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How To Get The Lowest TCO For Your Financial Accounting Software

Posted by Matt Woodward

Jan 29, 2014

If you want to achieve the lowest total cost of ownership (TCO) for your financial accounting software, use a cloud-based system built on Microsoft Dynamics.
According to our research, using cloud-based financial accounting software can result in a savings of 48 percent for companies that ordinarily upgrade their on-premises system every three years.

On average, on-premises accounting systems cost $151,000 per year while a cloud solution costs about $78,000 per year, the research shows. These figures include the number of technology users, support, training, maintenance, the software and hardware.
So how are those savings possible? Research from analyst firms, industry-related articles and SMB Suite worksheets outline the answer as well as why it’s so important for companies to study TCO.
For starters, the Aberdeen Group, a technology research firm, produced a white paper that discusses the TCO of ERP, both on-premises and cloud-based, and from many different vendors. Aberdeen surveyed nearly 1,700 companies and found that there is a wide range of TCO factors, including company size, the number of ERP users, the variety of the tool’s functionality and the business benefits that the company gains from the software.
The study shows why understanding TCO is so important for companies: You can save a lot of money if you pay attention and track costs.
“While benefits can be achieved from ERP by all companies, research showed that those that pay the closest attention to ROI reap far more rewards,” the white paper explains. “And yet, few demonstrate the discipline to closely monitor this level of payback and performance.”
Although many companies use TCO to choose a software platform in the first place, it’s just as important to keep evaluating costs and benefits throughout the life of the software, Aberdeen suggests.
For those companies that do evaluate costs continually, they will find that cloud-based programs are consistently more affordable. An article in Business Finance Magazine agrees.
“For most companies, this hosted delivery model requires no initial cash outlay for IT resources while enabling a faster software implementation, on-demand scalability and improved ROI,” the article suggests. “These factors collectively reduce the TCO and accelerate time-to-market benefits.”
And research shows that Microsoft is the company to go with for low TCO.
Nucleus Research, an analyst team that focuses on ROI, published a slideshow called “Microsoft Dynamics GP Competitive ROI Positioning,” which shows that of the leading cloud-based ERP software solutions — SAP, Microsoft, PeopleSoft and Oracle — Microsoft solutions had the lowest TCO. The study included costs for software, hardware, personnel, consulting and training.
More than 70 percent of Microsoft Dynamics GP customers surveyed achieved a positive ROI within 23 months, the firm reported. By comparison, 65 percent of Oracle customers achieved this within 30 months, and 43 percent of SAP customers made it after 46 months.
One reason for these numbers, Nucleus suggests, is because Microsoft “takes less time to deploy and fewer resources to support.”
While ROI isn’t the same thing as TCO, the Nucleus publication and the Business Finance article agree that they are significantly related because the TCO is calculated with ROI figures.
In the end, calculating TCO has never been an easy task for any business. But companies must understand all the hidden costs associated with their financial accounting software, including maintenance, hardware and downtime, which can be the biggest disruption to business.
When they finally do calculate TCO, they’ll discover that cloud-based software built with the Microsoft platform is the way to go.

Topics: Business Executives