% of all ERP implementations in 2013 were SaaS based. To give you a perspective, the corresponding figure for 2012 was well above at 26%. Panorama Consulting began studying this adoption rate four years ago and this is the first time they are seeing a drop in adoption numbers.


There is a lot of speculation as to why this drastic fall in the adoption rates has occurred. One common theory is that the NSA spying revelations could have caused a bit of panic among the small and medium businesses that form a major chunk of SaaS ERP customers. But this theory can be easily debunked by taking a look at the growth of Amazon AWS that has seen no apparent drop in adoption rates over the past year. But those speculations are not without merit – multiple studies conducted to analyze the impact of the revelations on cloud adoption peg the loss at anywhere between $22 billion and $180 billion. In any case, SaaS ERP is a segment that is likely to see much less impact due to the revelations compared to other segments like cloud hosting or email communications.


While the drop in SaaS ERP adoptions over the past year is definitely interesting and not something many people might have expected, it is not entirely worrisome. One of the major reasons for this is because of the growing maturity among businesses in terms of their objective. The 2012 report on SaaS ERP adoption showed that a huge chunk of businesses were implementing the application simply because “they have to”. With ERP implementation carried out as an exercise without clear intents and purposes, the mission is expected to fail. It comes as no surprise then that over 50% of projects implemented in 2012 saw cost overruns with 60% of businesses failing to see major benefits from ERP implementation.


In comparison, the latest report shows that over 60% of the respondents felt their implementation was a success with only 10% of businesses terming their project a failure. Most businesses who were surveyed reported clear intentions and purposes with respect to the ERP implementation.


There are two reasons why the SaaS ERP adoption has slowed. Firstly, the number of businesses that were brought in by the hype over SaaS ERP have come down significantly after a number of projects were deemed unsuccessful over the past couple of years. Consequently, only businesses that desperately need an ERP to manage their growing business are implementing them. Secondly, the majority of businesses that opt for SaaS ERP are still small and medium sized companies. As the Panorama Consulting report shows, the new implementations are grossly smaller projects distributed over a larger implementation-period. This is clearly an SMB phenomenon.


Neither of these reasons are cause of concern. With greater awareness of ERP benefits and a larger success rate, SaaS ERP adoption should resume its growth over the next two years. With smaller projects becoming more common, SaaS ERP providers like NetSuite and EnterpriseOne would finally be able to target the long-tail of the enterprise world. The focus would now shift from features made exclusively for large sized businesses to smaller products with simpler features that SMBs prefer.


This is a positive trend since with more SMBs implementing ERP, the benefits and competitive advantage that this application provides will reach a wider business audience that can drastically increase the productivity of the business landscape overall.



The success rates for ERP implementation over the next two years is absolutely crucial. This will ensure that SMBs gain greater trust in ERP and the adoption of SaaS ERP will take off one more time over the next few years. 

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