What’s the Cost Benefit of a Cloud System?
Almost all our clients want to know the answer to this question. What is the cost benefit of a new system?
This is the million dollar question when it comes to changing to a new system. There isn’t a simple answer to this question, neither is it a one answer fits all.
However, when discussing costs benefits of a new system, there are a number of factors involved.
Traditional Server Costs
Most systems are still running on traditional servers. Servers are by no means cheap and have a lot of costs associated with them. For a medium-sized company, a typical server costs around 5000-$25,000 to initially purchase and setup. In addition to this is the required software that is also quite costly depending on your needs. This can also range from $2-20,000.
Server rooms also have special cooling requirements, which is an additional cost related to the maintenance of the system. Most companies these days have external consultants who maintain and troubleshoot their servers. These consultants cost from $800 to $5000 per month.
As you can see it really starts to add up quite quickly, any upgrades/updates and repairs are all additional costs on top of the initial overlay of capital, and on top of that is the maintenance of the system constantly.
You will need to work out where you fit in the range of things, perhaps it is less than the suggested range I have mentioned, or far exceeds it. That is something you need to work out.
Most traditional accounting systems are quite old in their software architecture. What does this mean? In a nutshell, it means they are like an island to themselves, and it is very difficult to connect them to other essential platforms like e-commerce, CRMs, EDI connections, marketplaces, B2B, eBay, Amazon and so forth. That is not to say that they don’t create custom solutions in an attempt to integrate. But most of the connections are cumbersome and not seamlessly integrated like cloud-based solutions.
You might say, “so what, why do I need all these connections?” You’re absolutely right, you might not need any of these connections to currently trade. However, more and more customers expect you to be able to log in and purchase directly from you.
Some customers, like large retail outlets, won’t even deal with you if you do not have an EDI interchange. Read my article on EDI for a more detailed explanation.
Further to this, if you want to be able to seamlessly work on different marketing channels, ie Amazon, eBay and trade marketplaces, and have it all consolidated and working on the same platform for efficiency. It would be very difficult to do this using a traditional system.
E-commerce stores run by Shopify, Magento and WooCommerce are a normal part of trading these days. However, they are not a normal part of the traditional system. If anything, they couldn’t be further from it.
What does the lack of integrations and connections mean?
It means you are leaving money on the table, lots of it and your competition is getting past you. Depending on your industry, this could be up to 50% in trade difference. However, on average, it is more like 15-20%. It does not take long to calculate how much that adds up to on your bottom line.
The painful reality is that some software can practically replace staff. Like some of the accounts receivable software, in my opinion, are better chasers of money than real staff. Have a read of my comparison on Debtor Management Software.
From an owners perspective, it really makes a difference to replace jobs that are repetitive and streamlined. The cost-benefit does not even compare.
Repetitive tasks like data entry can also be now replaced with smart scripts that can pull data directly into your main operating system. Orders coming from your e-commerce system will not need to be printed and re-entered. But rather will come straight into your inventory management software. It is in these areas that cost, and time savings are really realized.
What does a new system not do?
It does not magically start marketing for you or create better workflow out of thin air. Artificial intelligence is the buzzword in cloud technology. But I’ll tell you what, it’s still has a bit of catching up to do. What I’m trying to tell you is, that the system will not think for you. You still have to use the grey matter between your ears.
This is by no means a comprehensive list of factors to consider, but a starting point as you explore the cost-benefit. So, if you are considering the change to the cloud, these are certain things to look at. If you need to have a chat with one of us, Send us a Message and we will get in contact with you, and assist you in your decision process.