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RFID, Business Intelligence (BI), Mobile Computing, and the Cloud
Another unique feature of Plex’s software is its pricing model. Many ERP companies
price their software on a per-user basis. Plex saw a problem with this approach: it
encouraged companies to limit the number of people who would interact with the
software. Plex, however, wanted to encourage customers to use software. In addition, the
company wanted to match its pricing to the real costs of transactions processed. In a
seat license model, a customer may minimize users but have the same volume of
transactions as a customer with many more users. Plex prices its software based on the
size of the business, whether measured by company revenue or total number of
employees. Plex adjusts the amount of the subscription on a yearly cycle. If a company
suffers a downturn in business—and its revenue or number of employees is reduced—
then its subscription is reduced. Of course, if the customer grows, so does its
subscription. 233
Plex has observed an interesting phenomenon with its customers. At first, new
customers are hesitant to use a cloud system—they are concerned about data integrity
when all customers reside in a single system. But after a while, customers typically
realize that other Plex customers actually form a community, and collaboration within
the Plex community provides value. Rather than being a software company that is sales
and marketing driven, Plex has become a company where users, and the user
community, directly drive innovation, and all customers benefit.
Questions:
1. How will SaaS affect large ERP companies such as SAP and Oracle? Will their
size and research capabilities allow SAP and Oracle to gain dominance of
the SaaS marketplace, or will ERP systems be provided by a growing number
of small companies, such as Plex, each providing specialized ERP packages
specially tailored for specific industries?
2. Will Fortune 500 companies eventually leave SAP ERP for SaaS systems? Will
they adopt SaaS products from smaller providers? Will they use Business
ByDesign? Or will companies like SAP and Oracle migrate their current large
ERP packages to an SaaS environment?

Exercise 8.2
Returning to the example company, Fitter, assume that under its newly appointed CIO,
Fitter has made the decision to acquire an ERP system. Now the CIO must decide how to
implement the system. After talking with various ERP software vendors, the CIO has
determined that Fitter has two options for implementing ERP software:
1. Buy a license for the ERP software, purchase the hardware required to run it,
and hire and train system administrators.
2. Run Fitter’s ERP system over the Web through an SaaS provider, which
would deliver ERP services for a monthly fee.
Both types of implementations have advantages and disadvantages, as you have
already seen. For the first part of this exercise, you must write a memo to the CIO
enumerating the pros and cons of each method. Use a table similar to the one shown in
Figure 8-7 to organize your thoughts.

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