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The enterprise need for cloud infrastructure and services continues to grow at a rapid pace, due to a number of factors driving cloud adoption. Global spending on public cloud services is currently forecast to grow by 23.1% by the end of this year compared to 2020, reaching a total of $332.3 billion.
Often the adoption of this strategy is not well organised by companies seeking an ROI that capitalises on technology. As a result, without a well-defined strategy, companies may not achieve their intended goals.
Generally, companies tend to think that moving workloads to the cloud can reduce IT costs by eliminating on-premises infrastructure investments. When the process is done properly, this is true, but if it is done in an uncontrolled manner, costs rise.
At this point, the question arises as to whether mass migration to the cloud is a good strategy. Several reports find that cloud deployments can deliver up to four times the ROI compared to on-premises workloads, thanks to the functionality, agility and ease of use benefits of a cloud architecture.
At least 55% of companies use multi-cloud models and 21% rely on at least three cloud systems, adding complexity to the way they manage their multi-cloud environments, resulting in hidden costs and difficulties in maintaining these hybrid environments. A properly managed cloud strategy can optimise costs, but only if control and optimisation of the procured architecture is established.
Cost management models are typically budgeted on a quarterly or annual basis, but such a model is not the most appropriate for cloud migration, as its payment mechanisms are on a pay-as-you-go basis. Factors influencing the hidden costs of cloud adoption strategies include:
Thus, services migrating to the cloud need an action plan in which budgets and expenditure control are established, along with an alert system when actual costs exceed expected costs.
Tagging workloads to the cloud often takes a lot of effort and can cause companies to abandon the migration altogether, but at that point, trying to return to on-premises can result in high losses.
Modernisation tools, analysis, prioritisation of applications and proper planning are key to trying to generate the greatest ROI from cloud migration. Aspects to consider as a strategy include:
In distribution, most US distributors have either moved to a cloud-based ERP platform or plan to do so in the near future. Such platforms mean that functions are always up to date, there is better efficiency of IT staff, and there is better uptime and security.
Looking ahead, ideally, cloud-based ERP should be universally adopted within the next decade. Trying to calculate the ROI for this type of migration may seem complicated, but it is not. Financial payback can be generated in a short order as long as improvements are estimated and general assumptions are applied.
Revenue momentum, cost savings, improved quality and performance, reduced capital requirements and cloud savings are the key elements that drive cloud ROI. In addition, there are the benefits of ease of use, customer satisfaction and improved quality of work.
It is estimated that companies that engage the full range of ERP technology in the cloud reap an estimated reward of more than $1,500 per user. This cost reduction combined with other benefits of ERP systems can generate an annual ROI of more than $3,000 per user.
As with any strategy to be implemented by a company, the process of migration to the cloud must establish the start of the transformation, define the objectives, analyse and determine which tools are necessary and available on the market to initiate this strategy.
To carry out these processes, the state of the business and the use of technology that the company can cover must be known, with clear and realistic objectives, and identifying the right team or teams to lead the transformation.
In conclusion, obtaining a successful ROI will not be a simple process because it requires an assessment of the applications that exist within the company and how much technical debt has been accumulated. Companies need to be aware of the tools that are available in the market and will be valuable and viable depending on the needs and strategy adopted.