An increasing number of companies, especially small and medium businesses (SMBs), are now looking at adopting ERP solutions on the software as a services (SaaS) model for faster deployment and enhanced cost effectiveness, research firm Gartner today said.
According to Gartner, SaaS ERP in India is expected to grow at a compound annual growth rate (CAGR) of 28%.
Enterprise resource planning (ERP) is an integrated suite of solutions that help a company plan and manage its core business processes like production, inventory management as well as other operations like HR and accounting.
"In the next five years, SaaS ERP is expected to grow by 28% CAGR in India and 37% in China over the next five years. In line with the global trend, end users in India and China deploy SaaS ERP because of the benefits of faster deployment and the perception that it is cost effective," Gartner India Research Director Sunil Padmanabh told PTI.
Also, for organisations looking for solutions that can scale up as their businesses grow, SaaS seems like a good option, he added.
Gartner estimates that there are over 1,000 user organisations that have adopted SaaS-based ERP in India and China combined.
However, SaaS ERP applications in India and China constitute less than five% of the overall ERP market in India and China.
SaaS is a delivery model in which software and associated data are centrally hosted on the cloud and can be accessed through a web browser.
Other Gartner reports suggest that on-premise ERP market in India is expected to touch USD 538 million by 2017 from USD 178 million in 2013, growing at a CAGR of 17%.
"Today, SaaS ERP adoption is clearly in the SMB segment, but large enterprises, including multinationals, have been gradually considering SaaS for their dealer/distributor networks," he said.
Both in India and China, SaaS-based ERP has not yet been widely adopted for mission-critical operations, verticals that are heavily regulated like banking, telecom and public sector, or in specific manufacturing operations that tend to be too sensitive to be shared with a third-party organisation.
Challenges in SaaS ERP adoption include limited flexibility of customisation, issues with data security and network.
"SaaS ERP in India will experience gradual adoption through a wider choice of solutions, vendors and rapidly evolving partner ecosystems," Padmanabh added.