By Jennigay Coetzer – Business Day, 28 February, 2011

Over the past year it has become more feasible for companies of all sizes to access ERP and payroll applications online on a software as a service or hosted basis, instead of implementing it in-house. “From a technology, pricing and implementation perspective it is more viable,” says Jane Thomson, MD of Softworx.

ERP originally worked on a per transaction basis, but suppliers are changing to an hourly fee of about R200 regardless of the number of users accessing the application, which is more practical. “But payroll applications are still charged for on a per employee basis of about R100 a month,” says Thomson.

She says over a three year period the cost of software as a service and hosting is on a par with that of implementing the software in-house. With hosting, companies can own the application and the software settings, but have it hosted off-site by a service provider for a monthly fee.

Alternatively the software and the settings are owned by the service provider and the customer pays a time-based subscription, says Thomson. She says ERP is still considered to be a core business function, with a lot of IP and competitive information and database involvement, and most companies want the flexibility of being able to change their own settings.

But payroll settings are common across all companies and are usually owned by the service provider. “There is not a lot of difference between one payroll and another and there is nothing competitive edge about this type of application,” she says.

She says it is easier to sell the idea of software as a service, and hosting services to smaller companies, particularly those that do not have their own in-house IT departments.

About 10% to 20% of companies in this category are actively looking at new ERP systems or at other ways of running their existing systems, and about 50% of these are willing to discuss doing it on a hosted or software as a service basis, says Thomson.

She says service providers are experienced in managing the IT infrastructure and systems and have built-in back-up and disaster recover processes. This means lower risk, and access to these facilities are included in the monthly fee.

“We came across three companies last year that lost their systems and did not have back-ups,” says Thomson. Softworx provides hosted and software as a service solutions using it’s parent EOH’s infrastructure.

“The customer can choose any ERP system, either the one they are already using or they can change to another one,” she says.

Gary Epstein, MD of QuickBooks EasyBiz says many accounting and payroll software suppliers are developing online versions of their applications. “Online versions are the way of the future because they give users instant access to information at any time from anywhere.”

He says the online version of QuickBooks’ has been a success in the US because the telecommunications infrastructure and bandwidth speeds available there for internet access are far more advanced. In addition, purchasing goods online has become a way of life in the US, while it is still in its infancy in South Africa, says Epstein.

He says in the local market, smaller businesses still want the look and feel experience of viewing software packages on the shelf, selecting one and installing it. “Customers still like to run their software on their desktop.”

He says some of the online versions have been disappointing and response times have been a problem due to bandwidth issues. “We will not release the online version of QuickBooks in South Africa until the infrastructure is more stable, otherwise it could harm the brand.”

Jennigay Coetzer is a freelance business and technology journalist with 25 years experience, and she writes regularly for Business Day. She also runs media training and writing skills workshops, and is the author of A Perfect Press Release – or Not?, a guide to writing and distributing effective press releases, an electronic version of which can be downloaded free from her website: www.jennigay.co.za.

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