Amid ERP Skills Shortage, Customers Look to SaaS

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It used to be that companies weighed a 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 "U.S. 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."

Those resources are in short supply right now -- and not just for ERP skills. Included on the list of most highly valued SAP skills, according to Foote Partners data, are: SAP Master Data Management; NetWeaver Business Intelligence / Business Warehouse; Business Objects; and SAP Human Capital Management.

For SAP, which has more severe staffing problems (some 30,000 to 40,000 experts in need) than Oracle, the news is worse: "Unless the striking variance in skills availability is eliminated," Stiffler notes, "Oracle will become an increasingly attractive option relative to SAP."

Into the Arms of Another Software Delivery Model

Beyond the SAP and Oracle sales competition, however, there is a bigger problem that on-premise software vendors face: 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." (For more on SaaS ERP options, see "SaaS's Impact on the Enterprise ERP Market.")

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.

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