The obvious advantages of cloud ERP systems - such as cost reductions and increases in productivity, efficiency and overall growth - are well-documented. For instance, a study by Panorama Consulting Solutions found that ERP implementation led to business process improvement for 95% of businesses*. In another study, respondents were asked which areas produced the highest ROI following ERP adoption, the top three answers were reduced IT costs (40%), reduced inventory levels (38%) and reduced cycle time (35%)**.
Stats like these are why migrating to a cloud ERP has become a rite of passage for growing businesses, signalling their maturity from a small business to one on a serious growth journey.
However, beyond these quantifiable benefits, there are less tangible yet equally impactful returns on investment that cloud ERP systems offer. This blog delves into these surprising ROI aspects, shedding light on how cloud ERP systems can transform your business in ways you might not expect.
ERP systems have the potential to touch so many different aspects of a business. But beyond the obvious advantages, these platforms offer much more. They can make for more happy, productive employees, support step change improvements in customer service and increase organisational agility.
What is soft ROI?
When evaluating the ROI of any new system, there are two types of ROI to consider: "hard" and "soft." Hard ROI includes measurable financial gains like increased revenue or reduced costs. For example, NetSuite cloud ERP customers experienced a 40% to 60% improvement in order processing efficiency and a 40% to 55% reduction in reporting times, both quantifiable in monetary terms. Soft ROI, however, encompasses intangible benefits such as enhanced employee morale or improved brand reputation. These can significantly impact a business's overall success, though their exact financial value is harder to determine.
The soft ROI of cloud ERP
Modernisation and innovation
There is growing recognition that adopting cloud ERP is a gateway to modernisation, allowing integration with other business systems and the adoption of emerging tech like IoT, AI, and advanced analytics – another less obvious ROI.
Using a highly customisable cloud ERP as your core business system allows you to introduce advanced technologies into your business ecosystem without the need for a major overhaul. The new capabilities might allow you to further streamline operations or add new innovations that were out of reach when your systems were scattered or limited. This extensibility gives that critical level of adaptability needed to swiftly adapt to market changes and customer demands, which could mean the difference between leading the market and being left behind.
Talent attraction and retention
Every business wants to position itself as a leader to attract and retain talent. If you want to appeal to tech-dependent job seekers whose upbringing was infused with technology, you need competent technology to support their role. So, it follows that the right technology attracts staff and helps improve retention. Yet many businesses continue to run on legacy systems and heavily siloed departments with inefficient systems and processes.
Systems, like cloud ERP, are built for automation. They remove those tedious tasks – especially for those in the finance teams - and promote time spent on high-value activities. This means cloud ERP can support talent to step into more compelling roles and open career opportunities centred on business development and strategic planning - not just sitting behind spreadsheets. If you can demonstrate a collective innovative mindset, flexibility for hybrid work, and advanced tech – these are all highly appealing propositions for job seekers.
Support for hybrid workers
Another significant advantage of cloud ERP systems is their support for flexible and remote work environments. Employees can access the ERP system from anywhere with an internet connection, allowing for greater flexibility in where and how they work. This capability is particularly valuable in today's increasingly hybrid work culture, allowing employers to offer flexible work arrangements while knowing that employees can remain productive regardless of their location.
Better customer service
One of the standout features of cloud ERP systems is the ability to provide real-time access to data. Immediate access to up-to-date information allows customer service representatives to respond to inquiries with accuracy and confidence. Whether it's checking the status of an order, verifying inventory levels, or providing precise delivery timelines, real-time data empowers staff to offer prompt and reliable information. This immediate responsiveness not only resolves customer issues more quickly but also builds trust and satisfaction, as customers feel valued and informed.
Collaboration and communication
Integrated ERP systems break down silos and facilitate better teamwork across departments. By centralising data and providing a unified view of operations, employees can collaborate effectively, knowing they all have access to the most accurate and up-to-date information. For example, the finance team can instantly see the same financial data without struggling with multiple spreadsheet versions or toggling between different systems. Keeping everyone on the same page leads to more cohesive and efficient operations, ultimately resulting in higher ROI.
Change and adaptability
Companies often find themselves needing to adapt to changes on the fly, whether they are market shifts, regulatory updates, or internal process improvements. Cloud ERP systems offer a high degree of adaptability. With cloud-based ERP solutions, updates and new features are often rolled out automatically by the provider, ensuring that the system stays current with minimal downtime. This agility enables businesses to respond promptly to new opportunities and challenges, contributing to the often intangible soft ROI of cloud ERP.
Scalability
One of the core strengths of cloud ERP systems is their ability to scale alongside business growth. As a company expands, its operational needs and data volumes increase. Cloud ERP systems are designed to handle this growth seamlessly without requiring significant changes to the infrastructure. For example, if a business opens new locations or enters new markets, the cloud ERP system can easily accommodate additional users, processes, and data. This scalability means that the systems are not a hindrance to growth, they're invaluable helpers.
Sustainable practices
Cloud providers continually optimise energy use in their data centres. They are designed with advanced cooling systems, energy-efficient hardware, and smart resource management techniques.
In fact, many leading cloud providers utilise renewable energy sources to power their operations, reducing their reliance on fossil fuels. By leveraging economies of scale, cloud providers can achieve higher energy efficiency compared to individual on-premises data centres, ensuring that every watt of energy is utilised effectively.
Corporate responsibility
Energy efficiency in cloud ERP systems aligns with broader corporate sustainability goals. Many companies are now recognising the importance of environmental stewardship and are actively seeking ways to reduce their carbon footprint. By adopting cloud ERP systems, businesses can demonstrate their commitment to sustainability and corporate social responsibility. This commitment not only helps in complying with regulatory requirements but also enhances the company's reputation among customers, investors, and other stakeholders, and potentially helping to attract eco-conscious clients and partners.
Evaluating the complete ROI of cloud ERP
ERP systems are comprehensive and powerful tools that can transform how companies operate, opening up new avenues for growth. As such, they represent a considerable investment for any company. Quantifying the value of an ERP is the first step towards building a business case that justifies an ERP investment in the first place.
When crunching the numbers, it's important to keep an eye on the soft ROI of cloud ERP. Because while the hard ROI of cloud ERP systems provides a clear financial justification, it is often the soft ROI that represents the transformative potential. By considering both aspects, companies can make a more comprehensive and compelling case for adopting cloud ERP systems, ensuring they capture the full spectrum of benefits these powerful tools offer.
Learn the steps for building a business case for cloud ERP
* Panorama Consulting Solutions (2018), 2018 ERP report. Available online.
** Ultra Consultants (2024) ERP Survey: The Real Facts about ERP Implementation. Available online.
