Without a doubt Software as a Service (SaaS) is a hot commodity in the IT world. I know this because of the volume of emails that I receive extolling the virtues of SaaS. These emails even exceed the number of emails I get from strangers in foreign countries offering me deals that are too good to be true. Between these two sources my email inbox is never starved for attention. 

But no matter how much attention SaaS is receiving, we still have to ask ourselves, “Is it a good for warehouse management systems(WMS)?”

And there is a very simple, yet complex, answer to this question: It depends on the warehouse. 

SaaS is an established application delivery model in the supply chain world. It is well-suited for applications such as transportation management and global trade management. For these applications, collaboration throughout an extended trading partner network is essential. On the other hand, interest in SaaS as a WMS deployment model has been growing steadily.

I’m measuring some of this interest by the number of mid- and top-tier WMS vendors who have on-premise applications that are scrambling to work SaaS into their go-to-market message. 

My initial reaction is to discount some of these vendors’ SaaS strategies on purely linguistic terms. That is, their applications are not designed to run in a multitenant mode with multiple clients sharing the same servers, code set and database. 

So according to my narrow definition, they aren’t true SaaS solutions. Technically these vendors are seeking to offer their solutions on a hosted basis. The difference between hosted and SaaS is the same as the difference between renting a detached single family home and a unit in an apartment complex. 

Here’s what I mean. With hosted solutions, you are paying for software licenses upfront just like you would if you wanted to run the software in your own data center. You are an owner as opposed to the SaaS renter, even though the hosted software runs in a third-party data center. Hosted also means that the third-party service provider maintains your application and database instance separately from other customers; you are living in a detached home even though a third party is responsible for daily maintenance. SaaS means that the roof you are living under may be shared by others.  

But I realize my fixation on words is a bit myopic and doesn’t take into account why so many companies that are pursuing a new WMS are so interested in SaaS. A SaaS solution can certainly offer a low-entry cost for relatively modest warehouses that are seeking a new WMS. However, the interest is still very much there for many larger, more complex operations that will still end up making major expenditures in implementation and integration services, regardless of the deployment option chosen. 

These operations are not looking to fly their WMS acquisition under the corporate expenditure request process. The possibility of avoiding the upfront investment in on-premise licenses is certainly appealing to some. But the real driver is the desire to outsource WMS application infrastructure. 

I can’t point to many top-tier WMS implementations that weren’t accompanied by a significant investment in supply chain IT infrastructure, followed by ongoing operational costs. This investment isn’t static, as IT infrastructure inevitably requires periodic upgrading. 

Having a WMS instance hosted by a third party is hardly a new concept. But advancements in server technology, system software, management tools, and bandwidth make it a more economical proposition than it was 10 years ago. Web services make integrating applications over the cloud more attainable. Most enterprises cannot continue to build out their data center capacity infinitum. So I totally understand why SaaS and third-party hosting have become so popular in the WMS marketplace.

Is SaaS or hosting a good fit for WMS? As with any outsourcing opportunity, economics will drive the answer for any particular situation. Coming up with reliable numbers to support a strategic business case can take a bit of work. 

Application flexibility, customer requirements, vendor base, distribution network structure, integration, and corporate governance all must be factored into the equation from both current and strategic timeline perspectives. Appropriate service level agreements must be hammered out to guarantee performance and reliability. For all but the simplest operations, determining the viability of SaaS or hosting for a WMS requires a fair amount of due diligence.

I’m sure many enterprises searching for a new WMS solution get all of this. They have already done their homework on SaaS and hosting for other applications. But many others are relatively new to the game. 

The problem with the whole SaaS concept is its appeal is partially based on immediate gratification. You can move in just as soon as you sign the lease and pay the first month’s rent. So it is easy to think that SaaS will allow you to cut some corners during the selection process. 

Unfortunately, you have to do your homework before you say whether it makes more sense to rent or buy. 

-- Tom