Sunny Han

SaaS or On-Premise: What’s the Better Fit for Manufacturing?

Software-as-a-Service (SaaS). This is a term that’s been around for decades, and has infiltrated every business sector in the world. In fact, studies have shown that 80% of all businesses no matter how big or small use at least one SaaS solution, and that percentage is growing. However, the manufacturing industry has been slow to understand and embrace this evolution of software. We recently heard “We aren’t technology experts; we’re production experts” from metal fabrication shop in Utica, NY. That seems to be the general sentiment that’s permeated the small-business manufacturing industry. So let’s break it down: what is SaaS and cloud computing, and why is it important for manufacturing?

You may be asking yourself, “why is this something I should care about?” It’s a fair question because the reality is manufacturing operating systems, or ERPs, haven’t really changed much in 30-40 years. Until now, and that’s why it’s important. The world is changing quickly, especially when it comes to technology, and as Charles Darwin once said, “It’s not the strongest or the most intelligent who will survive, but those who can best manage change.” The old adage of, “It’s always been done this way” is rephrased in the manufacturing world as, “we’ve been using our ERP for 8+ years and it’s worked great. Why change?” Let’s find out.

What is SaaS

SaaS isn’t a particular type of software in terms of industry or customers, but rather a software licensing model that requires a subscription to access the software. The software isn’t hosted on a local server like previous generations of software – instead it’s hosted at an off-site location. This software model was popularized by and spread to others like Intuit/Quickbooks as they created a modern, fast, reliable software platform where users paid for a subscription. The subscription provides access to a platform that continuously improves, evolves, and is accessible via the web from any location.

SaaS vs. On-Premise for Manufacturing

We’ve already discussed what SaaS is, so now we’ll briefly touch on what “on-premise” means, and what the differences are between the two. On-Premise is the term used to describe the type of software that most manufacturers are familiar with. Your software is installed locally on a server that’s located inside your building, or, on-premise. There are advantages to SaaS, including the following which are typically most valuable to manufacturers:

SaaS On-Premise
Requires Paid Updates? No Yes
Requires Server Upgrades? No Yes
Requires Internal IT Support? No Yes
Access Remotely? Yes Only with VPN
Security Protections Continuously Improving / Monitored Static
Speed Continuously Faster Continuously Slower

While it’s sometimes easy to look at the monthly cost, something you aren’t used to paying, and saying, “well I only pay half of that with my current system.” However, what’s typically overlooked is how much money goes into upgrades and server replacements every 3-5 years which can add up to thousands of dollars. When those costs are recognized and spread out, oftentimes the total cost of ownership of SaaS software is significantly more affordable.

So Why is SaaS Important for Manufacturing?

Data On Demand. It seems like every day that passes our customers want things delivered faster and faster, with the highest quality possible. How many calls do you get per day from customers asking to move up their delivery date? And tomorrow they’ll ask for an update on their job. What hurdles do you have to climb through to get an update? With SaaS software, you’re able to get live insight into job status instantly. By providing this information back to customers immediately, it gives your customers the confidence and comfort that your shop is under control, well managed, and they are in good hands.

Professional IT Support. As manufacturing companies grow larger, traditionally there’s been an inflection point where they realize they need to hire an IT professional to manage everything in the business. But how do you know the best one to select? Do you have many options to choose from in your town/city? Wouldn’t it be easiest if your IT support was managed by the same company that provided your software so that you didn’t have to incur the costs of hiring more labor for an aspect of your business that may be somewhat foreign?  

The future of manufacturing software is SaaS: connected, cloud-based, flexible, and when done right, beautifully simple to use. Schedule a live demo to see how leading custom manufacturers use the next generation of manufacturing ERP, MES, and MRP solutions to fuel their growth.

// This article was updated 4/04/23.

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