The SaaS product will offer many new functions, including document imaging and filing, at a lower cost compared to the city's old server-based systems, when it is all online by September 2012, Edwards says.

Jeff Kaplan, an analyst with THINKstrategies , says that ERP SaaS products are a second wave of services that follow on the heels of applications like Gmail and Google Apps, which showed web-based software could work for businesses.

"It's motivated by frustrated users of on-premises products and by the economy because companies can't afford those anymore," Kaplan says. "They're finding that SaaS ERP may be more reliable and secure and cost effective than those old legacy apps. There's a bunch of vendors who are emerging and they are seeing rapid growth."

Ron Bonig, an analyst with Gartner Inc., says that a growing number of small to medium colleges are exploring SaaS ERP due to cost savings and increased features, but that larger schools aren't yet jumping in en masse. Some larger schools are, however, using SaaS for a few functions, such as payroll.

What's happening is that some schools are recognizing that they can now put together various applications in a best-of-breed approach, rather than bringing in an all-in-one ERP suite. "The opposition to this approach is loosening," Bonig says. "People are trusting it more, so they're willing to put more things out there."