8th April 2018 •

The Value of a True Cloud ERP Platform

The debate over whether cloud-based ERP systems are more cost-effective than their on-premise counterparts continues. On-premise vendors claim their higher initial outlay costs are out-stripped in the longer term by the subscription costs of cloud-based systems, whilst cloud-based vendors will highlight the fact that the savings are made through lower capital expenditure on hardware, on upgrades, and via indirect costs saved through efficiencies and readily available business information. 

Computer Economics has been assessing the IT spend of companies that have moved largely to the cloud to determine whether SaaS saves money in the long-run. They surveyed 13 companies in the US and Canada from a variety of industries, with turnovers ranging from $40 million to $2.5 billion and between 135 and 12,500 employees.   

The results were compelling. Companies that largely moved to the cloud spent 21% less as a percentage of revenue, and 16% less on IT on a per-user basis compared to their on-premise counterparts.  

Where do the savings come from? 

The largest saving, unsurprisingly, is achieved through IT staff efficiencies. Typically, on-premise users spend 42.3% of their IT budget on IT staff, whereas this is reduced to just 30.9% for those in the cloud. 

Cloud users spent 7% of their IT budget on data centre infrastructure compared to the 11.7% industry average. This saving is achieved by cloud users pooling their resources together, therefore benefiting from economies of scale, which is just not possible as a sole user.  

Cloud users did find their spend on end-user devices such as laptops, tablets and phones was higher – typically 10% compared to 7% as the industry benchmarks. This might be attributed to the fact that companies using the cloud might be re-allocating spend from company hardware & servers to employee hardware. Furthermore, systems like NetSuite, which can be accessed anywhere with an internet connection, lend themselves to encouraging greater use of tablets and mobile phones. 

Application software is the other area where cloud users saw an increase in relative spend at 36% compared to 23% for industry benchmarks. This could be attributed to the costs of cloud infrastructure and the personnel to support it being met by the vendor via software subscription fees. 

The advantages of using the cloud extend far beyond just cost savings, with companies often benefiting in more intangible ways, including: 

  • Speed of implementation 
  • Scalability 
  • Ease of upgrades 
  • Agility 

For an increasing number of companies there is clear evidence that moving to the cloud will offer long-term savings. Are you interested in how moving to the cloud can benefit your business? Get in contact with us today at Elevate2 or download our free PDF below:

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