Cloud creates path to profitability for Australian businesses. A complimentary report from cloud-based business management software provider NetSuite

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1 Cloud creates path to profitability for Australian businesses A complimentary report from cloud-based business management software provider NetSuite

2 Introduction Australian businesses are facing a dynamic and challenging economic climate and having the right software can result in more customer success for less expense. Software allows businesses to automate processes and manage sales, but if the software is inflexible, or expensive to maintain, the organisation s overall profitability is put at risk. To understand how Australian businesses are increasing their profitability by moving to the cloud, on-demand business management software provider NetSuite commissioned independent IT research firm Telsyte to survey more than 200 Australian business decision makers on a range of key performance metrics following their adoption of cloud applications. For any business, profitability is determined by two main factors - controlling costs and increasing revenues. This report shows how through cloud applications, businesses have been able to make strong improvements to both. In addition to increased revenue and cost savings, organisations that moved to cloud-based software reported better business intelligence and increased speed to market both essential to sustaining profitability. Definitions: Cloud Cloud computing Computing services like software, CPU processing and storage procured on-demand as a service. The customer does not need to buy and manage IT infrastructure. SaaS Software-as-a-service Business applications like CRM, and e-commerce IaaS Infrastructure-as-a-service IT infrastructure like computing resources, storage and networking PaaS Platform-as-a-service Hosted development environment like Java,.Net and PHP Cloud creates path to profitability for Australian businesses 2

3 Top business priorities call for cloud solutions Every year Telsyte conducts extensive research into business priorities and challenges among Australian organisations and number of key themes emerge. In 2013, the top six business priorities are centred around company finances with revenue growth, operational cost savings and capital investment making up the top three. This report identifies how cloud computing can have a positive impact on the top priorities of Australian businesses and how moving to the cloud can enable a new paradigm of productivity improvements and business intelligence. What are your top three business priorities for ? Revenue growth Operational cost savings Capital investment Customer acquisition and retention Sustaining or improving profit margins Productivity and process improvement 33% 32% 24% 43% 64% 60% Telsyte Australian ICT decision maker study 2012 n= 831 Cloud software gears up revenue growth To understand the overall benefit software can have on a business, Telsyte s survey asked respondents from organisations using cloud services whether the speed of company growth has increased with the transition to the cloud. The majority of respondents (55%) believe the speed of company growth has increased with the transition to cloud. This is also a good indication that cloud-based software can scale and cope with company growth. However, not all clouds are created equal and for some organisations moving to the cloud was unable to overcome their challenges, or the cloud application itself did not provide the features necessary to increase growth. The impact of software on growth To further quantify how much a business can grow by moving core applications to a cloud provider, Telsyte asked respondents to estimate the benefits of SaaS and cloud-based applications in terms of additional revenue growth generated for the business. Cloud creates path to profitability for Australian businesses 3

4 Has the speed of company growth increased with the transition to the cloud? Business leaders report an average 9.4 percent company growth due to cloud software, with key drivers being agility and speed to market. about the same 24% NO 21% YES 55% With Australian businesses so dependent on software for operations and revenue, how well applications work and the features they provide can have a direct impact on company growth. Telsyte asked respondents using only on-premise software if their applications are a growth inhibitor for the organisation. Nearly one-third of respondents view their existing software as a growth inhibitor. This is a particularly high rate considering the aim of most applications is to automate and streamline business processes and support business growth. Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications The benefits of SaaS and Cloud-based apps in terms of additional revenue growth More than 15% 10 to 15% 5 to 10% less than 5% 14% 24% 25% 37% Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications Cloud creates path to profitability for Australian businesses 4

