To Be, or Not to Be, in the Cloud

Organizations make daily decisions that better adapt their organizations to a changing external environment. These decisions revolve around four factors: people, processes, technology and records. Leaders of the 21st Century argue that the most salient of these factors is technology.

In fact, the IBM Institute for Business Value recently conducted a study based on data collected from 4,000 C-suite executives worldwide.

Out of 9 factors, CEOs and all other CxOs reported that technology is a top 3 external force impacting organizations, with CEOs, CIOs, CMOs, and CSCOs reporting it’s the single most salient factor.

Although the other factors serve meaningful functions, technology directly supports both strategic initiatives and operational efficiency.

Consequently, organizational leaders benefit from understanding technology and the compelling reasons to adopt cloud applications.

This article elucidates two early warning signs that it’s time to consider a new ERP system — high technology- related costs and operational inefficiencies.

Like all budgets, the IT budget is necessarily limited. Considering limited resources, system cost is one of the weighty factors determining whether or not it’s time to change ERPs. In a traditional organization using on-premise technology, IT allocates budget to hardware, software, and the people tasked with operating, maintaining, and supporting the technology, with most of the budget allocation going toward hardware and people.

In contrast to the on-premise model, the budget using a cloud infrastructure allocates most of the resources to software.

This is possible because the organization providing the cloud software deploys people to maintain and support the hardware and software; therefore, more of the organization’s budget can be allocated to the software necessary to solve a wide variety of business problems.

Besides people and hardware savings, some of the intangible costs associated with on-premise technology, which organizations often fail to include in their ROI analyses, are software downtime, cost of future integrations, cost of modifications requiring programmers, and the cost of security and losing data in the event of a disaster.

A ubiquitous and significant early warning sign is operational inefficiencies. As businesses grow and evolve, and as they shift strategies to meet external environmental demands, the IT architecture has a direct impact on how efficiently the organization can cope with complexity and meet strategic goals. When complexity of the organization exceeds IT capabilities, the entire organization is weighed down by inefficiencies that consume resources.

Operational inefficiencies occur when (a) efforts are duplicated within and between functional departments, (b) communication between people is slow and arduous, (c) records are stored in a variety of systems making them difficult to retrieve, and (d) employees rely on spreadsheets to work around system limitations. Although large companies have the resources, and essentially the buffer, to absorb some of these inefficiencies, those same inefficiencies can be crippling to companies who have limited resources (i.e., most companies in the 21st Century).

Selecting an ERP system is about solving organizational problems; the choice is a business decision, not necessarily a technology decision. Two of the most significant early warning signs of problematic technology and business processes are high technology-related costs and operational inefficiencies that disable organizations from achieving overarching organization and business unit strategic goals.

After accounting for capital expenses, design and deployment costs, ongoing infrastructure, and ongoing training and support, the cloud-based model typically outperforms the on-premise model.

In addition to saving money, organizations increase operational efficiency with cloud-based software.

Growing and adapting to the environment, and continually solving efficiency problems, is more scalable with cloud software due to the ease of integration between applications.

Ultimately, organizational leaders benefit from being able to recognize high technology costs and operational inefficiencies, and they usually benefit the most by solving these problems with a cloud software solution.

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