Looking into cloud ERP or financial management software like Sage Intact? Make your best business case with this three-step process.
By Paul Johnson
CPA, CGMA, MBA
The cloud is a highly popular platform for hosting critical business applications such as ERP and financial management. One survey predicts that 83% of enterprise workloads will be in the cloud by 2020. And there’s good reason for that. Software-as-a-Service (SaaS) applications can be deployed more quickly, cost less, can be accessed anywhere/anytime, and have the flexibility to adjust to changing business requirements.
However wonderful these benefits sound in theory, the hard reality is that companies must build a business case for significant technology investments. Nucleus Research developed a three-step methodology to help organizations do just that—so they can realize the benefits of cloud financial management sooner rather than later:
1. Identify the top areas of benefit
The most successful business cases are built on only two or three major benefits, while most “bad” ones have five or more. The following five factors can be used to rank your expected benefits on their ROI potential:
Breadth and repeatability provide the greatest potential returns from a benefit, according to Nucleus: “We often see this in cloud projects such as [Sage] Intacct, because the usability of the application enables companies to extend its use and function to more employees that weren’t touching financial information before (breadth), and the ability to access from anywhere (including mobile devices) increases repeatability.”
2. Quantify the primary costs and benefits
These can either be one-time or recurring. When gathering and including costs in the calculation, be sure to follow these basic rules:
- Do count everything that is directly associated with the project, e.g., annual subscription fees for the software.
- Do count infrastructure items that were driven by the project, e.g., extra bandwidth.
- Don’t count infrastructure items not associated with the project, e.g., existing Internet connections.
Benefits can be either directly quantifiable or more indirect productivity-based gains. One of the greatest of these is increased worker efficiency. Specific examples of benefits that Nucleus Research has found from cloud financial management software such as Sage Intacct included:
- Saved 500 hours a year on manual data entry.
- Eliminated $30,000 in annual IT costs, due to moving from an on-premise solution.
- Reduced month-end cycle from 8 hours to 6 hours.
- Reduced time for monthly reports from 1 day to 2 hours.
- Avoided an additional accounting employee.
3. Assess the financial metrics such as return on investment (ROI) and payback.
To make a solid business case, Nucleus recommends focusing on two core metrics (ROI and payback), and a secondary metric (total cost of ownership):
- ROI, which is the average net benefit over three years divided by the initial cost, is the most important metric for choosing an application and prioritizing projects during budgeting.
- A key measurement of risk, payback period is the length of time it takes for benefits returned to equal the initial cost of the project.
- While total cost of ownership (TCO) provides a good metric for budgeting, it’s not usable for assessing the bottom-line benefits of a project because it only calculates lowest cost rather than greatest return.
Get your best cloud ROI with Atlasphere Consulting
Nucleus found that Sage Intacct users realized both direct and indirect benefits, including increased productivity, increased visibility, reduced or avoided IT costs, improved inventory management, accelerated financial processes, and reduced audit costs. Need help building your business case for your next technology project? Contact the experts at Atlasphere Consulting!