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The Compelling TCO Case for Cloud
Computing in SMB and Mid-Market
Enterprises
A 4-year total cost of ownership (TCO)
perspective comparing cloud and on-premise
business application deployment
A Hurwitz wHite PAPer
SanjeevAggarwal,PartnerLaurieMcCabe,Partner
StudysponsoredbyNetSuite
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Conns
ExecutiveSummary...............................................................................................................1
Introduction...........................................................................................................................2
Figure1.Four-YearTotalOwnershipCostDistribution-NetSuiteandMicrosoft
DynamicsGPandCRM.....................................................................................................2
Section 1: SMB & Mid-Market Enterprises Face Difcult Business and Economic
Challenges.............................................................................................................................3
Section2:CloudComputingShiftstheTCODiscussion.............................................4
Figure 2. Key Benets of Cloud-based Business Application Solutions................... 4
Section3:WhydoesTCOmatter?....................................................................................5
Section4:WhatdoesthisTCOmodelinclude?..............................................................6
Section5:AssumptionsforDevelopingtheTCOModel.............................................7
Section6:TCOMethodology............................................................................................8
Figure3.KeyFunctionsandFeaturesforMid-MarketCompanies............................9
Section7:TCOComparisonforCloudvs.On-premiseBusinessSolutions.............9
Figure4.100-UserTCOforNetSuiteandMicrosoftDynamicsGP/CRM..............10
Figure5.TCOComparisonfor52-users,100-user,200-userforNetSuiteandMicrosoftDynamicsGP/CRM.........................................................................................12
Section8:RecommendationsforSMBandMid-MarketEnterprises........................13
Section9:Conclusions.......................................................................................................15
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Executive Summary
Cloudcomputingessentiallyeliminatestheneedforcustomerstobuy,deployandmaintainITinfrastructureorapplicationsoftwareindividually.Regardlessof theapplication,thecloudcomputingvendortakesresponsibilityforallof the
infrastructurerequiredtorunthesolution--servers,backup,software,operatingsystems,databases,updates,migration,powerandcooling,facilityspace,etc.,andassociated internal and third-party stafng costs. Because cloud computing vendors
manageallof theircustomersonasingleinstanceof thesoftware,theycanamortize
costsoverthousandsofcustomers.Thisyieldssubstantialeconomiesof scaleandskill,andlowerstotalcostof ownership(TCO).
Key ndings from our analysis include:
Overall TCO for NetSuites cloud-based integrated solution suite is signicantlylowerthanacomparableon-premisesolutionconsistingofMicrosoftDynamicsGP and CRM. This holds true for both SMB and mid-market rms. The TCOforcloud-basedvs.on-premisebusinessapplicationsolutionswas:
55%lowerfor52users 50%lowerfor100users 35%lowerfor200users
ITInfrastructurecosts(hardware,softwareandon-goingmaintenancerequiredtoruntheon-premisebusinessapplications)accountforabout11%of thetotal
costof deployingon-premisebusinessapplicationsalmost$172,500inthe100userscenario(Figure1).Comparably,therearenoITInfrastructurerelatedcostsforcloud-basedbusinesssolutions.
TotalCostforcloudcomputingisafull$730,745lessthanon-premisefor
the100userscenario.Withcloudcomputing,theoverallcostofrunningthesolutionismorepredictablethanon-premise.Figure1showsthatapplicationsubscriptioncostsaccountedfor65%ofthetotalsolutioncost,whereastheon-premiselicensecostonlyaccountedfor26%oftotalcost.
Spendingforapplicationimplementationandsupport(includinginternalITstaff and/or VAR, consultant or SI resources) is signicantly higher for on-premisesolutionsthanforcloud-basedsolutions,asmuchas3.5timesmorefor
the100userscenario.
Pre-integrated front and back ofce functionality in the NetSuite offeringincrementallycontributestoreducingintegrationcomplexityandlowers
applicationimplementationcosts.
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Figure 1. Four-Year Total Ownership Cost Distribution - NetSuite and MicrosoftDynamics GP and CRM
Sourc: Huriz & Associas
Introduction
Smallandmediumbusinesses(SMBs)faceatrickydilemmaintodayschallengingeconomic climate. Its no longer business as usual; companies need to gure out
howtooptimizefortoday,andgetontracktocapitalizeonnewopportunitiesthat
willemergeastheeconomystartstogrowagain.Theyneedbusinesssolutionstohelp them to manage more efciently day-to-day, and also provide them with theintelligencetheyneedtomovethebusinessforward.
