While Gartner projects that public cloud revenue will continue to grow, data reveals that many companies are still hesitant to make the move to cloud-based financial systems. In fact, just a few years ago, less than 20 percent of companies surveyed had embraced the cloud. Many C-level executives have serious concerns about the cloud, including security, cost, data ownership, and how they’ll fit a project of this magnitude into their plans. Here we’ll take a look at some of the most common objections to cloud-based software and some things to consider to aid in deciding if the cloud is for you.
“The cloud isn’t secure.”
Security is one of the most cited objections to cloud-based software, according to a recent survey—and validated by discussions with our own clients. With all of the data leaks, hacks, and security compromises we hear about in the news, and from the companies and services we use on a daily basis, it’s easy to understand why. It begs the question: if some of the world’s largest corporations can’t keep their data safe, how can we?
With the ever-increasing popularity of SaaS applications and subsequent focus on security, it’s become standard practice for cloud service providers to build highly-secured data centers equipped with disaster recovery measures, weather and environment protections, security guards, and more. As you can see, this approach makes cloud technology more secure than most in-house legacy systems. In fact, a Tech Target report cites on-premise environments experience an average of 61.4 attacks as compared to only 27.8 for service provider environments. On-premise environments also suffered significantly more brute force attacks compared to their counterparts.
When it comes to your organization’s data, here are some things to think about when questioning the security of cloud environments versus your on-premise solution. In most cases, clients find their in-house systems do not adequately meet the standards that reputable cloud providers do when it comes to security and data protection.
- In the case of a disaster, do you have geographically separated data centers?
- Does your environment employ multiple levels of redundancy in case of system failure?
- How scalable is your infrastructure? Can it handle spikes in usage as your business grows?
- Is your environment adequately protected from unauthorized access attempts, viruses, and other malware?
- Do you perform any type of background check or screening on employees working on-site or those who may have remote access?
- Do you have physical security measures in place i.e. security badges, biometric access, locks, alarms, video surveillance, security guards?
- Does your organization have standards in place to regularly review personnel performance and compliance, processes, equipment, authorizations, etc.?
- Do you consider your hardware and infrastructure to be high-performance? Do you upgrade at regular intervals?
“We can’t afford the cloud”
Because cloud-based SaaS solutions are considered the latest and greatest, another common objection to cloud-based software is that it’s too expensive—especially for small and medium-sized businesses. While costs of the actual software may not vary too much from on-premise solutions, cloud solutions often have a lower total cost of ownership (TCO) due to needing fewer resources to run and maintain the system, as well as not needing to invest in hardware or other physical infrastructure.
Another difference between cloud and on-premise solutions is how they are billed. Cloud software vendors typically utilize a subscription billing model where the customer is charged monthly or annually and is considered an operating expenditure. On the other hand, on-premise software customers generally pay a one-time, upfront licensing fee and are considered a capital expenditure.
While additional services including support, customizations, integrations, etc. are separate costs for both types of solutions, it is also worth keeping in mind that most cloud-based ERP solutions provide regular and automatic updates as part of the subscription. Upgrading an on-premise ERP system is often a time, money, and resource-intensive project and without regular updates, your system will quickly become outdated.
Before dismissing cloud software for being too expensive, consider the following:
- What is the total cost of ownership for your on-premise solution?
- How does the cost of your current system compare to a cloud-based solution?
- How often do you upgrade your system?
- What is the average cost of a system upgrade?
- How often would you have to upgrade in order to stay current?
- What is the cost of system downtime?
- Do customizations and integrations carry over between versions automatically? If not, do you require the assistance of a third-party firm to assist in keeping your system running?
“I don’t want a third party owning our data.”
Data ownership and access is another common cloud ERP objection. In a similar vein to security concerns, it’s not unusual for IT and finance executives, in particular, to feel uneasy about a third-party storing your organization’s data.
As stated by SoPub, “The key point to take away from data ownership issues is that it all boils down to the contract. Many contracts stipulate who owns the data, whether it’s the provider or the company.”
So while this may vary depending on which cloud vendor you are considering, make sure you determine this ahead of time. Reputable companies should be forthcoming about their policy. Take NetSuite, for example. They explicitly state, “NetSuite recognizes that the data in your NetSuite account is your data. Should you plan to end your NetSuite subscription, there are several ways for you to export your data.”
- What is the vendor’s policy on data ownership/access? Can it be changed?
- In the event you needed your data exported, what is the process like?
“We have other priorities.”
Migrating to the cloud can take a considerable amount of time and resources, so it’s understandable why some executives would want to push the project aside in lieu of other “low-hanging fruit” projects. But the reality is, legacy technology in matured organizations may date back decades. Extensive customizations have saddled companies with old technology that requires significant amounts of resources to run and maintain and has stagnated capabilities.
Cloud software offers clear benefits to forward-thinking companies who want to reevaluate their accounting and ERP software needs and reprioritize their IT budgets. In an intensely competitive global economic environment, SaaS and other cloud services present a compelling argument for organizations to transition from outdated legacy investments to cloud-based business management applications.
On the flip side, you don’t want to migrate to the cloud just to do it. You’ll want to ensure your organization is ready, able, and willing—and has a business case to back it up. Amazon’s Cloud Adoption Readiness Assessment has some great points to consider that will help you decide if your business is ready to migrate to the cloud:
- Has your company identified (and agreed upon) a specific business reason for moving to the cloud?
- Does your organization have someone who would be able to serve as the project lead?
- Have you engaged with stakeholders across the company to see how a new software could affect and/or benefit them?
- Do you have a business process optimization and/or change management plan in place?
- Has your organization decided who will own operations of cloud-based systems?
Cloud-based business management software has continued to place pressure on companies to replace inefficient, overtaxed, and cumbersome legacy ERP systems. And though it may feel like your company is the only one stuck in the past, the truth is, you’re not alone. Overcoming the objections of cloud-based software from leadership can be difficult, but being armed with the appropriate knowledge and facts can help you make a solid business case for the cloud.
Want to learn more about how NetSuite—the world’s leading cloud-based ERP system—can help your business overcome its challenges?