Every company has asked this question when comparing on-premises to cloud costs. Certainly if you are looking to migrate your on-premises CRM to Salesforce this is something you are going to want to cover upfront, especially if you work in the IT group. While cost cutting is not quite as urgent as a few years ago, the pressure to innovate and digitally transform has increased and that is forcing the hand of many companies. The funds to do so must come from somewhere.
So how do you know you have captured the true cost of your current system and can compare it in an apples-to-apples fashion to cloud? Keep in mind that cost is not the sole factor in making a change but everyone usually needs a baseline from where to start. Independent surveys show that 88% of clients report savings moving to the cloud and major enterprises have described their cost savings at Dreamforce when migrating to Salesforce. I have broken out four areas below where much of the savings are likely to come from:
Application Software Maintenance
This is clearly an area where making room for innovation investments is available, with maintenance costs in the range of 22% of list license price per year! The real question is what are they getting in return? A Forrester survey revealed that 85% of enterprises don’t see the value in their software maintenance.
In the case of Siebel, the very last release was made in 2011. Unless you customize the system on your own, you will get little in the way of innovative features as Oracle is investing more in current and not legacy product lines.
The question remains how long can users continue to pay a hefty sum for maintenance in functions needing innovation without getting new or transformational features in return? This alone is the reason many have chosen to reinvest in a cloud-based CRM system like Salesforce where they get a new release three times per year without concern for the other costs that follow.
IT Stack Software
Application maintenance is just one piece of the equation for on premises applications. In addition, software for the web server, web application server, security and operating systems (among others) make up a layer of licensing and support costs that are required. These are other direct software related costs that must be considered in the total cost of ownership of an on-premises system. Further, IT resources (mentioned more below) are consumed just to upgrade and maintain compatible release levels of the stack with the current version of the application. Keeping up with this is like trying to figure out a Rubik’s cube. But IT is far from a game.
Hardware and Servers
Regardless of the technology deployed it is the firm’s responsibility to purchase and maintain servers and related storage devices for their on-premises systems. Independent analysis shows an overall 79% savings in infrastructure when moving to the cloud. While costs vary and have leveled out with commoditization this represents another cost at the expense of innovation. In addition to a content management strategy, companies like Box provide storage in the cloud for a fraction of what it costs you to keep it on-premises while integrating with your Salesforce instance. Think a bit further about the cost of running these systems 24/7 and the consequential energy costs and it does not take long to figure out how much sense it makes to run all of this in the cloud.
Gone are the days when IT organizations could afford to hire and maintain an IT support staff to work exclusively on their on-premises CRM system. Today IT is increasingly counted on to contribute to an organization’s top line and not just keeping the lights on. As a majority of IT budgets continue to be dedicated to maintenance and their resources, companies want to redeploy them in core business functions where they contribute to the top line. They cannot easily do this maintaining the status quo… moving their CRM apps to the cloud is an easy way to make the transition where most of the IT support resides with the provider. In a TechTarget survey, of the respondents that implemented a private cloud, 59% note a more efficient use of IT resources. I have also heard it reported that some have redeployed up to 50% of their IT resources into the core business after moving to the cloud.
Costs aside, can you imagine the complexity faced by an organization to make all of this operate while incurring the risk of downtime? While not yet considered mission critical, customer facing applications are what keeps leads being developed, support incidents getting closed, opportunities turning to sales and revenue coming in the door. These are the benefits of CRM Modernization. So if the costs are not daunting enough to drive change, maybe giving the user a simple interface to accomplish all these tasks is.