Cloud Defies Odds, Continues to Multiply Value for Businesses by 2.1 Times

Many pundits predicted cost advantages of the cloud would taper off once the majority of applications shifted away from on-premise. After all, what more did the cloud offer beyond reducing upfront capital expenditures and maintenance costs. How very shortsighted that view was.

In 2012, we looked at the Return on Investment (ROI) for cloud applications, finding they delivered 1.7 times more value than their on-premise counterparts. Four years later the ROI of cloud applications has actually increased, by nearly 25 percent. Our latest report shows that cloud applications now provide 2.1 times more value than on-premise. Rather than diminishing, the value of the cloud is growing. Flourishing even.

So why exactly is the cloud delivering more value today and trending higher? First, cloud offerings are maturing. Vendors continue to innovate with richer features and better functionality. In fact, if you look at nearly any industry you’ll see that vendors are dedicating their development budgets to better cloud solutions. From CRM and ERP to WFM and Supply Chain applications, almost every new version is cloud-based. In many cases, second and even third-generation cloud solutions even. Better functionality leads to more value.

With all that development power behind the cloud, competition has gotten fiercer. And that is driving down costs, particularly around consulting and implementation. By 63 percent over on-premise deployments according to our latest research. Cloud apps have gotten even easier to implement, requiring fewer personnel during deployment. This is a significant part of the savings. It also speaks to a growing focus on ease-of-use for deployment and beyond, which we believe will continue to drive up value for cloud solutions.

Perhaps the most exciting trend that the cloud is enabling is increased integration. Now that everything is software-based, clever vendors are finding new ways to integrate applications. Mega-apps, if you will. It’s suddenly much easier to connect CRM with deep customer insight to the supply chain for better solutions. Tighter integration of HCM and HR apps with the back office. And analytics embedded into every app.

This is driving tremendous value, enabling exciting new capabilities for businesses. And it’s changing the conversation from a limitations-based “What will IT enable” to an empowering “What customer trend do we need IT to support” discussion. But that’s another blog.

Bottom line, the cloud has surpassed initial expectations for capital expense reduction and continues to prove itself a sustaining business model. It’s delivering nearly a quarter more ROI today than four years ago with signs of going higher yet.

At this point the cloud vs. on-premise debate is over. On-premise will make sense only for extraordinary cases and businesses will have to factor in paying a premium for it. Otherwise, it’s all cloud.

The bigger questions going forward will be, which cloud solution is better. And that will be the focus of upcoming research on cloud apps.