Advice and Information for Finance Professionals

Nucleus Research: Cloud Delivers 2.1 Times More ROI than On-Premise

Jon Gelberg
Principal Content Strategist

If you’re still balking at making the transition into the cloud, here’s a bit of news that just might change your mind:

Cloud application projects deliver more than double the ROI than on-premise projects.

More than double.

That was the eye-opening finding of a recent study by Nucleus Research.

The researchers at Nucleus pored over several years of case studies and found that cloud application projects deliver 2.1 times the ROI of an on-premise based project.

This represents a 24 percent leap over 2012.

Nucleus Study: Cloud ROI Methodology

So, how did Nucleus come up with these figures?

As explained in the report: “The Cloud ROI multiplier is driven by a number of factors including lower initial and ongoing costs and the ability to deliver greater value over time without the cost and disruption traditionally associated with upgrading, expanding, or changing business applications.”

The study covered case studies involving organizations employing a variety of cloud applications including Enterprise Resource Planning (ERP), Human Capital Management (HCM), Customer Relationship Management (CRM) as well as Work Force Management, Supply Chain Management, Content Management and Platform as a Service (PaaS).

Cloud Savings on Implementation, Human Capital and Customization

Some of the biggest savings were found during the consulting and implementation phase, where costs for the cloud were 63 percent lower than for on-premise implementations. In yet another significant cloud advantage, following the implementation of a cloud-based solution, companies spend 55 percent less on personnel to support cloud-based applications as opposed to on-premise.

Suffice it to say, that’s a staggering number.

Supply and demand is yet another factor driving down the cost of cloud adoption. Competition in the cloud space is getting more intense by the day, which has resulted in lower subscription rates from providers.

In terms of customization costs (both in time and money), the high levels of functionality offered by top-tier cloud providers also cuts down costs as built-in best practices translate into the need for fewer custom-built add-ons. Moreover, the ability to personalize and extend cloud applications (using PaaS) ensures that any extensions are upgrade-safe, eliminating the expensive re-writes that come with upgrading an on-premise application.

The report also noted another major positive in going to the cloud: if you don’t like your cloud vendor, it’s much, much easier to end a subscription than it is to disband an on-premise setup. This means that vendors who provide the highest quality applications, a steady stream of new features and upgrades, and who deliver on their promises are going to thrive, while those who don’t are going to find themselves on very short leashes.

Even the Grass is “Greener” in the Cloud

If all this wasn’t enough to send you racing to the cloud, the Nucleus Report uncovered yet another major advantage of going to the cloud: it’s the Green way to go. That’s green as in environmental protection and green as in cost savings.

Cloud applications actually use 91 percent less energy than on-premise solutions. With a whole lot less IT infrastructure on site, companies are no longer paying for the cost of keeping the switch on, letting the cloud vendor absorb the cost as part of the cloud application package.

Massive ROI has Always Driven Oracle’s Cloud Initiatives

The Nucleus Report puts an exclamation point on much of what Oracle has been saying for years.

Essentially, companies embracing the cloud find it accelerates the speed of business, creating the kinds of efficiencies and transparencies that allow companies to act more quickly, decisively and intelligently.

In an interview with Forbes, Oracle CEO Mark Hurd put it this way:

“The cloud is the ultimate in vertical integration, because somebody’s done now all the work for you. When somebody buys an application in the cloud, they have actually procured hardware, database, middleware, services, a datacenter, [floor space], security. They’ve bought all of that at the same time. And so this shift to the cloud really is the ultimate testimony to vertical integration.”

Which, not surprisingly, was echoed by Hurd’s co-CEO, Safra Catz:

“With modern cloud applications, we finally have the technology that’s compelling [both] technically and from a commercial point of view. We have the potential of doing more and spending less doing it.”

To dive into the details, we invite you to read the full Nucleus Research report, “Cloud Delivers 2.1x ROI.”


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