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SaaSplaza

Does Putting Dynamics ERP in the Cloud Increase Service Costs?


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Requested by the committee of Directions EMEA 2012 (the Microsoft Dynamics NAV partner show that took place in Rome this past April) I prepared a presentation designed to answer the question on most every Dynamics VAR’s mind: Does selling a Dynamics Cloud solution lower service revenue when compared to on-premise?

What I found was a HUGE win, partly for the VARs, but more so for the end-users.

To get the answer to this question and many, many more, SaaSplaza surveyed about 20 NAV Partners in Europe who have successfully sold NAV in the Cloud (delivered from the SaaSplaza platform). There were many interesting responses and outcomes, which I detailed at the show, and share with you now.

First, a direct answer to a direct question: Yes, service costs for end-users are typically far lower (average of 40% lower) with a Cloud deployment than with an on-premise deployment. And it should come as no surprise!

The choice of going to the Cloud for customers comes with the expectation of a quick and riskless implementation. They do not expect a long, perhaps uncertain, and often costly implementation process, but instead expect a quick start and to achieve ROI in less than a year. And in most every case, this is exactly what they got.

So why the big dip in service costs? It appears to be perception of what the Cloud promises, above all else: hands-free, no IT staff or hardware needed, just log-in and work. This rightfully earned perception/expectation can drive down the felt need for consulting hours—based on our findings, these hours can dip by an average of more than 40% when compared to a standard on-premise implementation.

What’s strange is that more end-users are not asking for the Cloud! Because on the other side of this question was perhaps the most interesting finding of this survey. It came from a question on whether a NAV from the Cloud was sold because there was a strong demand by a customer, or if it was sold via a proactive approach of the Partner going out selling NAV as a Cloud solution.

In 70% of the cases when a Dynamics NAV Cloud solution was sold, it was the Partner who proactively sold it, and did so without an initial demand by the customer. It showed that Partners who really embraced the Cloud were the ones who sold more than one implementation and who would repeatedly win new business.

And while Partners selling the Cloud may have taken a dip in per-customer service revenue, they would—because of the greater value proposition, speed of implementation, etc.—have a more compelling offer for their customers, and attract more business.

Perhaps most importantly, these Partners were empowered by a true and unwavering belief that the Cloud is the way to go. This belief, of course, came from their new NAV on the Cloud customers, who came on board more easily that on-premise customers as they no longer had to worry about infrastructure, and would enjoy reduced service costs as well.

So while I set out to discover a Dynamics Partner win (as SaaSplaza is a Partner-focused organization), in the end what I found was a classic win-win. Partners win by more easily attracting new customers. And the customers win because they spend far less for a more effective, maintenance-free, and infrastructure-free solution.

(This is the first contribution of Herb Prooy, CEO of SaaSplaza. Check back often as he will be reporting regularly on his experiences working with Microsoft Dynamics ERP partners and customers all over the world. Learn more about SaaSplaza, Dynamics in the Cloud, Cloud security, and more at www.saasplaza.com.)

by Herb Prooy, CEO, SaaSplaza

2 Responses to “Does Putting Dynamics ERP in the Cloud Increase Service Costs?”

  1. Doug Pitcher says:

    I agree with everything here. Expect several more deals to come down the pipeline when selling the cloud but expect less service revenue related to those sales. There is still a need for good consulting and project management skills to guide the implementation but the need for infrastructure downtime is dramatically decreased.

  2. Excellent article. I’m IT Director at a ginormous corp, and have been pushing the cloud for years. This’ll help make my case!

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