HOW IT WORKS
Cloud service vendors are facing a massive windfall these days, as demand has climbed for their services over the last few years. Companies are realizing the potential of the cloud to streamline workflow operations.
To that end, the ROI (return on interest) multipliers for cloud applications versus traditional physical operations, is increasing. Nucleus Research has published numerous case studies, which demonstrate that projects using cloud applications offer 2.1 times the ROI than that of on-premise ones. Overall, since 2012 the rate is up 24 percent.
“The cloud ROI multiplier has risen, with cloud projects delivering 2.1 the ROI of on-premise ones”.
The increase can be explained by the continued buy-in on the part of companies investing in cloud-based services for data management and customer front-ends. The cost saving benefits for adopting cloud services cannot be overstated. And tied to the greater investment options, cloud services offer unparalled opportunities as more vendors launch their products into the market.
Based on Nucleus Research’s publishing on a selection of cloud projects across the core functions of enterprise software including enterprise resource planning (ERP) and accounting, customer relationship management (CRM), human capital management (HCM) and workforce management (WFM), supply chain management (SCM), content management, and analytics, as well as infrastructure projects such as platform as a service (PAAS), the investment returns and functionality adaptations are not slowing down.
The same was true back in 2012 when Nucleus Research published its first report of the cloud ROI multiplier (Nucleus Research m108 – Cloud delivers 1.7 times more ROI, September 2012).
DEEPER DIVE
While it may be obvious that more complex functionalities and applications in cloud services would lead to higher initialization costs, the reverse is actually true, according to Nucleus Research’s reports.
- Since 2012, the cost of deploying cloud systems has fallen 63% compared to physical systems. Along with it, the requisite personnel expenses have dropped in parallel.
- The costs after implementation have also plummeted by as much as 55 % in terms of staffing and upkeep costs.
From a business standpoint, the primary driver of the cost savings are the competition in the market. With vendors offering further options personalized to a business’ needs, it keeps cost down. In addition, the recognition that systems integrators are leaning toward flexible pricing models in order to match customer expectations.
Another key factor in the increased ROI is, based in the flexibility of the cloud itself. It benefits its users by delivering long-term net gains as well as the ability to adapt to changing needs in the future. The latter is particularly important because it washes away the traditional costs of changing business functions. Cloud service vendors recognize that aspect and are able to leverage the flexibility of their programs and change with a minimum of disruptions.
OTHER CONSIDERATIONS
An unforeseen but fortuitous result for adopting cloud services is the ability for a company to leverage its usage after the initialization. Since a vendor is obligated to provide the best service at the beginning, it forces them to provide the most efficient options rather than one that fulfills only part of the enterprise solutions. This provides the most flexibility and personalization for a business and allows for a business to take advantage of system indicators and data usage.
BENEFITS OF SWITCHING
The reports by Nucleus Research indicate that due to the lowered cost of switching applications, they are more likely to re-trench in the first six months if a program isn’t working. (Nucleus m107 – CRM – propensity to switch, September 2012).Although the CRM cloud market is arguably the most mature of the cloud markets, the propensity to switch out ERP, HCM, and other applications that aren’t working in the first few months is following the CRM model. Without having to worry about the pressure points of sunk costs as part of traditional disruptions, project managers are seen to be twice as likely to switch halfway through and seek partnership with a competitor.
“Cloud applications use 91 percent less energy than on-premise systems”.
GOING GREEN
In today’s market, “going green” is very much in vogue, and cloud services have evolved to provide solutions. Nucleus Research’s analysis found that cloud applications used, on average, 91 percent less energy than physical systems (Nucleus Research k52 – Cloud computing: it is easy being green, October 2010). As PAAS and other related vendors have continually made iterations in data center energy requirements, and more and more companies switch their programs to the cloud, economies of scale mean that there is a greater energy efficiency in the cycle. To say nothing about the decreased demand on a business’ physical footprint.
WRAP-UP
While there are some industries that have been slow to catch on to the cloud bandwagon, it is clear that there are real and significant benefits to switching to cloud services for ERP and CRM programs. These days, with cloud delivering 2.1 the ROI of physical applications with lower startup and lifecycle costs, the flexibility and adaptability of such services provide unparalled advantages.