Executive Briefings

The Pros and Cons of SaaS-Based Warehouse Management Systems

Since cloud-based or SaaS warehouse management systems first appeared around seven years ago, there have been no shortage of opinions proffered on the pros and cons of the Software-as-a-Service model for WMS. Let's look under the hood of SaaS WMS and evaluate its strengths and weaknesses.

SaaS WMS costs less on average in the initial few years of ownership. One of the major advantages touted by cloud-based WMS providers is the cost compared to the perpetual license model. In all of our WMS selections this year, SaaS WMS was, on average, less expensive to own in the first year than traditional providers, sometimes by a very wide margin.

In certain select instances, lower-tier WMS providers can cost less than SaaS WMS providers. In three out of the 15 price-points we had for comparison, the perpetual license model was less expensive than the SaaS model, but all three instances involved tier-2 or tier-3 providers.

The cost advantage of SaaS WMS drops off as operational complexity increases. In basic, simple operations where the WMS doesn't require a lot of configuration, cloud-based WMS can cost about one-third of the price of its traditional counterparts. However, in even moderately complex operations, this cost differential narrows by about half, as the SaaS-WMS providers have to build in configuration time and cost to their up-front cost.

SaaS WMS is still cheaper in the long run in simple operations: When we calculated the five-year cost of ownership with both models, a simple operation that selects a SaaS WMS still enjoys savings of 50 percent or more over a perpetual license model. Remember, a perpetual license model still requires users to pay 18 percent to 22 percent of the software cost each year in ongoing maintenance and support. This cost adds up and helps maintain the wide price differential even over time.

For more complex operations, the cost savings with SaaS WMS almost vanish by the 5-year mark. In the projects we studied, the SaaS WMS providers' ongoing costs were significantly higher than the maintenance and support on a traditional WMS, which erode most of the savings by year 5. Companies with complex operations will need to weigh the cash-flow benefits of SaaS against the higher long-term overall costs.

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Keywords: warehouse management, WMS, supply chain solutions, supply chain management IT, SaaS

SaaS WMS costs less on average in the initial few years of ownership. One of the major advantages touted by cloud-based WMS providers is the cost compared to the perpetual license model. In all of our WMS selections this year, SaaS WMS was, on average, less expensive to own in the first year than traditional providers, sometimes by a very wide margin.

In certain select instances, lower-tier WMS providers can cost less than SaaS WMS providers. In three out of the 15 price-points we had for comparison, the perpetual license model was less expensive than the SaaS model, but all three instances involved tier-2 or tier-3 providers.

The cost advantage of SaaS WMS drops off as operational complexity increases. In basic, simple operations where the WMS doesn't require a lot of configuration, cloud-based WMS can cost about one-third of the price of its traditional counterparts. However, in even moderately complex operations, this cost differential narrows by about half, as the SaaS-WMS providers have to build in configuration time and cost to their up-front cost.

SaaS WMS is still cheaper in the long run in simple operations: When we calculated the five-year cost of ownership with both models, a simple operation that selects a SaaS WMS still enjoys savings of 50 percent or more over a perpetual license model. Remember, a perpetual license model still requires users to pay 18 percent to 22 percent of the software cost each year in ongoing maintenance and support. This cost adds up and helps maintain the wide price differential even over time.

For more complex operations, the cost savings with SaaS WMS almost vanish by the 5-year mark. In the projects we studied, the SaaS WMS providers' ongoing costs were significantly higher than the maintenance and support on a traditional WMS, which erode most of the savings by year 5. Companies with complex operations will need to weigh the cash-flow benefits of SaaS against the higher long-term overall costs.

Read Full Article

Keywords: warehouse management, WMS, supply chain solutions, supply chain management IT, SaaS