5 The inhibitors to growth relating to business software Not easy to change or configure Does not have features we need Software too difficult to use to full capacity Applications not integrated IT required to improve software too high Management don t see software as strategic Poor software quality / uptime Other 5% 27% 23% 23% 18% 17% 17% 41% Australian Business Application Usage and Benefits Study 2012 ; n= 79, base: orgs without cloud applications (multiple selection allowed The survey also asked respondents to identify growth inhibitors relating to the on-premise software. The number one inhibitor was that the software was not easy to change or configure, as seen by 41 percent of respondents. This is followed by a lack of features (27%) and ease of use, and lack of integration (23%). This indicates that configuration and features are seen as important for business growth and, if lacking, can equally inhibit growth. Nearly one third of organisations surveyed view their existing on-premise software as a growth inhibitor. Cloud software gears up revenue growth With 60 percent of Australian IT and business leaders citing operational cost savings as their number two business priority, Telsyte looked at how organisations that have adopted cloud computing are reducing operating expenses. Moving from an on-premise application delivery model to a cloud-based model can reduce operating expenses a number of ways from power consumption to maintenance fees and the benefits will be ongoing for the business. Cloud creates path to profitability for Australian businesses 5

6 Managing operating costs and being able to generate more revenue are two of the most important metrics for any business using cloud services. Organisations surveyed have saved an average of 8.7 percent in operating expenses as a result of adopting cloud software. Not having to invest in as much IT and software assets can reduce operating costs which is key to how cloud-based software provides a positive impact on an organisation s bottom line. Moving from an on-premise application delivery model to a cloud-based model can reduce operating expenses a number of ways from energy consumption to maintenance fees Cloud applications change the operating expense equation $ $ On-premise OPEX Data centre space Energy consumption Software licensing Application support Specialist skill sets Cloud OPEX Consistent licensing fees (eg per user) No data centres No power expenses Less ongoing support Fewer specialist skills What are the benefits in terms of savings in operating costs for your entire business as a result of adopting cloud and SaaS applications? More than 15% 10 to 15% 5 to 10% less than 5% 16% 27% 26% 32% Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud apps Cloud creates path to profitability for Australian businesses 6

7 Cutting expenses at every level With the term cloud computing used to describe a general, on-demand computing service, more specific terms are used to describe the three levels of infrastructure which can be delivered as a service. All layers have the potential to reduce operating expenses. In addition to SaaS, infrastructure-asa-service (IaaS) is used to describe fundamental computing and storage cloud services, and platform-as-a-service (PaaS) is used to describe an application server environment developers use to deploy custom applications in the cloud. For example, a subscription to a hosted virtual server with 2GB of memory and 50Gb of storage space is classed as IaaS. A Java application cloud service is an example of PaaS. Survey respondents were asked about their use of the three levels of cloud services. Due to its ease of adoption, SaaS has the highest uptake with the more recent rise in IaaS indicating businesses are prepared to use cloud services instead of physical servers, benefiting from the broader availability of such services over the past three years. Platform-as-a-service (PaaS) has the lowest rate of penetration which is consistent with the rate of organisations developing internal applications. Today s savvy businesses prefer to procure applications than develop them in house. SaaS 46% IaaS 41% PaaS 13% Australian Business Application Usage and Benefits Study 2012 ; n=133, base: orgs with cloud applications (multiple selection allowed) Cloud takes on capital investment Alongside operating expenses, capital investment is a top priority for Australian business and the subscription model of cloud can help reduce or eliminate capital investments in IT infrastructure. Telsyte s research found 29 percent of respondents reduced overall IT infrastructure costs when adopting cloud services. Cloud creates path to profitability for Australian businesses 7

8 Cloud versus on-premise: The varying level of capital investment Cloud CAPEX Limited, if any, outright purchase Subscription pricing No IT service infrastructure No datacentres On-premise IT CAPEX Everything purchased outright Datacentres/server rooms Server and storage equipment Networking equipment Software licensing Cloud does away with infrastructure capital expenditure related to the required to run business applications Speed to market and agility with cloud Reducing cost is only half of the financial equation and the ability to bring new products and services to market combined with how well customers are managed can dramatically affect revenue. How has cloud and SaaS impacted your organisation s ability to bring new products and services to market faster? Telsyte s research examined whether organisations that have moved business applications to the cloud are able to bring products and services to market faster. Some 46 percent of respondents believe the transition to the cloud has had a positive impact on their organisation s speed to market. We are faster to market now 46% We are slower to market now 17% We are about the same speed to market now 37% Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications Cloud creates path to profitability for Australian businesses 8

