Why SaaS-Based Solutions Often Miss the Mark in Enterprise Settings

Authored by Mr. Laeeq Siddique — Leading SAP S/4HANA Innovation & Strategy

SaaS solutions for SAP ERP are increasingly popular due to their simplicity, predictable pricing, and fast setup, attracting businesses looking to save time and reduce IT overhead.

For example, a mid-sized retail company running SAP ERP might adopt a SaaS-based CRM tool to enhance customer engagement without the need to build an in-house solution. Similarly, a healthcare organization could choose a SaaS billing system to simplify patient payment processes, freeing up resources to focus on patient care. These solutions promise convenience and flexibility, making them an attractive option for businesses looking to modernize quickly.

However, for enterprises relying on SAP ERP systems, SaaS solutions often present unexpected challenges. SAP customers operate within a tightly integrated ecosystem, where every tool and system must work together seamlessly. When SaaS solutions cannot deliver this level of integration, they disrupt workflows, create additional costs, and leave businesses with limited customization options. These shortcomings can prevent enterprises from fully leveraging the power of their SAP ERP systems.

In this blog, we will explore why businesses choose SaaS, where these solutions fall short, and how custom development or extensions built with SAP’s modern technology stack can provide better results. Through real-world examples, we will show how enterprises can overcome these challenges and achieve solutions that truly fit their needs.

 Why Enterprises Choose SaaS Solutions

SaaS solutions have become a go-to option for businesses looking for simplicity and speed, especially when they want to avoid the complexities of traditional IT systems. SAP ERP customers are often drawn to smaller, niche SaaS applications that promise to quickly address specific needs and deliver a competitive advantage. These solutions are designed to work independently, providing immediate results without the long lead times of traditional software development.

For SAP ERP customers, smaller SaaS solutions offer quick, targeted functionality with predictable costs.
Why Building an MVP is Key to Your Custom SAP Development Project – Like SaaS, an MVP in SAP development delivers fast results and scalability with minimal upfront investment.

Simple Pricing Structures

Smaller SaaS solutions often come with straightforward subscription pricing, making costs predictable and easier to manage. This appeals to businesses looking for quick wins without the commitment of significant upfront investments. For instance, a mid-sized manufacturing company running SAP ERP might choose a SaaS scheduling tool to optimize production shifts. With a fixed monthly fee, they gain access to specialized features without needing to invest in custom-built solutions.

Vendor-Managed Maintenance

Unlike on-premise solutions, where internal teams must handle updates, security, and maintenance, SaaS solutions place this responsibility on the vendor. For smaller applications, this can be a game-changer. Consider a retail company using a SaaS inventory tracking app for one of its regional warehouses. The vendor handles updates, ensuring the app is always running smoothly. For SAP ERP customers who already manage large-scale systems, this offloads some of the operational overhead.

Quick Onboarding

Smaller SaaS tools are particularly attractive for their rapid implementation. These solutions are designed for specific use cases, enabling businesses to deploy them in days rather than weeks or months. For example, a logistics provider might use a SaaS route optimization tool alongside its SAP ERP system. This allows them to improve delivery times immediately without waiting for a large-scale IT project.

The Draw of Niche SaaS for SAP ERP Customers

For SAP ERP customers, these smaller SaaS solutions appear to be the perfect complement to their existing systems. They target specific pain points, provide immediate functionality, and do so with predictable costs and minimal effort. It is no surprise that many organizations see them as a fast track to innovation without disrupting their core operations.

But then here comes the big but.

Why SaaS Often Fails to Deliver in Enterprises

While smaller SaaS applications promise quick wins, they often fall short when deployed in enterprise environments, especially for SAP ERP customers. These challenges become evident as businesses attempt to integrate these tools into their existing systems, scale them to meet evolving needs and deal with limitations arising from multitenant architectures.

When SaaS solutions fail to integrate well with existing SAP systems, they create significant roadblocks, including fragmented data and disrupted workflows. If you’re looking for a more cohesive solution, we suggest exploring our article on 𝗧𝗵𝗶𝗻𝗸 𝗮 𝗦𝗮𝗮𝗦 𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻 𝗶𝘀 𝘁𝗵𝗲 𝗲𝗮𝘀𝘆 𝗰𝗵𝗼𝗶𝗰𝗲 𝗳𝗼𝗿 𝘆𝗼𝘂𝗿 𝗦𝗔𝗣 𝗘𝗥𝗣?

Integration Challenges

SAP ERP systems are not standalone solutions. They form the backbone of an organization’s operations, connecting financials, supply chain, sales, and other critical functions. Adding SaaS solutions into this environment often reveals the limitations of tools designed for isolated use cases.

• Fragmented Data: SaaS tools typically operate in silos, leading to fragmented data. For example, a retailer using a SaaS analytics tool might struggle to sync it with SAP ERP’s financial reporting module, causing delays in decision-making. Custom solutions built within the SAP ecosystem eliminate this issue by ensuring seamless integration.
• Hidden Costs: Integrating SaaS with SAP ERP frequently requires middleware like SAP Integration Suite or third-party APIs, increasing costs. In contrast, SAP-native extensions leverage the existing technology stack, providing cost-effective, out-of-the-box compatibility.
• Compliance Risks: Many SaaS tools lack enterprise-grade compliance features. In regulated industries such as healthcare or finance, this can lead to operational and legal risks. SAP ERP solutions, built with compliance in mind, provide peace of mind for businesses.

