When companies make the decision to implement cloud-based ERP (Enterprise Resource Planning software), it’s typically a decision based on the need to improve visibility across a multitude of business processes and to enable the sharing of information across different departments – accessible both on and off the premises.
But what about the financial benefits, particularly those pertaining to ERP software that is based in the cloud? When compared with multiple on-site business IT systems, the overall cost of having a unified cloud-based solution is significantly lower, which can only be a good thing for businesses looking to reduce the overheads eating away at their profits.
How cloud-based ERP can reduce your IT costs
Lower cost of ownership
When on-premise systems require ongoing investment to manage and maintain the software and related hardware, servers, and necessary facilities to run them, it’s easy to see why such a considerable percentage of retail IT budget – and that of businesses in other industries – is spent on maintenance (source, IBM) – and that’s before initial purchasing costs are taken into account.
Cloud-based ERP is much less expensive to implement, as the IT infrastructure is managed and maintained by the cloud ERP provider, who ensures the system is always running and that data is secure. So long as businesses have a reliable internet connection and an internet-enabled device, little else is required from their side to access and make full use of the system.
Whilst larger organisations can look to make substantial savings, smaller businesses – particularly those who require a minimal physical presence in order to trade online – can also benefit greatly from this type of setup; removing the need for costly space to store servers and other hardware.
A 2015 study by Statistia showed that UK-based companies using cloud computing reported financial savings of between 10% and 20% right across the board.
Keeping pace with change
Inflexible systems that require unnecessary updates and enhancements are an ongoing financial burden, especially to a business with a limited IT budget.
It’s nearly impossible for disparate legacy systems to be flexible enough to meet the changing needs of businesses, particularly retailers, whose customer-base may grow, or whose product range often fluctuates according to trend. Whatever the reason, if a company is using several separate systems, overseeing areas such as ‘inventory’, ‘shipping’, and ‘CRM’, can require comprehensive upgrades to ensure overall compatibility when a single system is changed.
Each upgrade is a financial cost in itself but as the infrastructure continues to grow, so does the cost to run these constantly developing systems; requiring additional hardware, support, and staff to maintain them in the long run.
Because cloud-based ERP unifies all essential systems into a single software solution, updates are minimal and usually taken care of by your cloud provider, reducing the amount of money businesses need to spend in order to keep pace with regularly occurring changes.
Lower energy costs
Cloud computing can help companies reduce the cost of running their IT systems, preventing the kind of energy wastage often committed by businesses with an on-premise infrastructure which means lower utility bills.
A cloud subscription covers all the data centre running costs, including electricity, cooling, etc. but since cloud servers are shared between many subscribers, the economies of scale allow the providers to keep subscription costs low.
Additionally, cloud computing allows companies – and in particular retailers – to get rid of any excess servers they may currently use to handle spikes in activity, typically experienced at this time of year, which are not cost-efficient and generally only see between 5% and 15% usage during less busy times (source, IBM). Instead, businesses using cloud software can easily scale resources up or down to cope with changing demand.
In fact, you may remember earlier in the year what was at the time being dubbed as ‘dressgate’. Following the hype, retailer Roman Originals received 9,838% more website visits on 27th February than on a usual day, and transactions increased 339%. But despite this, it was able to deliver on the user experience and ensure it could meet the high demand because cloud computing and real-time data prevented its website and supply chain from bucking under the pressure. (Incidentally, the company’s website runs on NetSuite’s cloud eCommerce platform).
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