ERP skills shortage pushes customers to SaaS

SMBs find hosted apps increasingly attractive

It used to be that companies weighed the purchase of a vendor's software mostly by its merits — whether the packaged application was robust enough for a company's needs, how it would play with the company's other back-office systems, how long it took to implement and, of course, whether the customer could get a good price from the vendor.

Now, due to an acute skills shortage in enterprise software circles that's hitting SMBs especially, a new and critical selection criterion has been added to the top of the mix: Availability of resources to help implement the SAP or Oracle software, according to recent research from AMR Research analyst Dana Stiffler.

With these big enterprise software vendors successfully promoting software products to manage business processes to small- and medium-sized businesses, the supply of skilled people to manage these products has not kept up with demand.

"SAP and Oracle application skills, in particular, are in huge demand, with service providers reporting their ERP practices continue to experience double-digit growth and strong pricing premiums relative to other IT skills," Stiffler writes in the recent US ERP Skills Gap Leaves Titans Vulnerable report. "They tell us the packaged applications business is limited only by their ability to find, train and place appropriate resources."

The net effect of the skills shortage is pushing existing and potential customers to consider alternative software delivery models, Stiffler contends.

"I think what it really means long term is that people are really crying out for a different delivery model for enterprise software and business functionality," she says. "And it's my belief that combinations of SaaS and business process outsourcing (BPO) will eventually begin to emerge and make that gap be slightly less noticeable."

AMR survey data as well as that of other high-tech market researchers illustrate just that. When CIOs were asked by AMR how they would like to ideally purchase software and have it delivered in the coming three to five years, "it's striking that many chose SaaS or BPO as the preferred way for them to be able to support these different business processes," Stiffler says. "It's not a majority, but it's edging toward half [of survey respondents]," adding that that's especially true for small and midmarket customers.

SAP and Oracle have made no secret of their desire to infiltrate the SMB market with a business-model-defying combination of on-premise and on-demand offerings.

SAP's rollout problems with Business ByDesign, its on-demand ERP product, have been well documented. Stiffler wonders if the ramp-up issues SAP has experienced might be due to internal SAP ideological discussions as much as technical snafus.

"I don't know if the problems they are having with that is because it's so difficult in and of itself, or it's contrary to what they've traditionally sold and where they've been so very successful," she says. "To make a switch to a more service-based business model looks, in the short term, suicidal. In the long term, it looks like a very good investment [for SAP and Oracle], but when do you pull the trigger? Those are conversations that are going on all the time at those companies."

In addition, SAP's and Oracle's missteps and their ecosystems' inability to serve new customers opens the door for Microsoft's Dynamics ERP product set. "I think [SAP and Oracle] are really vulnerable in attacking the mid-market," Stiffler says, "and it makes Microsoft look much more attractive relative to Oracle and SAP, if there's this big skills gap."

What SAP and Oracle need to remember as they attack the SMB space is how those companies operate and what they truly need from an ERP provider. "Their goal in life is not to have a strong ERP capability internally, and their goal is not to be involved in a never-ending software rollout," Stiffler says. "They want to get functionality or process. It's all about getting up to speed on an operational or corporate process."

If SAP and Oracle can't figure that out, their strategies could be in trouble, Stiffler adds: "That's where it leaves them vulnerable, because they're counting on the bulk of their growth coming from the midmarket and even the small business."

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Tags SaaScareersskills shortageERP

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