Multitenancy Limitations

The multi-tenant model of SaaS applications, where multiple customers share the same infrastructure, reduces costs but limits flexibility.

• Customization Constraints: Enterprises require solutions tailored to their needs, but multitenant SaaS restricts this flexibility to maintain standardization.
• Shared Performance Risks: Multitenant architecture introduces the risk of shared performance degradation. SAP ERP’s in-memory database architecture ensures consistent performance, regardless of external demand.
• Data Security: Enterprises relying on SAP ERP systems prioritize data control and security. Multitenant SaaS environments often raise concerns about data segregation and compliance, which are non-negotiable for businesses handling sensitive information.

Scaling Problems

Smaller SaaS solutions may serve their purpose initially but often struggle to scale alongside a growing enterprise’s needs.

• High Costs for Features: Many SaaS tools offer limited functionality unless enterprises pay for additional features. Custom SAP solutions, by contrast, can provide these features upfront, fully tailored to the business’s needs.
• Vendor Dependency: Enterprises relying on SaaS vendors for updates risk delayed or deprioritized feature releases. In contrast, custom-built solutions put control back in the hands of businesses.

Cost and Effort: SaaS vs. SAP Extensions

The upfront costs of SaaS might seem lower, but the hidden expenses of integrating and maintaining these solutions with SAP ERP quickly add up. Middleware licensing, the development of custom APIs, and the constant need for patchwork solutions often lead to bloated budgets. On the other hand, SAP extensions built directly within the ecosystem align with existing technology stacks, reducing long-term costs and complexity.

For example, a global retail enterprise that initially opted for a SaaS inventory management tool soon realized the mounting expenses of integrating it with their SAP ERP system. Middleware fees, custom API development, and reliance on vendor support led to spiraling costs. By switching to a custom SAP extension, the company streamlined inventory processes, reduced integration expenses, and achieved a unified view of operations within months.

Similarly, a mid-sized manufacturing firm struggling with SaaS scalability issues found that building a tailored solution on SAP BTP eliminated additional feature costs and provided seamless scalability. The extension integrated directly with SAP ERP, offering the flexibility needed to handle growing operations without incurring unpredictable vendor fees.

Winning the Enterprise Game

For SAP ERP customers, custom development and SAP-based extensions provide the reliability, scalability, and integration that enterprises demand. SaaS can be a helpful complement for specific use cases, but when it comes to core business operations, the competitive advantage lies in solutions built with SAP’s modern technology stack.

 The Power of Custom and Extension Development with SAP

SAP ERP customers often operate in dynamic, high-stakes environments where off-the-shelf solutions may not align with their unique needs. Custom development and extensions within SAP’s ecosystem provide the precision and adaptability required to address these challenges. By leveraging SAP’s modern technology stack, businesses can build solutions tailored to their operations while maintaining scalability and long-term reliability.

Making SAP BTP the Heart of Your Innovation

SAP BTP is the foundation for creating highly specific, integrated solutions that expand the capabilities of SAP ERP without disrupting core systems. Procurement teams can automate approval processes, while sales teams gain access to consolidated dashboards, improving decision-making and operational efficiency.

How SAP Fiori Changes the Way You Work

SAP Fiori transforms complex processes into easy-to-use, role-based apps that work across devices. By improving usability, it helps teams work faster and smarter. Finance teams can track budgets and approve invoices efficiently, while maintenance teams can report issues directly from the field.

Building Reliable Applications with RAP

The Restful ABAP Programming Model (RAP) helps businesses create flexible, cloud-ready applications that work perfectly with SAP S/4HANA. RAP ensures these applications are both scalable and reliable, empowering businesses to adapt to evolving needs.

Connecting Everything with SAP Integration Suite

SAP Integration Suite connects SAP ERP with external tools and SaaS applications, ensuring a unified ecosystem. This supports accurate data exchange and improves operational efficiency across the board.

 SAP’s Technology Stack: A Game-Changer for Enterprises

SAP’s modern tools and technologies are designed to help businesses overcome the challenges of integration, scalability, and innovation. For SAP ERP customers, these technologies bring everything together, offering powerful solutions that fit seamlessly into complex environments.

SaaS systems often lack customization, leading to integration issues. Think a SaaS solution is the easy choice for your SAP ERP? Discover why it might not be the best option—check out our blog.

Why SAP’s Tools Make All the Difference

SAP’s modern technology stack allows businesses to innovate, integrate, and grow without compromise. For SAP ERP customers, these tools provide the flexibility to address unique challenges and maintain control over their systems. This approach ensures that businesses are always ready to meet new demands while staying competitive in the market.

Final Thoughts

SaaS solutions can be valuable tools for addressing specific business needs quickly, but their limitations become apparent in the complex environments that SAP ERP customers navigate. These challenges—ranging from integration hurdles to scaling issues—highlight the importance of leveraging solutions that align seamlessly with enterprise systems.

SAP’s modern technology stack empowers businesses to overcome these challenges, offering robust tools for custom development and seamless integration. By building tailored solutions or extending existing capabilities, SAP ERP customers can unlock new levels of efficiency, scalability, and innovation.

In an ever-changing business landscape, the ability to adapt and innovate with confidence is what sets successful enterprises apart. With SAP’s technology stack, businesses are not just keeping up—they are leading the way.

For businesses interested in custom SAP development, an MVP approach offers flexibility and scalability. Find out more: Why Building an MVP is Key to Your Custom SAP Development Project