The two most popular reasons companies today are choosing to host their ERP solution in the Microsoft cloud, and more specifically—Azure are:
- Cost Savings
Frankly—innovation is the reason that people should be moving to the cloud—it gives you the ability to do things you couldn’t before. What we’ve seen is that companies move for the cost savings and as they learn how to fully leverage the technology, they begin to more so value the ability to do things in a new way.
The cloud has been around for a while but the potential was always stunted by certain road-blocks; such as cloud economics, data sovereignty, and security. These road blocks no longer exist.
The eminent benefit that most companies realize by moving to the cloud is the ability to cut costs. As we’ve been working with Dynamics ERP customers I have found it helpful to really break down the cost comparison of on premise and the cloud which is what you’ll see below.
Note, our calculations are based on the industry norm as it relates to server replacement. Businesses typically replace their servers when they upgrade their ERP solutions, which is generally every 3 years. Some would challenge that you could extend a server’s life to 5 years but by that time the software would be so out of date that it would increase the risk of system failures, which could be detrimental to a business.
To get a full picture I created the table below to demonstrate a full year of cost; year 1 (Y1) being a year a company replaces hardware (i.e. servers) or migrates to the cloud, year 2 (Y2) as a normal operating year without the need for hardware or cloud migration.
Certain people look at the total cost when there isn’t a break-down, and think the comparison is unrealistic. We’ve gone through this exercise with clients using their numbers and they’re often surprised. The numbers below represent an average customer scenario.
To explain the below chart I want to first clarify the ERP purchasing process; you have two options—to buy your licenses outright, or to rent them. If you buy them—you pay for something called an enhancement plan every year afterward which can be 16%, 18% or 25% depending which plan is selected. The other option is to rent, this means paying a monthly fee but not having an enhancement plan. Another thing to note; if you buy the software licenses there is the option to run it on premise or in the cloud whereas renting is cloud only.
Company XYZ: 10 Users, 16% enhancement plan, own Dynamics NAV 2016
Note: GP users could expect a very similar cost comparison scenario as the one above. The cloud infrastructure cost would however increase from $4,680/year to $5,880/year.
What these costs are really illustrating is the ability for drastically lower costs, and the movement from utilizing capital expense to using operating expense.
A large portion of the business community have fear regarding the cloud. This makes complete sense—we fear what we don’t understand. The cloud is the most disruptive technology in the last 50 years—if your company isn’t leveraging it to their advantage, competitors will begin to. My aim is to ensure our customers are the disruptors, not the disrupted.
There are numerous advantages to the cloud and most companies think there has to be a ‘catch’—everyone has concerns—security, privacy, data ownership, uptime, amongst numerous others. I spend most of my days either discussing them or discovering innovative ways Microsoft is addressing those exact concerns.
I’m not going to pretend I don’t want to sway you—I think some type of cloud is imperative for every company. However; going completely to the cloud is not the right choice for every company—hybrid solutions can be the right option.
Change is a constant we have always lived with, but the pace of change has increased drastically. Microsoft has been releasing an unprecedented number of updates, a portion of my every day is dedicated to knowing all of it so we can help ourselves and our customers leverage the ‘latest and greatest’ functionality.
Personally I’m beginning to realize that companies today, no matter the size or industry, can’t afford not to begin planning the transition of all or some of their business to the cloud.
If cloud is on your 2016 business radar then contact us to discuss how we can make the cloud a reality this year.
If your business experiences these red flags, your diagnosis is clear: time to adopt the cloud!