AsSMBsevaluatedifferentbusinessapplicationoptions,totalcostofownership(TCO)isoftentopof mind.Manycustomershavebecomeinterestedinhowcloudcomputingorsoftware-as-a-service(SaaS)canhelplowertheircostsbyeliminating
upfrontcapitalinvestmentsandongoingmaintenancecostsassociatedwithon-premisesolutions.
Inthisstudy,webeginwithabrief overviewof SMBrequirementsandchallenges,andprovidecontextonhowcloudcomputingisreshapingtheeconomicsandTCOof thebusinessapplicationslandscape.Then,weexamineandcomparethetotalcostof ownershipforplanninganddesign,infrastructurehardware,softwareandsupport,
applicationsoftware,deploymentandtrainingcostsof MicrosoftsDynamicsGPandCRMtraditionalon-premisesolutions,withthoseof NetSuite,whichprovides an integrated front and back ofce SaaS solution. We conclude with our
recommendationsforSMBcustomersevaluatingthesealternativecomputingmodels.
Huriz whi Papr 2
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Overall TCO forNetSuites cloud-based integratedsolution suite issignicantly lowethan a comparablon-premise solutioconsisting ofMicrosoft DynamicGP and CRM.
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Section 1: SMB & Mid-Market Enterprises Face Difcult Business
and Economic Challenges
Justlikelargerenterprises,SMBsandmid-marketenterprisesneedbusinesssolutions
that help them to manage day-to-day operations and processes more efciently. At thesame time, they want insight and intelligence to successfully adapt to uid businessenvironment,andensurecompliancewithregulatoryrequirements.
However,SMBshavesmallerbudgetsandfewerITstaff thanlargercompanies.Small
businessesof 50to100employeesmayhaveonlyonefull-timepersontypicallyanITgeneralisttosupportacomplexarrayof ITresourcesandusers.Inmediumbusinesses (100 to 999 employees), IT stafng grows, averaging about one full-time
ITpersonforevery100employees.But,businessandITcomplexityoftenoutstrip
the growth of IT resources, especially in mid-market rms, who face the complexitiesof managingseverallocations,multipleservers,anexpandingarrayof desktopsanddevices,andamoremobileworkforce.
Asaresult,reactingtodailyapplicationavailability,maintenanceandsupportissuescanmaxouttheITstaff,leavinglittletimetodeploynewsolutionsoreventoupdateexisting ones. The difcult economic climate only heightens SMB requirements foreasiertouse,fastertodeployandmorefunctionalsolutionstohelpthebusiness
effectivelynavigatethroughuncertaintyandimprovethebottomline.
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Business and ITcomplexity oftenoutstrip the growtof IT resources,especially in mid-market rms...
Easing the upgrade process and improving operations
When a new CEO came on board at this 50-person insurance rating, quotingand policy solutions in 2000, he was frustrated with the lack of communicationand coordination within the firm. Everything was in silos, and it was dicult tocommunicate, according to the IT Director. We had internal people managingit, but they didnt understand all the diferent applications, and upgrades weredicult. In 2005, the firm implemented NetSuite, attracted by the clouddelivery model, and built-in integration capabilities. This provides us with thelatest version, all the time, without downtime, she notes. Having one systemand a unified dashboard has also helped us to improve service levels andincrease customer satisfaction.
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Section 2: Cloud Computing Shifts the TCO Discussion
Cloudcomputinghassteadilygainedmarketacceptanceasanalternativetotraditionalon-premise solution deployment and maintenance because it offers several benetstocustomers(seeFigure2).Thecloudcomputingmodelcanhelpcompanies
conservecashandfocuslimitedresourcesonthebusiness,insteadofreactingtoITinfrastructure-related re drills. In the cloud computing model, vendors provide Web-basedaccesstoapplicationsasaservice,throughasubscriptionpricingmodel.This
eliminatestheneedforcustomerstobuy,deployandmanageITinfrastructureandsolutions.Vendorstakeresponsibilityforeverything:theservers,storage,operatingsystem,database,businesssoftware,updates,migration,powerandcooling,datacenterspace,andsupportservices.Asaresult,cloudcomputingshiftstheITburdenfrom
thecustomertothecloudcomputingapplicationvendor.
