On-Premises or Cloud ERP – Which Delivers $1 Million More in Value?
Compare Costs Between On-Premises and Cloud ERP Using 3 Criteria
The cloud has become a critical tool across the modern business landscape, making communication and collaboration easier, faster, and more affordable. Right now, 94% of enterprises use at least one cloud service, but many companies still rely on legacy ERP for their mission-critical operations.
Cost is the most prominent factor resulting in this odd disconnect. As you know, it takes a significant investment to implement a mission-critical ERP solution, which is why smart leaders demand a reliable ROI before choosing to upgrade an on-premises solution like Microsoft Dynamics SL.
Cloud vendors often try to sidestep the cost conversation by pointing out persuasive cloud benefits: agility, mobility, seamless data sharing, increased insight, and unlimited customization among them.
It is hard to justify a large investment based on such nebulous criteria. That is why you deserve to know the hard numbers when calculating the value behind on-premises systems like Microsoft SL or Cloud ERP like Acumatica.
Comparing the True Value: On-Premises and Cloud ERP
To accurately compare the value of on-premises versus Cloud ERP, you must carefully investigate the costs of running the solution, the costs of any required add-ons, and the costs of future growth plans, such as eCommerce initiatives.
Business agility has been the main driver for and the main benefit of the move to cloud, with 64 percent of respondents saying the use of cloud has increased their organization’s agility.
1. Base Cost
Your value relies on the calculation of all your costs over time, including costs that are often overlooked (or intentionally glossed over) during the sales process.
- Microsoft Dynamics SL has extensive on-premises IT management costs. Companies with on-premises ERP may find it hard to imagine that the costs of maintenance plans, software upgrades, hardware upgrades and storage, backups, licensing, training, and IT staff are not required costs with the right Cloud ERP.
- Acumatica Cloud ERP eliminates a lot of the complexity and cost of IT management. Cloud ERP from Acumatica eliminates per-user licensing costs, training costs, upgrade costs, and backup costs, and significantly reduces the time and money you have to spend on IT management. Eliminating these costs can result in gains of $1,078,600 for some companies.
By 2022, organizations that continuously improve their SaaS ERP will realize 60% more business value through adopting the latest best practices in frequent vendor releases.
Once your ERP is running, it is important to compare add-on costs when considering SL or Cloud ERP so you can ensure that your ERP meets your precise needs. Microsoft SL and other on-premises tools require add-ons that Cloud ERP often includes built in.
- Microsoft Dynamics SL users typically add around 5 add-on solutions to handle their full end-to-end workload. If you run SL, you are likely also running add-ons for ACH, budgeting, requisitions, expense management, and document management and approval. All these functions are built in with Acumatica Cloud ERP.
- Acumatica Cloud ERP includes built-in robust tools for most or all of the standard on-premises add-ons. Acumatica eliminates many typical add-on costs with included AP bill payment via ACH, budgeting, requisitions, expense entry, document management / approvals, and more. Eliminating these add-on costs can result in gains in the range of ~$35,000 (plus annual maintenance) to ~$110,000 for an average-sized company.
Product functionality is the most important decision factor in cloud core financial management suite evaluations.
3. eCommerce Integration
Many companies looking to grow realize that they must provide the convenience of eCommerce, but they are held back by the cost of on-premises eCommerce integration.
- Microsoft Dynamics SL eCommerce integration requires a custom setup and delivers limited options. Not only is the custom setup cost high, but the final product is often disappointing as users struggle to get their systems to communicate.
- Acumatica Cloud ERP offers seamless eCommerce that is easy to use. The Commerce Edition from Acumatica provides natively coded, fully-supported, real-time eCommerce integration that is hassle-free and features robust import/export and APIs to make your current processes easier. Eliminating these costs can result in gains of ~$15,000 to ~$20,000 for the eCommerce connector tool, plus additional gains when considering the costs of implementation and configuration.
By 2024, at least 65% of organizations will justify integration capabilities expenditure as strategic investments, up from less than 40% in 2019.
How to Determine the Long-Term Value of SL or Cloud ERP
In this article, we have discussed the approximate base costs, add-ons, and eCommerce costs to consider when comparing Microsoft SL or Cloud ERP, but we could not get into hard numbers because every business’s precise needs are different.
Yet, still, you deserve hard numbers.
According to a recent report from Forrester Consulting, businesses switching from an on-premises solution like SL to a cloud ERP like Acumatica “would experience benefits of $3.5 million over three years versus costs of $1.2 million, adding up to a net present value (NPV) of $1.4 and an ROI of 66%.”
Learn more about the total economic impact of evolving to cloud ERP by picking up your own complimentary copy of the Forrester report, which outlines the precise benefits and savings experienced by 4 businesses as they embarked on their cloud transformation.