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Would it surprise you to hear that the average enterprise spends 57% of its IT budget on supporting business operations and only 16% on boosting innovation? What would it mean if you could shift that equation and spend more on designing, making, and selling products that set your company apart in a highly competitive landscape for distributors and manufacturers? One way to alter the imbalance is to move some of your IT infrastructure to the cloud. Cloud computing, specifically Cloud ERP, minimizes the need for internal IT resource spending, freeing more of that cash for innovation.

How’d we get here?

To put it mildly — distributors and manufacturers have had a rough few years. As such, it’s understandable that perhaps you haven’t been focused on your company’s digital transformation. Historically, though, companies in these industries have long lagged in the adoption of advanced technologies. For example, many still rely heavily on on-premise technologies for ERP, CRM, and Warehouse Management functions (among others).

We’re not ignoring the very real fact that implementing a new distribution or manufacturing software application is costly and potentially disrupting — whether it’s cloud or not. But the truth is, you could be putting your entire operation at risk by continuing to rely on aging technology. ERP software publishers are no longer making serious investments in their on-premise applications — indeed many have been, or will be, sunsetted.

Maintaining and securing on-premise technology requires a significant IT investment — money that we know you can use powering things like efficiency improvements, new initiatives, expansions, and product development.

Here’s where to invest (and why)

Where are companies choosing to spend their IT budgets? Overall, spending on cloud services will see the most significant increase (37%) in 2024, while conversely, spending on server infrastructure is expected to decrease by an almost equal amount (35%).

In short, companies are shifting their technology spending away from on-premise applications. Instead, they are investing in the cloud.  Indeed, a 2022 survey that included a majority of responses from manufacturers found that 65% have implemented cloud-based or SaaS applications.

Investing in cloud ERP simply because everybody else is doing it isn’t reason enough. But it is helpful to understand the benefits cloud ERP users are realizing, which include:

  • Better use of your cash

Cloud-based ERP solutions are priced using a monthly or annual subscription-based licensing model. This model results in a lower initial cash outlay, a more predictable cash flow, and makes IT budgeting tasks more straightforward and accurate.

  • Minimize hardware and server costs

If you had to buy computer hardware — especially a new server — lately, you’ve undoubtedly experienced sticker shock and extended delivery delays. And that’s just to get it to you. Servers are time-consuming and expensive to maintain as well. Most small to mid-sized businesses do not have the internal IT resources required to manage their servers effectively.

  • Forget about maintenance and upgrades

One of the real “dangers” of on-premise ERP is that companies don’t want the expense and disruption associated with installing routine maintenance releases and periodic updates. As a result, they end up even further behind the technology curve and may even have an unsupportable product.

  • Optimize companywide

Modern Cloud ERP applications offer features such as automated workflows, integration with third-party applications, and powerful self-service reporting tools that can make room for staffing reductions in other departments. As a result, many of our clients have been able to eliminate or reduce administrative positions as a result of their move to the cloud. In this way, some companies may enjoy significant staffing cost savings in their move to Cloud ERP.

  • Scaling simplified

Cloud ERP applications can support a large number of users and are flexible, allowing you to scale your business up and down as needed. This can reduce costs in the long run, as you only pay for the functionality and number of users you require at any given time.

  • Streamline integrations

Cloud ERP solutions are typically easier to integrate with third-party products than on-premise solutions. Many include out-of-the-box integrations with CRM, WMS, AP Automation, Enterprise Reporting, and HRMS applications. Most cloud ERP applications also offer an API to streamline additional integrations.

Cloud ERP applications designed for distributors and manufacturers, like Sage X3 and Acumatica, provide the modern technology infrastructure that companies like yours can leverage to minimize IT spending and maximize innovation. Caron works with manufacturers, distributors, and mining companies throughout North America, helping them leverage next-generation business management applications from Sage and Acumatica to build lasting success. Contact our team to learn more.