Figure 2.Key Benets of Cloud-based Business Application Solutions
Sourc: Huriz & Associas
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Cloud computingshifts the IT burdfrom the custometo the cloudcomputingapplication vend
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Feature Customer Benefit
Eliminate capital
costs
Vendor pays for shared multi-tenant infrastructure
SMBs access solutions through a web-interface over the
internet
Pay for usage on a per month/user basis
Faster
deployment and
productivity
SMBs are up and running in 3-4 weeks vs. 3-4 months as
there is no need to acquire, install and test infrastructure
Applications can be accessed from anywhere, anytime
and through any device
Everyone in company has access to real-time information
Streamlines use
and management
Web-based, self-service access to business solutions
Vendor manages and updates infrastructure
No software to maintain and upgrade
Automated upgrades to new versions of applications and
functionality
IT focuses on higher value, more strategic initiatives
Increase flexibility SMB can expand or contract services as their needschange
Support a increasingly mobile workforce
Easier to investigate solutions prior to acquisition
Improve customer
service
Direct customer connection to resolve problems
Incentive to achieve high customer retention and upsell
additional solutions
Better reliability
and performance
Enterprise class IT infrastructure that is affordable Vendor provides high-availability for business continuity
and disaster recovery
Vendor provides required data backup services
Reduces power consumption and data center space
Proactive support and management
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Cloud computing vendors can provide these benets because theyve built their
solutionsasWeb-basedservicesfromthegroundup.Insteadofbuildingtheirsolutionstorunin-house,asaseparate,individualinstancesforeachcustomer,theyarchitecttheirsolutionsforaone-to-many,ormulti-tenantmodel.Thismeansthattheycanrunthousandsof customersonasingleinstanceof thedatabaseandapplicationsoftware.Byoptimizingtheirsolutionsforthissharedenvironment,they
can achieve efciencies throughout the solution lifecycle that would be difcult for on-
premisevendorstoachieve.
Section 3: Why does TCO matter?
IntheITindustry,TotalCostof Ownership(TCO)isusedtocalculatethetotalcostof purchasing(orinthecaseof cloudcomputing,subscribingto),andof operatingatechnologysolutionoveritsusefullife.TCOprovidesarealisticandholisticmeasureof thelong-termcostsrequiredtoacquireandoperatetechnologysolutions.
Returnoninvestment(ROI)isanothermethodtoevaluateandprioritizetechnologyinvestmentsinacompany.Thismeasureistypicallyusedtocompareinvestmentsthat
uncovernewtoplinerevenueandgrowthopportunities.However,ROItendstobemore subjective in nature than TCO, because ROI looks at business benets, whichoftencannotbemeasuredasobjectivelyascosts.
Hurwitz&AssociatesviewsTCOasapreferredmethodtocomparetechnology
investments when two solutions provide roughly equivalent benets over the solutionlifecycle,buthavedifferenttypesof costsassociatedwithacquisition,maintenanceandoperation.Forthesereasons,aTCOcomparisonoffersamoretangible
assessmentof thetotalcostsinvolvedindeployingcloud-basedSaaSandon-premisebusinesssolutions.
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The fact thatthere was little ono infrastructure internal supportrequired drove usto a software-as-service solution.Security softwarrm
Lean and mean IT
Headquartered in Slovakia, the U.S. division of this security software firm hasgrown from 1 to 135 employees over the past 10 years. The division had beganby using multiple brands of packaged software for accounting, contactmanagement and reporting functions. But as it grew, the organization wanted
tighter integration across functions, better reporting, and an easier way toprovide access to an increasing number of remote employees. It also wanted tokeep upfront capital and ongoing support costs low. The fact that there was littleor no infrastructure or internal support required drove us to a software-as-service solution, according the firms Business Systems Director. Since deployingNetSuite in 2006, the company has kept IT lean and mean, and the singlesystem, real-time view of customers helps our sales and support teams to offerbetter service to customers.
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Section 4: What does this TCO model include?
