Optimize your technology investment by cutting costs, increasing access and limiting risk.
Midmarket organizations are quickly migrating from on-premise solutions to cloud platforms for a variety of reasons, including increasing flexibility and accessibility, and managing costs. As companies have become more comfortable storing data and applications remotely—and as the cloud has demonstrated comparable performance to on-premise platforms with additional benefits—cloud adoption is surging, and companies are evaluating how they can leverage cloud platforms to build a competitive advantage.
The midmarket can be difficult to define. We define the midmarket from $50 million to $2 billion in sales, but it’s not just about dollars; it’s also about the critical business drivers a company faces. We typically work with companies with $20 million to $200 million in sales that are unhappy with the performance of their enterprise resource planning (ERP) platform in a wide range of industries, from service organizations and the public sector to technology, manufacturing, distribution, retail and professional services.
What is the Cloud?
The cloud is a virtual storage option to house technology systems, software and data. Your most critical information may not be a fit for the cloud, but the majority of your data can likely be stored in either a private or public cloud environment. The private option carries more expense with a higher level of control over security and functionality, while the public cloud is a more affordable solution with applications and data stored on shared servers with information from other organizations.
Instead of housing information on an internal server, data is stored in an off-premise server, without the need to maintain and update infrastructure. Users access data as they would with in-house storage, often with less downtime than if servers were located on site. When the right cloud solution is deployed, hardware, software, facilities and staffing efficiencies are realized, with access to data anywhere at any time and increased security.
Some organizations remain apprehensive about storing information remotely amid concerns about the potential access level and data breaches. With the cloud’s growing popularity, the volume of available providers has surged, and capabilities and security levels can vary widely. As with any service provider, organizations must perform their due diligence to ensure a cloud vendor is reputable and their security measures match your company’s requirements.
Many organizations are looking to make a change to take advantage of increased access to cloud technology, while others are simply looking for ways to further optimize their IT environment. In some cases, companies evaluate cloud solutions to solve business problems and inefficiencies due to nonintegrated solutions and older technology. In others, companies require multilocation and multicurrency functionality or greater analytics for business operations. In recent years, cloud-based solutions have come a long way in extending capabilities and meeting these complex business needs.
Costs Related to the Cloud
When looking at the investments necessary to deploy a cloud solution, companies must look at the financial investment, as well as changes to people, processes and support. Financially, the cloud is much more cost-effective than on-premise servers. Instead of a significant up-front investment and ongoing variable costs for support, maintenance and upgrades, the cloud carries a fixed monthly cost for the application software, hardware, support and backups. Costs for maintenance, as well as future technology and functionality upgrades, are already embedded into the monthly costs.
From a people perspective, cloud computing allows employees to access data from anywhere in a virtual environment without worrying about connectivity and infrastructure for office servers. Often through efficiencies gained in a cloud environment, companies are able to maintain or reduce human capital costs. The cloud can improve processes, integrating work flows by taking advantage of newly developed software to enhance the end user experience. It puts information in the hands of the end user without having to rely on internal support resources to generate reports or queries.
Implementing a cloud platform and outsourcing the storage of at least some of your data and applications allows you to concentrate on what is core to your business. With a fixed monthly cost, you can have systems that offer deep functionality, with the flexibility and ability to integrate with other cloud or on-premise systems. The cloud allows you to focus on running the business and making it more efficient and profitable without having to hire and maintain resources. From a risk perspective, your data is secure, and the resources of your cloud provider are in the background to support your applications, rather than your internal IT support, which is only one person in many cases.
How Mature is the Cloud?
Cloud solutions have evolved significantly in the last few years. Many solutions, such as NetSuite, have matured and provide the same or better functionality and capabilities than their on-premise counterparts. They may not have the same market share, but as users get more comfortable and the pendulum continues to swing toward cloud platforms, implementation will continue to increase. As with any solution in the market, some may not be truly mature—or a good fit for your business. An advisor can help you choose which cloud platforms align best with your business goals.
Going forward, businesses should look at cloud platforms from a strategic perspective, gaining an advantage over the competition while increasing focus on the business and reducing risk. Cloud adoption is accelerating, with 15 percent of change over the last five years, and cloud adoption could equal on-premise use within the next five to seven years.
Embracing the Cloud
As we continue to see the demystification of the cloud, organizations are becoming more comfortable with potential solutions. Executives evaluating cloud solutions for their businesses are realizing they are already heavily involved in cloud technologies as individuals, from shopping to personal email accounts.
While cloud platforms and capabilities are rapidly becoming more mainstream, several variables exist that determine which applications and data should remain on-premise and which should reside in the cloud. A midmarket organization considering a move to the cloud should consult with a provider with significant experience in both on-premise and cloud platforms to develop a plan that aligns with your resources and goals. iBi
Keith Brooks is director of information technology consulting for McGladrey.