While we all talk about the relative benefits of cloud vs on-premise, it’s easy to forget that just a few years ago some questioned whether cloud applications really delivered on their ROI promise over the long term. Because we at Nucleus Research have been quantifying the ROI of technology deployments for the better part of two decades, we benefit from having a lot of real data to work with, and have been analyzing the ROI of cloud since the early days.
Just two years ago, we found that the ROI from cloud applications was 2.1 times that of on-premise ones (based on all our published case study data). That was a 24 percent increase from a previous audit we did in 2012. Obviously over time cloud applications have become more complex and scalable and there are now cloud applications across many sectors beyond just CRM, including ERP, supply chain, human capital management, and analytics. With deployments becoming more complex and broad, we had to wonder, are we still seeing the cloud ROI multiplier effect?
The short answer is yes: The benefit of the cloud versus on-premise solutions continues to grow, with our latest study finding that the ROI of cloud deployments relative to on-premise ones has increased by more than 50 percent, to a whopping 3.2.
In the hotly-contested CRM market, there are a number of reasons why the cloud ROI multiplier continues to grow. The traditional reasons have been lower initial and ongoing cost of ownership as well as the ability to deliver greater ongoing benefit over time without the cost and disruption of traditional on-premise upgrades or application enhancements. However, there’s more to the cloud CRM multiplier story.
A lot of it has to do with the subscription model. With vendors on the hook to gain renewal every year, customers are more likely to demand that vendors deliver value to them quickly – or they’ll look elsewhere at renewal time. In the world of CRM where it’s not unusual for customers to change applications much more frequently than they would an ERP system, for example, the lower switching costs associated with cloud make that threat even more real. Also, when the onus is on the vendor – not the internal IT team – to make sure the application delivers to the business, business leaders are much more comfortable being demanding. They can demand exactly what they want without worrying that IT will stop answering their calls or snub them at the water cooler.
The cloud ROI multiplier in CRM also has a lot to do with innovation. With most vendors now delivering several releases a year with real advances in functionality, and customers adopting those new innovations almost seamlessly, the ability to get more value from cloud CRM and “edge” cloud CRM applications such as CPQ, for example, has accelerated. In fact, we found edge CRM delivered 4.2 times the ROI of traditional core CRM, largely because of the more complex (and costly) problems it often solves for businesses.
However, the cloud multiplier in CRM is – above all – about productivity. With low-code or no-code apps, the ability to rapidly spin up mobile apps for specific user needs, and ongoing innovation in user experience and usability, cloud CRM drives us all to be more productive. Ongoing vendor investments to bring embedded intelligence, integration, and AI to CRM continue to push productivity potential. And that’s good news for all of us.