TheTCOmodelthatHurwitz&Associatesusesinthisstudycomparesfunctionallysimilarcloudandon-premisebusinessapplicationsolutionsoveraperiodof 4years
(theusefullifeofasolutionforbothhardwareandsoftwarewithouttheneedforamajorreplacementof solutioncomponents).TheTCOcalculationmodelincludesthefollowingcategoriesandcomponents:
1. Evaluation and Selection:
Solution evaluation & analysis:Evaluatefeaturesandfunctionalityofcompetitiveproducts.
Vendor review and SLA analysis (as applicable).Reviewandauditvendorlicenseagreements,service-levelsandsecurityrequirements.
2. IT Infrastructure hardware, software and support (primarilyrequiredforon-premisesolution;theseareincludedinthesubscription
costsforcloudsolutions):
Server and storage hardware and maintenance.Capitalexpenditurerequiredtoacquireserversandstoragetorunapplications,databases,andtestenvironment.Operatingexpensesformaintenance,space,powerandcooling.1
Operating system, database, security, backup software and maintenance.Capitalexpendituretoacquireoperatingsystem,database,security,anddatabackupsoftware;operationalexpensesforsoftwaresupport,upgrades,patchesandbug-xes for this infrastructure.1
Administrative IT costs for systems and database.Percentageof full-timeequivalent(FTE)ITadministratorssalaryforhardwaresystems,softwareanddatabases.2
3. Application subscription costs OR application license costs:
ERP and CRM application subscription or license cost. Costsarecalculatedonanequivalentnumberofusers.Inthecaseofcloudsolutions,theseare
operationalcostsandremainconstantforthelifeof thesubscriptionservice.Inthecaseof on-premisesolutions,theseareinitialdeploymentcapitalexpenses.Allapplicationcostsarecalculatedbasedonvendorlistprices.
Application maintenance. This includes operational costs for bug-xes and
upgradestonewversionsof thesoftware.Thesecostsareincludedinthesubscription costs for cloud solutions, and are factored as a xed percentage ofinitiallicensingcostsfortheon-premisesolutions(insomecases1-2yearsof
annualmaintenancecostsareincludedininitiallicensecosts).
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1(AllinfrastructurecostsarecalculatedforDellserversandstoragesystemsandpricesfromDellswebsite.)2Annualsalaryestimatessourcedfromwww.salary.com.
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4. Application solution deployment costs:
Detailed design. Dene project objectives and scope; existing processes; identifyprocess gaps and data sources; document business requirements; develop nalprojectplan.
Conguration and deployment. Application conguration to specications;
integration between front and back ofce functions; custom integration ifrequired;datamigration;systemtesting;cutovertonewsolution.
5. Initial and ongoing training costs:
User training.Toincreaseandaccelerateadoptionbyusers,includingnewusers
overtime.
Administrative training.Totransitiondailysystemadministrationtothe
customersinternalstaff.
Section 5: Assumptions for Developing the TCO Model
Someof thekeyassumptionsusedindevelopingtheTCOmodelinclude:
Selection of 52, 100 and 200 user scenarios.Thesethreeusersizescenariosarebasedonthenumberof employeesthatusethesolution(s),notonthetotal
numberof companyemployees.Thesesizeswereselectedbasedonthemid-marketfocusof bothcompanies,andwerealsorepresentativeof thecompaniesinterviewedforthisstudy.
Application costs.Applicationcostswerebasedonstandardlistpriceperuseraspublishedbyeachvendor.
Ratio of ERP to CRM users.Ascompanysizeincreases,theratioof CRMtoERPusersincreases.ERPuseistypicallylimitedtocompanyexecutives,accounting and other back-ofce staff; while a broader range and typicallylargernumbersof employees,spanningcompanyexecutives,sales,servicesand
marketingdepartments,oftenuseCRM.SinceMicrosoftsellsandpricesitsDynamicsGPandCRMsolutionsseparately,weaccountedforthischangingratioasthenumberof usersgrows.NetSuiteissoldasanintegratedapplicationsuiteonaperuserbasis,withallfunctionalityavailabletoallusers,socostsare
calculateduniformlyregardlessof whichusersusewhatfunctionality.
