SaaS Sounds Good—But Does It Really Improve Upon Traditional ERP?

I get the “Quotes of the Day” feed in my browser, and yesterday’s quote, from economist Thomas Sowell, gave me some pause:

“Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good.”

I work for a software company that is the poster child for replacing traditional ideas with a new approach. Dave Duffield and Aneel Bhusri founded Workday on the principle that traditional ERP software is irreparably broken and the world needs an alternative. Our products are brand new from the ground up, based on a new delivery model (Software-as-a-Service, or SaaS), a new Web-based technology stack, and a new business foundation—and it sounds really good!

But the quote made me think. Are marketplace doubts about SaaS and cloud computing based on the suspicion that what we are doing is just replacing what worked—and traditional ERP worked at the beginning—with something that just sounds good but does not deliver real improvement and value? And is there a kernel of validity to that theory? Certainly the entrenched vendors—Oracle, SAP, and others—have come up with thousands of words shaped into arguments about why the new model won’t work, and about the folly of replacing their tried-and-true solutions with an approach that might sound good but is risky and unproven.

I did wrestle with this for a few minutes, and while it would be easy to dismiss the essence of the quote by saying, “Well, if we never replaced something that worked with a good idea, we would still be living in caves, or riding in stage coaches, or watching black-and-white TV, or [fill in your favorite innovation here].” But if you are asking someone to take a big step forward with something really important, they deserve a better answer.

As I said, traditional ERP worked. Like everything else, it is, and always will be, perfectly designed to do what it does—but actually that’s its fatal flaw. Sure, if you measure traditional ERP against what it was designed to do it still “works”; the problem is that the world has moved on while the core ERP model has become heavy, complex, and expensive to maintain. Yesterday’s ERP system was not designed for today’s technical capabilities or business requirements. It does not work for today’s businesses, and replacing something that doesn’t work with a good idea is the definition of innovation and progress.

It was a short wrestle. At Workday, we are not replacing something that works with something that sounds good—we are offering the market a real alternative to the old ways that have proven not to work anymore.