Considering an upgrade from your spreadsheet program or paper-based warehouse organization system? Although software-as-a-service (SaaS) or cloud-based warehouse management systems are rapidly increasing in popularity, thanks to their lower ownership costs and painless implementation, a number of WMS providers still promote some form of on-premise solution.
So what are the pros and cons?
In a head-to-head cost comparison between on-premise and SaaS WMS solutions, on-premise is the more expensive option, at least in the short term, requiring a large upfront investment in purchasing the software license, along with ongoing support and maintenance costs.
For a small number of the very largest corporations, the perceived benefits of hosting their WMS on their own servers may make this trade off worthwhile. For the vast majority however, a SaaS WMS can deliver the same results faster and for less cost.
Other SaaS Benefits
Based on the initial expense of an on-premise solution, warehouse operators assume that trying something else would only cost more. But moving to a versatile, best-of-breed, cloud WMS allows for a fast, affordable transition and improved warehouse performance. What’s more, with a cloud-based WMS, upgrades are included as part of the service, which means your software will always be up-to-date, and you’ll never suffer from “version lock.”
Other key benefits of a cloud-based WMS include:
- Minimal capital expense: Without the need for long-term licenses, specialized equipment, and resources to host and maintain the system, a SaaS WMS eliminates the need for large capital outlays. Businesses can be more financially nimble without burdensome upfront expenses, instead paying predictable subscription fees.
- Rapid implementation: With configuration, hosting, and implementation all taken care of by the vendor, a typical SaaS WMS implementation can take just weeks, compared to months or even years for an on-premise system.
- Scalability: The SaaS model encourages scalability on two fronts. First, the software can be operated on any web-enabled computer, without the need for time-consuming hardware setup and can quickly and easily be deployed to additional warehouses to support growth and expansion. Secondly, additional licenses can be enabled on an as-needed basis, allowing a warehouse to quickly scale to meet growing demand or accommodate seasonal peaks.
- Ease of use: A cloud-based WMS ends up being more practical and uncomplicated for the end user. Picking and fulfillment operations can be optimized and made more efficient when the WMS in place makes sense and is easy to access for everyday users.
A best-of-breed cloud WMS solution offers all of the same benefits of a traditional WMS, but makes implementation faster and total cost of ownership (TCO) lower.
How On-Premise Costs Add Up
There are a variety of costs associated with on-premise software solutions. From the initial purchase through implementation and start up, these include:
License Fees
On-premise products rely on a one-time (perpetual) purchase pricing model, and vendors tend to market this as a selling point above the competition. Unfortunately, this also translates into a substantial upfront capital investment which, along with ongoing support and maintenance costs, can make for a high total cost of ownership and lengthy payback period.
Custom Implementation
On-premise WMS solutions are often billed as flexible software that can be tailored to meet the exact needs of any logistics model. What isn’t usually disclosed, however, is the time and money required to make this happen.
On-premise vendors will likely require clients to only hire certified IT staff to handle implementation as well as any ongoing maintenance. The proprietary nature of this model means warehouse operators will have little freedom of choice in picking the right IT talent, nor will they have much leverage if implementation falls behind schedule or the WMS doesn’t meet expectations.
Proprietary Hardware
The very equipment on which on-premise software runs is usually mandated by the vendor with strict guidelines. This can be expensive to purchase or lease, not to mention difficult to operate or maintain. Purchasing more specialized hardware only increases capital expenses, not to mention the cost of support staff to perform necessary maintenance and upgrades.
Many of these common stumbling blocks related to on-premise WMS solutions are of little concern in the SaaS realm. Using the cloud software model, clients pay a single monthly fee, a more budget-friendly approach for growth-minded companies. When users pay for exactly what they need, it becomes much easier to scale according to demand growth or specific improvements, especially considering the speed of SaaS implementation.
The Danger of Being “Locked In”
As is the case with many business systems, on-premise solutions like warehouse management software may have been in place for years or decades. This creates a massive long-term investment in the software — one that many executives are reluctant to forfeit, even though their WMS is no longer fit for duty.
The easy solution (continue using outdated on-premise software) too often wins over the fix that’s financially sound. While doing away with a legacy system may be painful in the short term, the benefits realized by switching are usually extraordinary. In the long run, continuing to fall behind will cost far more than a transition to better functionality.
According to Supply Chain Digest’s Supply Chain Opportunities and Trends Benchmark Survey 2016, “The on-premise model that has dominated the supply chain software industry since its inception is poised to become something of a relic over the next five years.”
A WMS that fits perfectly into your warehouse’s needs and budget isn’t a pipe dream. More businesses are finding the costs of legacy on-premise software to be untenable and are making the switch to SaaS with great results.
Chris Anton has been matching great companies with great order-to-cash solutions for nearly 20 years. Since 2001, Chris’s focus has been Warehouse Management Software. ADP, Sysco, along with others have worked with Chris to reinvent their distribution and warehousing operations. One of the first on the scene in Cloud and SaaS in 2010 with SmartTurn, he’s brought new technology and architecture to Enterprise markets. Chris leads Global Sales Operations for Snapfulfil and continues to manage its growth as a premier cloud WMS provider.
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