Hardware infrastructure needs to be functionally equivalent for servingapplication, high-availability and data back-up requirements.Wehave
calculatedacquisitioncostsfornewhardwareandsoftwarecostsintothetraditionalon-premisemodeltomakeITinfrastructurefunctionalityandcostsequivalenttowhatisprovidedbycloudsolutionvendors.Basedonuser
discussion,wecalculatedanaverageof 3servers(ERP,CRM,andtestserver)with
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internal RAID for 52-user scenario. The conguration for 100 and 200 users
includesaclusterofserversforSQLdatabasethatcanbeaccessedbytheERPandCRMapplicationserverswithasharednetwork-basediSCSIstoragesystem.3
Application solution deployment, integration, and training costsweredeterminedbasedondiscussionswithusers,VARs,SIs,vendors,andsecondarymarketresearch.
Section 6: TCO Methodology
ThepurposeofthispaperistoexamineTCOforcloudandtraditionalon-premisebusinesssolutionsnottoevaluatecustomersatisfactionwiththesesolutions.BothNetSuiteandMicrosoftDynamicsGPandCRMaremarket-provensolutions,with
thousands of customers, and many very satised ones. However, their businessanddeliverymodels,andcostandpricingstructuresareverydifferent.Asaresult,companiesthatareconsideringpurchasingabusinesssolutionwanttobetter
understandhowchoosingonemodelortheothercanaffectTCO.
ThestudycomparesTCOforcloud-basedandon-premisebusinessapplicationsthatprovide similar capabilities for mid-market front and back ofce business functions
(Figure3onthefollowingpage).NetSuiteprovidesthisfunctionalityviaacloudcomputingmodel;Microsoftprovidessimilarfunctionalityinanon-premisemodelthroughacombinationof MicrosoftDynamicsGPandDynamicsCRM.4
Hurwitz&Associatesindependentlycontactedmid-marketusersof thesesolutionstodiscusstheirevaluationanddeployment(initialandongoing)experiencesonconditionsof anonymity.Thesecompaniesdiscussedtheirexperienceswithsolution
evaluation,selection,deployment,andon-goingoperationalprocesseswithus,andprovideddetailedcostinformationforeachof thesephases.Ascontext,theyprovidedqualitativeinformationaboutthecompanysorganizationstructure,objectives,challenges,experienceandsatisfactionwithsolutions,andwithVAR,SIorconsulting
servicesthattheyuse.
SMBsandmid-marketcompaniesvarywidelyintermsof numberof employeesand number of users of both front-ofce CRM applications and back-ofce ERP/
accountingapplications.Weinterviewedcompaniesrepresentativeof thethreeuser
sizetiers(52,100and200users)toprovideamorecompleteillustrationof howsomeof thecostsincludedintheTCOcomparisonchangeasthenumberof userschanges.
The mix included independent commercial entities, not-for-prot organizations, anddivisionsof largercorporations.
3Server,storageandinfrastructuresoftwarepricingwascalculatedusingpricesavailableonDellsWebsite.4Microsoftalsooffersacloud-basedversionof CRM,DynamicsCRMOnline,whichwasnotincludedinthisstudy.
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Section 7: TCO Comparison for Cloud vs. On-premise Business
Solutions
DetailedyearlycostcomparisonforthevariouscostcategoriesisshowninFigure4 (on the following page), for the 100 user scenario. The top section of the gurehighlights yearly costs for the 2 solutions, clearly showing the rst year costs for the
on-premisesolutionsaremuchhigherthanforthecloudcomputingsolutions,astheon-premise solution require signicant upfront capital expenditures for acquiringtheinfrastructurehardware,softwareandbusinessapplicationssoftware,aswellasadditional internal IT resources required to install and congure these components.
The bottom section of the gure shows four year total costs for the variouscomponents. The key component leading to a signicant difference in TCO is the
additionaltotalITInfrastructurecostsfortheon-premisesolution.
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...the rst yearcosts for the on-premise solutionsare much higherthan for thecloud computingsolutions...
Figure 3.
Key Functions and Features for Mid-Market Companies
Source: Hurwitz & Associates
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Figure 4.
100-User TCO for NetSuite and Microsoft Dynamics GP/CRM
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The key componeleading to asignicantdifference in TCOthe additional toIT Infrastructurecosts and relatedmanagement costfor the on-premissolution.
