SAAS or Hybrid ERP: Which type of ERP fits your purpose?

Many companies are taking a key step in their digital transformation journey and are searching for an ERP solution that meets their unique needs. Increasingly, companies choose the Software-as-a-Service (SaaS) model, where they pay a monthly license fee, and the provider handles upgrades and support. Hybrid ERP, however, offers a different path, allowing companies to purchase their ERP licenses and run the software on their own servers or through an Infrastructure-as-a-Service (IaaS) environment, with added custom support to ensure smooth operation.
Both SaaS and Hybrid ERP come with their advantages and challenges. Depending on your business goals, each model can be the right choice. This article provides an objective perspective on both SaaS and Hybrid models, covering the six essential evaluation points to consider when comparing these options. These insights will help you choose an ERP system that aligns with your company and objectives. The best ERP model and solution for your business ultimately depend on your needs and how they relate to the capabilities offered by SaaS and Hybrid ERP.
1. Infrastructure scalability and performance:
A Hybrid ERP solution can be hosted in various ways:
- Externally Hosted by an IT Provider: In this model, you have greater control over system performance than in a SaaS model, as you decide the necessary IaaS capacity and performance levels. You benefit from your IT provider’s security and accessibility features.
- On-Premises Installation: Hosting the ERP system on your own servers provides full control over performance, security, and accessibility. Managing your infrastructure internally means you are not dependent on an internet connection, unlike in SaaS or IaaS.
In a SaaS ERP model, infrastructure flexibility is limited. Some providers allow performance upgrades for an additional fee, but customers generally share the same base infrastructure. This model offers security and data accessibility managed by the provider.
2. Scalability of license model
In a Hybrid ERP model, you purchase only the licenses you need and can expand by acquiring additional licenses. Scaling down isn’t feasible except by canceling maintenance contracts for unused licenses.
In a SaaS model, scaling up or down is more flexible, depending on the number of users. Some companies choose longer contracts with discounts for higher license volumes. While scaling down may only be feasible at the end of a contract, scaling up is typically seamless.
3. Support
A SaaS ERP system comes with full support for the core application, including regular upgrades and troubleshooting via helpdesk. However, customizations and integrations usually fall outside standard service and may require additional costs through a partner.
Hybrid ERP offers more customization and technical support options, comparable to SaaS-level service. You can select different support levels based on your needs. Some companies may not require 24/7 support, while others prioritize rapid ticket resolution or guaranteed uptime. In a Hybrid model, you can choose the service level that best aligns with your needs and budget.
4. Control over your Upgrades
With Hybrid ERP, you control system upgrades entirely. In SaaS ERP systems, updates are automatically implemented, which may temporarily disrupt your business operations.
In a Hybrid ERP model, you decide when to apply updates, allowing you to schedule them at the most convenient time for your organization.
5. Customizations
A Hybrid ERP system provides more control over the software, making it easier to implement customizations and integrations. This flexibility is advantageous for organizations with a complex environment involving multiple applications, where customization is often necessary.
6. Total Cost of Ownership of your ERP software
The Hybrid model involves purchasing software licenses, which can be a significant investment, though many providers offer monthly payment options. SaaS is a subscription-based model, with monthly or quarterly payments, avoiding large upfront costs and integrating expenses into regular business operations.
Over 5 to 10 years, the TCO for a Hybrid ERP model may be lower than for SaaS, as you pay a one-time license fee followed by annual maintenance. There are also fixed costs for hosting and support that can be spread over several years.
SaaS offers simplicity: a fixed price per user per month, including ERP licenses, software maintenance, basic support, and updates. Additional costs for customizations and integrations are often billed separately by a support partner. Calculating and comparing the total costs for both models is advisable to make an informed decision.
Since total SaaS costs are generally higher over the long term (5-10 years) compared to Hybrid ERP, it’s useful to calculate the TCO for both models and compare. You might be surprised by the outcome of your calculations.
Which type of ERP fits your purpose?
The chart below illustrates which ERP type is best suited to your business, considering “Flexibility & Control” and “Complexity.” Flexibility and control depend on infrastructure options, performance, and update timing, while complexity reflects the degree of customization and IT landscape (such as interfaces with multiple applications).


Marcel van Es
Account Manager NetSuite
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