Back in 2000, the marketplace business plan centralized all B2B transactions in order to acquire an abundant amount of money. These transactions occurred because during that time, Euro creation and ERP vendors were stuck in the migration of old technology software. This migration meant undergoing major changes in the software, but without changing the technology. Internet applications were the only focus in the marketplace; it was assumed it would be enough to take over. The issue, however, is that the business model was not suitable for customers and/or suppliers, and the gap between ERP and marketplaces was too extensive.
Fast forward a few years to 2005, when web enterprise applications matured, and a number of new players on the market started selling sourcing, purchasing, procurement, and invoicing applications. The applications were proposed either on-premise, or as Application Service Provider (ASP) subscription model, also known as on-demand. Despite the present technology, the market was divided in either supplier relationship oriented solutions (sourcing, supplier portals, supplier hubs, vendor management systems), or solutions that focused more on procurement and finance.
Now in 2011, with the emergence of cloud computing platforms, ASPs have been replaced with Software as a Service (SaaS), and almost all vendors are pushing hard on this application. There are applications that are SaaS only, (which does not provide on-premise software); those that shift from pure software to SaaS (with issues in rewriting to be truly cloud compliant); and finally there are web technology applications that can be provided as either SaaS or on-premise. In addition, new integrated suites are managing entire purchase-to-pay chains using centralized and easy-to-use software offered as either SaaS or on-premise, thus resulting in customers having a choice.
There are a variety of reasons to opt for the SaaS-Cloud business model. It is the simplest and most effective way to provide software while the cost of operations and maintenance are being shared. This is very important for small and mid-size companies that cannot maintain an IT department for non-production applications. In addition, these applications are standardized and customizable, and will come with standard connectors to their financial system.
For large companies, SaaS will be used when the purchasing department needs a solution to run quickly and efficiently without the constraints of internal IT requirements. However, an on-premise or private cloud will still be considered, because purchase to pay solutions manages most of the spending. This can become quite strategic, and as a result, the move from SaaS to private will still remain important. In addition, a purchase-to-pay solution can be connected to a plethora of internal systems, such as finance, MRO, production, asset management, and HR, which will make companies reluctant not to own their application.
SaaS will quickly grow in the next few years, mainly because it is significantly more affordable than traditional software, with a quick return on investment. However, on-premise or private cloud software will still remain important for companies, especially when they have been using and leveraging purchase-to-pay solutions for years.
-- Julien Nadaud