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Year 1 Year 2 Year 3 Year 4 TotalCost 4Years
Year 1 Year 2 Year 3 Year 4 TotalCost 4Years
NetSuite Microsoft Dynamics GP AdvancedManagement
Cost
pe
r
year
(in
Thousands
of
Dollars)
Total Evaluation & Selection Total IT Infrastructure
Total Application Software Total Applications Implementation & support
Total User Training
10 -
499
215
37
761
12
637
382 389
73
1,492
$0
$400
$800
$1,200
$1,600
Total Evaluation &
Selection
Total IT Infrastructure Total Application
Software
Total Applications
Implementation &
support
Total User Training Total Costs
Cost
per
year
(in
Thousandsof
Dolla
rs)
NetSuite Microsoft Dynamics GP Advanced Management & CRM
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Additional key ndings from the TCO comparison are detailed in Figure 5 on the
followingpageandinclude:
OverallTCOforNetSuitewasconsiderablylessthanfortheMicrosoftDynamicsGPandCRMsolutions.TCOsavingsdotaperoff,however,asthe
numberof usersincreases.Inthe52-userscenario,NetSuiteTCOis55%less;for100usersthanMicrosoftDynamicsGPandCRM;50%less;and35%lessfor200users.
TheyearlysubscriptionfeeforNetSuite,whichincludesboththebusinessapplicationsandallof theunderlyinginfrastructureandsupportcostsnecessary
tosupportdeliveringtheapplicationasaservice,accountsfor2/3of totalcosts.
Totalcostsforon-premiseapplicationsoftwareandmaintenanceare25%lessthanthetotal4-yearcloudsolutionsapplicationsubscription(maintenanceisincluded in the subscription fee). This is because in the rst year of the on-premisemodel,customerspaythefullcostforaperpetuallicense,andthen
payapercentageof thelicensefeeformaintenancethereafter.Thisgapwidensinfavorof on-premisesolutionsasthenumberorusersincreasesbecausesubscriptioncostsperusersremainconstantthroughoutthe4-yearperiod.
ITInfrastructurehardware,software,andmaintenancecostsarezerofor
cloudbusinesssolutions(NetSuite),butaccountforalmost15percentoftherst year costs (12% over 4 years) in an on-premise implementation. Thesecapitalexpensesareof particularconcerntomid-marketend-usersgiventhe
tightbudgetsandevenof greaterconcerninthecurrenttougheconomicenvironmentwithverytightandexpensivecreditterms.
InternalITresourcesandVAR/Consultantresourcecostsaccountforapproximately30percentoftheTCOcostsinacloudsolutionscomparedto
around58-60percentinon-premisesolutions.
Intheon-premisescenario,alargeaportionof theinternalITcostsareincurredonanongoingbasisforinfrastructureanddatabaseinstallation,setupandongoingmanagement,supportandupdates;asthereisnoon-
premiseinfrastructureforcloud-solutionsthesecostsarepartof theannualsubscriptioncosts.
Majorityof theVAR/consultant(externalVARsorserviceorganizationsof vendors) costs for both solutions are incurred in the rst year for detailed
designandimplementationof thedetaileddesigns.
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Figure 5.
TCO Comparison for 52-users, 100-user, 200-user for NetSuite and Microsoft Dynamics GP/CRM
Source: Hurwitz & Associates
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Section 8: Recommendations for SMB and Mid-Market Enterprises
While cloud computing can provide clear TCO benets, customers considering a cloudcomputingmodelneedtoevaluateotherimportantaspectsbeforeselectingasolution,intermsof boththeirownrequirements,andvendorcapabilities.
Service Level Agreements (SLAs) and contract terms. Incloudcomputing,customersgiveupsomecontroltothevendor.Whenevaluatingon-demandversus on-premises options, review the ne print of the contract terms before
makingdecisions,andgetanswerstothefollowingquestions:
Doesthecontractrequireanupfrontlong-termcommitment?
Howeasyisittochangethenumberof users?Whatpenaltiesorper-user
pricechangesareassociatedwiththesechanges?
DoestheSLAsupportingtheuptimeguaranteeforthesebusiness-criticalapplicationsof atleast99.5%?
Whatsecurityfeaturesaresupported?
Investigatecloudvendorsdisasterrecoveryandbusinesscontinuityplans.
Whatoptionsandpenaltiesdoesthevendorprovideifyouterminatetheservice?Forinstance,ifyouterminatethecontract,howdoyougetyourdataback?
