In April of this year, Nucleus Research published the results of a study that shows cloud-based application projects producing 2.1 times the return on investment (ROI) of on-premise ones. This figure is up a whopping 24% from their 2012 analysis, which demonstrated a still respectable 1.7 times ROI advantage. That substantial gain applied to Enterprise Resource Planning systems among a field of other enterprise-based applications (e.g. Customer Relationship Management, Workforce Management, Supply Chain Management). Why the growing advantage, and why is the separation almost certain to continue expanding? The study cites two main reasons.
Not as much turbulence on take-off
You know how, when climbing to cruising altitude during a flight, some clouds produce far more turbulence than others? Metaphorically, these jolts and rattles used to be a typical experience when installing business applications in the cloud's virtual space. Interconnectivity was far from seamless, and the disruption and delays when project plans didn't match reality led to ballooning budgets and overtaxed personnel. Climbing into the computing cloud used to be an exceptionally bumpy ride.
However, thanks to growing demand for reduced-hardware solutions, rapid advancement in cloud computing technology has smoothed out many of those wrinkles. According to the Nucleus Research study, recent cloud-based deployments of enterprise applications incur as much as 63% lower implementation costs than those executed on-premise. Such a sizable variance suggests that personnel time required to position applications in the cloud, rather than on-site, has also declined - a testament to the improved readiness of cloud environments. Today, the lift-off signified by implementation is a much more pleasant start to any cloud computing journey.
The seat belt sign remains off
On-premise deployments of business software, like an ERP system, can be great until it's time to upgrade...or expand functionality...or integrate with another application...or, in the case of strict client/server systems, purchase new workstations for users. Any of these actions - all of which are becoming more and more routine as software developers expand potential efficiencies within their products - inevitably lead to added support hours, external consulting services, work stoppages to reboot servers and upgrade workstations, and endless other disruptions that have become sadly traditional for on-premise deployments. Perhaps the most unfortunate consequence of these drawbacks and their associated costs is that they deter growth, which is exactly what enterprise-level systems are supposed to facilitate. Rather than comfortably flying at a preferred altitude, organizations in these circumstances can't seem to find steady air.
By way of contrast, the Nucleus study points out that companies spend an average of 55% less on personnel, on an ongoing basis, to support cloud-based applications. This is partly the case because, when using cloud applications (especially with the Software as a Service (SaaS) model, where updates are centrally handled), the pain of regular upgrades and patches is dramatically reduced. Furthermore, since true cloud-based applications are web-enabled, modern Application Program Interfaces (APIs) allow new integration points to be built almost on demand. This means that one cloud-connected application plays nice with other cloud-connected applications, and a wealth of advantageous services become available as a result. Rather than undertaking enormous and expensive custom programming projects in the presence of change, cloud-based applications have the inherent ability to adapt new functionality quickly when business developments demand it. What's more, cloud deployments are generally more reliable and cost-effective to secure than their on-premise predecessors, further reducing the ongoing costs of maintaining them. All of this flexibility and continuity allows companies running their enterprise applications in the cloud to unbuckle themselves from a single, unyielding strategy dictated by capital investment in aging technology.
On-premise deployment has long been the time-honored standard for ERP and other business management software. Depending on the particular needs of an organization, setting up and maintaining hardware environments for applications to run on is still the best choice. But times are changing (rapidly), and many markets demand increased agility from competitors in order to meet evolving customer demands. For companies responding to such needs, on-site installations have started to seem overly rigid and costly when air currents in the market shift direction. Now that initial and ongoing costs of cloud ERP and other enterprise implementations have swung below on-premise ones, and ROI has consequently risen, it's a great time to consider lifting off into the cloud.
Why are your applications right for your organization? Let us know in the comments! And if you're not sure what your next move should be, ask your Trusted Advisor.