Although more and more companies are moving to the cloud, I still run into the assumption that start-ups will eventually “outgrow” cloud ERP, as if SaaS is only appropriate for SMBs (Small to Mid-sized Businesses). Savings and value return for SaaS may have many variables, and these may differ substantially based on the size of your organization. However, the cloud offered value and cost savings to larger companies as well.
Here are five key areas to consider, whether you’re an SMB or a large company:
1) System Administration –
SMBs often neglect to spend what they should on system administration for on-premise system, so they “save” by not investing as they should in this area. As a result, they end up with under-performing, under-managed technology infrastructure, as well as the occasional disaster. For those SMBs that actually invest appropriately in what’s required for in-house server/network/platform maintenance, the savings of moving to the cloud are huge, since it can be very expensive for a small company to set up a good – or even adequate – in-house server/network/platform, along with the staff to maintain it. For larger enterprises, the cost models become more complex and are often more about core competencies, nimbleness and/or revenue per employee than about specific savings, but there is substantial value here too.
2) Scalability –
For a rapidly growing SMB, scaling in-house systems to keep up with your needs can be extremely challenging. In addition to systems and hardware, you’ll have to add people or contractors as needed – all “lumpy” expenses that are hard to predict and budget ahead of time. SMBs often have trouble planning far ahead and are also cautious about adding costs, so the predictable costs of SaaS can really help here. Larger enterprises are not normally affected as much by the need to scale rapidly and/or unpredictably, unless they are in a growth mode. At the same time, larger enterprises often benefit greatly from the ability to scale up or down for a period of time. A SaaS model helps here, since it’s much more cost efficient to increase/decrease system availability or access in the cloud than with an on-premise model.
3) Expertise –
Many SaaS offerings leverage data centers and support organizations that have more – and deeper – expertise for all of the required support areas than even the largest organization would employee. With SaaS, SMB companies can have enterprise level infrastructure without the expense. Enterprise companies benefit from deep expertise across the board for the specific SaaS offering.
4) Budget and IT Processes –
This area really affects larger enterprises more, since they usually have more structured budgeting cycles and combined pressures to manage cost and prioritize. SaaS moves significant amounts of your maintenance / replacement expense to a subscription which is factored into the standard budget – rather than dealing with funding / priority balancing. SMB budgeting decisions tend to be simpler and easier.
5) Customization and Product Extension –
Some of the best SaaS applications are combinations of a service with the software solution. Payroll services were an early example of this – there are other services such as Avalara for sales tax management or a number of the eCommerce platforms that include merchant banking features. The ability to integrate and extend is available for many SaaS applications since that is where they live. On-premise solutions, on the other hand, often require significant additional investments to extend the enterprise systems. Customization can be more challenging in SaaS, so the level and type of customization and the value received can be a cost impact item.
Whether your company is large or small, cloud applications can provide significant cost savings. If you’re interested in learning more about how cloud ERP and SaaS applications might benefit your organization, please visit our website, or contact me directly.
Bob Scarborough, CEO, Tensoft Inc.