9 Another key finding of the research indicated that 43 percent of respondents believe their organisation is more agile because of cloud software. Organisation agility relates to how fast new products and services can be offered and is another key driver of customer acquisition and retention. Telsyte s research also looked at the key productivity benefits of moving to the cloud, including the performance of the software and employee satisfaction. Just under 40 percent of respondents said their cloud-based applications performed better than their on-premise applications and 38 percent said employee satisfaction was a key benefit of the transition. A further 25 percent of organisations cited reduced staff resources as a key benefit of moving to the cloud. These metrics point to overall increased productivity with cloud services where businesses are able to do more with less. How has the adoption of cloud services affected your organisation s agility? More agile because of cloud software 43% Less agile because of cloud software 17% About the same agility 41% Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications Business intelligence and visibility take off in the cloud For a business to be effective it must have access to the right information at the right time. Telsyte asked respondents to rate whether their cloud applications were providing adequate levels of business intelligence and visibility compared with on-premise software. There was overwhelming satisfaction (91%) with the business intelligence offered by cloud-based software compared with on-premise systems, which is an encouraging sign for any organisation looking to extract more intelligence from their business applications. Are you satisfied with the level of business analytics you get from your cloud-based software providers compared to on-premise systems? NO 9% YES 91% Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications Cloud creates path to profitability for Australian businesses 9

10 Does your organisation get deeper, instant business visibility from its cloud-based and SaaS business software? NO 24% YES 76% In keeping with the high satisfaction from cloud software BI, most respondents (76%) believe their organisation gets deeper and instant business visibility with their SaaS applications. In comparison, only 12.7 percent of respondents say their on-premise business applications gave them the same level of instant business visibility. Australian Business Application Usage and Benefits Study 2012 ; n= 133, base: orgs with cloud applications Cloud concludes the profitability goal For businesses to achieve profitability, controlling costs and increasing revenues are critical. Cloud applications address both sides of the equation, underpinning overall profitability. With cloud applications being so important to business profitability, Australian organisations need to re-examine the cost of doing business with legacy on-premise software. Reductions in capital investment, operating expenses and support staff through the adoption of cloudbased software can significantly reduce a company s outgoings, however, there are also benefits like improved business visibility and agility that enable a business to increase revenue. This makes cloud-based software a compelling choice for Australian businesses looking to improve their profitability. Cloud creates path to profitability for Australian businesses 10

11 About this report This report was commissioned by NetSuite and produced by Telsyte. The research content of the report is from a Telsyte survey of 212 business professionals conducted in October The respondents were from Australian businesses (50 to 1000 staff) across 20 selected industries. The topic of the survey was cloud adoption and benefits. About NetSuite Today, more than 16,000 companies and subsidiaries depend on NetSuite to run complex, mission-critical business processes globally in the cloud. Since its inception in 1998, NetSuite has established itself as the leading provider of enterprise-class cloud ERP suites for divisions of large enterprises and mid-sized organisations seeking to upgrade outdated client/server ERP systems. NetSuite excels at streamlining business operations, as demonstrated in a recent Gartner study naming NetSuite as the fastest growing top ten financial management systems vendor in the world. NetSuite has continued its success in delivering the best cloud financials/erp suites to businesses around the world, enabling them to lower IT costs significantly while increasing productivity, as the global adoption of cloud is accelerating. For more information about NetSuite please visit About Telsyte Telsyte delivers strategic insights and advisory services to businesses that are producing, or are impacted by, disruptive technologies. Through deep insights and local engagement, we partner with clients to make informed decisions and achieve business objectives. Telsyte publishes studies into emerging consumer and business markets and provides custom research and advisory services. Our market leading coverage includes emerging technologies, mobility, enterprise IT, digital media and telecommunications. Telsyte is a wholly-owned business unit of UXC Limited. UXC is an ASXlisted Australian IT services company and the largest Australian-owned ICT consultancy firm with over 2,500 customer organisations in the private and public sectors across Australasia. For more information about Telsyte, please visit Cloud creates path to profitability for Australian businesses 11

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