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Is on-demand transaction software ready for prime time?

Over the past few years, a number of software publishers have popularized on-demand delivery of business programs. Most notably, Salesforce.com Inc. and NetSuite Inc. have developed a loyal — some would say messianic — following by offering hosted customer-relationship management (CRM) software along with other enterprise applications. Salesforce.com’s rise to industry stardom has been nothing short of meteoric. Four years ago, the company had 25,000 registered subscribers. Today, that number is closer to 350,000.

Even with the wild success of Salesforce.com, ERP vendors have been slow to embrace hosted products. Many have questioned whether a market exists for Web-based resource planning software, which typically pulls data from a company’s transactional and supply-chain systems. Frank B. Modruson, chief information officer at Accenture, a business advisory firm, thinks that on-demand ERP is a nonstarter for most global corporations. “They already have ERP systems that are very entrenched and integrated into their ongoing business operations,” he says. “They’re not about to dump everything and start over with something new.”

That’s not necessarily the case for small to midsize companies. Experts point out that many SMBs have yet to turn to resource planning technology to help with tabulations, transactions, or turnaround time. Absent expensive legacy systems, smaller companies are often ideal customers for on-demand ERP software. Says Albert Pang, director of enterprise applications research at tech consultancy IDC: “ERP is pretty much a clean slate for these businesses.”

Take the situation at Circle L Roofing Inc. Circle L, which serves customers ranging from Fortune 500 housing developers to individual homeowners, has 900-plus employees scattered across 10 locations in Florida. The ongoing housing boom and a string of devastating hurricanes over the past few years have kept the roof maker very busy, straining the company’s IT department. Compounding the problem: hurricanes that help plump up business also threaten Circle L’s own network of computers in Florida.

When management at the Bradenton-based business began shopping for its first ERP system, it decided immediately that the company needed something that would keep pace with Circle L’s breakneck expansion. On-demand ERP technology, which is quite scalable, fit the bill. What’s more, with financial information stored on the out-of-state servers of the third-party software provider (Intacct Corp.), Circle L’s managers now pay more attention to business strategies than to data-recovery strategies. Says company CIO Abraham Elias: “There’s real power in not having to worry about backing up data, or wondering how we are going to adjust if four hurricanes hit the region.”

Elias estimates that the Intacct system generated more than $100,000 in savings during its first year of use. He also calculates the hosted software reduced the cost of purchasing and maintaining financial systems by half.

You’ve Been Upgraded!

On-demand apps are not only maintenance savers, they’re also a heck of a lot easier to deploy than conventional software. An on-site or proprietary system must be carefully tested for server compatibility, performance, and other hardware-related issues. By contrast, deploying a Web-based program typically requires just a few weeks of prep work (mostly spent configuring the software, scrubbing data, and training users). At Circle L, Elias says he was surprised by how easy it was to roll out the on-demand application.

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