SaaS: CPGs Shift Away from On-Premise Software

Software as a service (SaaS) solutions offer speed, agility and adaptability. The SaaS model has become the standard in nearly every industry, and it’s transforming how manufacturers work as well. 

In a world where Amazon updates its software every few seconds, it’s not hard to see why business models of all kinds are rapidly shifting away from on-premise software.

  • SaaS: A subscription model tech solution centrally hosted by another party. SaaS is a category of cloud computing.
  • On-Premise: Software that is installed on your company’s hardware and servers, then managed internally.

SaaS Stats

  • 80% of businesses already use at least one SaaS application
  • 73% of organizations indicate that nearly all their apps will be SaaS by 2021
  • 93% of CIOs are adopting to planning to adopt cloud solutions
  • By 2020, 85% of small businesses will invest in SaaS solutions
  • SaaS spending will double by 2020
  • Cost (59%) and security (47%) are the top criteria IT experts consider when buying SaaS
    SOURCE: 99firms

 

Paul Wietecha

“Generally, people in our space are trying to do more with less,” says Paul Wietecha, Blacksmith Applications CEO and President.

“The business overall — the whole industry — is relatively flat. When that’s the case, you want to manage your costs better. You want to improve efficiencies. If I’m a manufacturer, I’m going to focus on the product, our core competencies, where I can get the biggest bang for my buck.” The search for efficiency inevitably leads manufacturers to cloud solutions. There’s no need for a company to support hardware on their end when they can outsource the configuration, implementation and workflow.

“Like other industries, CPGs are choosing cloud-based software. They want secure, accessible data. They need tools that make them more efficient in their work,” says Wietecha. “With our product offerings, SaaS is the best solution. It’s front and center, offering users scale and accessibility unlike systems of the past,” Wietecha explains.

“The financial and efficiency advantages can’t be overlooked.”

 

Technical Considerations:
On-Prem VS SaaS

 

Companies are moving away from on-premise systems to SaaS technology because of obvious advantages like

Just 2 years ago, more than 5 million people were working from home at least part-time according to the 2018 data from Global Workplace Analytics. Then, in March 2020, over 1.5 billion people around the globe were told to stay in their homes. The SaaS model is a natural fit for an increasingly remote workforce. On-prem, on the other hand, forces dial-up and virtual private networks (VPN).

 

 

COSTS

With on-prem software, companies are required to invest a lot of money up front to get the system up and running. Then they’re on the hook for support and maintenance costs, additional hardware, network monitoring, management tools (and more).

Gartner estimates that the annual cost of on-prem systems can be as much as 4x the cost of the initial purchase, and companies can spend up to 75% of their total IT budget to maintain and run legacy systems.

With SaaS models, costs are included in the subscription fee. Even when that’s not the case, costs are noticeably minimized with dramatic less demand for internal resources for support and maintenance. 

SaaS doesn’t depreciate or degrade, and you always have the latest version on hand.

On-prem software, however, begins to age as soon as you purchase it. When it’s time for an update, it takes months to get the newest features installed. Any customizations or enhancements are costly, not to mention time consuming.

Jeff Wagner, Senior Consultant at Blacksmith Applications, agrees that many CPGs switch to SaaS because of the lower total cost of ownership, “especially as it relates to the benefit stream.” Internally funding, developing and depreciating the upfront build as well as training internal and third party support teams to maintain the application lowers the ROI of on premises offerings he says.

VISIBILITY

SaaS enables instant bug fixes and enhancements. “To alert our users to system updates, it’s as simple as sending them an email letting them know what functions have been enhanced, where information has been added, and what bugs have been fixed,” says Brian Maloney, Blacksmith Applications. 

Technological considerations aside, many CPGs are moving to the cloud for the visibility and shareability of consistent information across the organization.

Mike Leiker, once an on-prem systems user, said, “A SaaS application provides immediate access to any approved user without time spent on installation or configuration. It ensures we all have access to the same information, one version of the truth and eliminates the churn of comparing data points from separate instances of an application. This is very beneficial when trade spend teams are collaborating with other teams within the organization — like sales, finance, etc.”

Blacksmith Project Manager Meghan Hoover adds, “Access to industry and system experts that provide insight not only into the features of the application, but how other companies within the industry utilize the software, can be beneficial to your company.”

“A SaaS application (like Blacksmith TPM and TPO) has been battle tested by some of the biggest companies in North America. Consequently, core functionality is already built in the application to address the requirements and needs of most would-be clients. This minimizes the number of custom enhancements, hastens the implementation process and provides clients with great value,” adds Wagner.

 

 

What the Future Holds

 

CPGs can prepare for the future by avoiding physical infrastructure.

With cloud software:

  1. Users are essentially renting the equipment that runs the software. If there’s a need to scale up or scale down, that can happen on a moment’s notice, with no impact on end user experience.
  2. The vendor is effectively purchasing hardware and utilities on a scale of thousands of businesses rather than just their own. And as technology changes, there’s not a large capital investment tied up in data center infrastructure or staff. 

DATA & PARTNERSHIPS

CPGs have access to more data than ever before, but a lot of this data is coming from separate sources, including other software applications. The ability to seamlessly integrate separate data sources is crucial to providing greater visibility into business effectiveness. Data integration provides efficiencies within an organization when resources are limited.

The future of SaaS will depend on effective strategic partnerships, as well as integrations that equip the customer to make assessments more proactively. 

“In the recent past, SaaS growth was largely centered on function-specific applications. This is evinced by the success and growth of many SaaS companies, notably Salesforce.com. What is interesting to watch is the investment in SaaS by the traditional heavy hitters like SAP, Oracle and even Epic in the healthcare space. This indicates that SaaS is the future not only for use-case specific applications, but also for soup to nuts ERPs,” Wagner advises.

Today, it’s commonly accepted that software is cloud-based service. “We’ll see more flexible options for providing computing hardware and more options for extracting value from our data,” says Blacksmith CIO Paul Cummings.

“With inexpensive computing, we can more efficiently perform analysis of the data we have. With improved visualization tools, we can more easily gain actionable information from our data. And, with less expensive storage, we have significantly more data upon which to base our conclusions. Additionally, with data concentrated from multiple CPGs in a common location, we have more possibilities to pool data across multiple entities for the greater benefit of all entities. This is a data “co-op”, he adds.

The SaaS based tech sector has grown up quickly.

“In the early days at Blacksmith Applications, people worried: my data won’t be secure, how can I trust you?”

Now, Azure AWS puts everyone’s mind at ease. Their data is in the same place as yours. The products are more mature. They’re really good.

“They’re up and running in a few months. Integration isn’t painful. SaaS is no longer the wild wild West.  We have the tried and true best practices to integrate or migrate from on-prem to the cloud,” assures Wietecha.


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