Address data security concerns upfront.Understandhowthecloudvendor
storesdata,whocanaccessit,andwhatsafeguardsthevendorhasestablishedtoensurethatdataisonlyaccessedbyauthorizedpersonnel.Thevendorshouldbeabletoprovideanaudittrailondataaccess.
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We reduced jobprocessing andHR support headcount becausethe Web-basedsystem is easy-touse and reducesredundancy anderrors.Coloradonot-for-prot
Getting more done with fewer people
A private, not-for-profit Colorado organization of 750 employees deliverssupport services to people with disabilities in Colorado. The organization hadbeen using traditional software for accounting, HR and payroll for several years.In 2006, it decided that the HR component wasnt meeting its needs. Afterevaluating several options, senior IT stafand executives determined thatpackaged software oferings wouldnt provide the anytime, anywhere access andsupport for employees it needed, and put an unwieldy burden on internal IT staf.According to the groups IT Manager, Ongoing software and support costs in asubscription service may be a bit higher than in a packaged license model, but wesave money because we dont have to buy and maintain hardware and software.Hes found that NetSuite is configurable and easy to manage and change. to of an FTE manages the suite and does customizations. Harding also notes thatthe pre-integrated system helps them get more done with fewer people. Wereduced job processing and HR support head count because the Web-based
system is easy-to-use and reduces redundancy and errors.
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Application customization requirements.MostSaaSapplicationsare
customized via conguration, instead of source code customization. Foraffordablecustomizationof cloudcomputingsolutions,aimforthe80/20rule.
Canthesolutioncangetyouatleast80%ofwhatyouneed,andhowmuchneededcustomizationcost?
Customerswithveryheavycustomizationrequirementsmaywanttoconsidera
packagedsoftwaresolutiontoachievedeepercustomizationorSaaStechnologyimplementationandcustomizationviathird-party.
Invest more upfront in the evaluation and selection process. Mostcompaniesareunder-investingwhenitcomestothoroughlyevaluatingbusinesssolutionrequirementsandoptions.Seekthehelpof independentconsulting
organizationstobetterunderstandthetotalcostof on-demandando-premiseoptions as they relate specically to your companys unique needs and budgetaryconstraints.
Carefully consider the benets provided by a third-party VAR or SI.Many
cloudcomputingvendorsoffercustomerstheoptionof purchasingthesolutionandconsultingandsupportservicesdirectlyfromthevendor,orthroughaVARor SI. In some cases, VARs and SIs may be a better t for your company than
the vendor in terms of their ability to provide industry-specic customization,integrationwithexistingapplications,migrationof datafromexistingapplications,trainingandcoachingforrampingupusability.
Assess the trade-offs of deploying an integrated suite vs. integratingapplications from multiple vendors.Withanintegratedsuite,allcoremanagementapplicationsrunonacommoncodebase,andsharethesamedatabase,providingasingle,integratedsystemof record.Thismeansthatmany
front and back ofces workows are pre-integrated, enabling a higher degree ofintegrationout-of-the-box,additionalcustomcodingorintegrationconnectorsandframeworks.
However, organizations that are happy with an existing front or back ofcesolution may nd it less disruptive and costly to integrate new functionality fromanothervendor,ratherthantosimultaneouslydeployanentirelynewfrontand
back ofce suite.
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Section 9: Conclusions
Bypackagingallof theapplicationsoftware,ITinfrastructureandservicestogetherinaWeb-based,multi-tenantsubscriptionmodel,cloudcomputingvendorshavetheabilitytocontainvariablecostsmuchmoreeffectivelythanpackagedsoftwarevendors-andpassthesesavingsalongtocustomers.
SMBandmid-marketenterprisesneedsolutionsthatenablethemtomeettheirbusinessgoals,andalsohelpthemtoconservecapitalandreduceongoingcosts.
Although one size does not t all, for many customers, cloud computing businesssolutionscanhelporganizationstoachievetheserequirements,andprovideadded
exibility to scale as business demands require.
th Complling tCO Cas for Cloud Compuing in SMB and Mid-Mark enrpriss
8/8/2019 The Compelling TCO Case for Cloud Computing-Correct
18/18
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th Complling tCO Cas for Cloud Compuing in SMB and Mid-Mark enrpriss
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