Cloud and the value curve

Last week Rebecca Wettemann, our VP of Research, published a piece looking at NetSuite’s growth over the previous year (o24 – What NetSuite’s growth means for ERP).  In it she makes the point that an increasing number of organizations normally considered conservative are embracing the cloud, and that’s helping NetSuite along with other cloud focused vendors such as Acumatica, FinancialForce, and Plex.  More importantly she points out that the cloud eliminates the stair step upgrade process, recovering the lost application value from delayed upgrades.

Traditionally ERP was an on-premise application deployed and then customized to meet a specific situation.  The deployment and customization effort was expensive as was the annual care and feeding of the now unique solution.  What organizations learned was that once deployed, the application becomes old, and it continues to age until an investment in an upgraded is warranted. As it ages organizations miss out on the new features and increased productivity that comes with new versions until they can justify an upgrade.  And that upgrade is a lot harder when the solution has been highly customized.  In fact, often the upgrade is justified only after an end-of-life notice from the vendor.  Even then, organizations such as Remedy make a healthy business supporting old and infirmed software versions.

This leads us to an interesting, 2-pronged value proposition. We know the cloud provides a greater ROI through lower initial and ongoing costs (m108 – Cloud delivers 1.7 times more ROI) but it also delivers value through immediate access to the latest features and less disruptive upgrades.