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Forecast: Cloudy with a chance of ERP

The ‘Cloud’ = Good, Cheap *and* Fast.

Good, cheap and fast: pick any two. Seems to be a good rule for a number of professional activities and apparently has official names: Project Management Triangle, Iron Triangle or Triple Constraint.

Just look for this expression in your favourite internet search and look at the nice image results:

Every cloud has a silver lining

Or

The Cloud: Good, Cheap and Fast

Or

Business in the cloud

Since Advantage has been chosen by Microsoft as a partner for the Dynamics NAV “road to repeatability” programme (read: a single NAV configuration, used by many customers), the audience we’ve attracted has been quite different from the traditional ERP buyers.

It appears that when people are in the mindset of shopping for cloud based solutions, they are genuinely expecting to get something that is good, cheap *and* fast.

It’s not difficult to understand how this happened. Part of the appeal of cloud computing is that the IT infrastructure and maintenance is hidden away, so it is a black and white thing: it just works unless there’s an outage.

The cost side of the equation is interesting as well. When offered a low headline price per user, per month, we get that everyday low price style of communication that works so well with supermarkets. We know that not all special offers are that special, but it works. It can then happen that we multiply by 24 months and x users and perhaps it’s not that cheap anymore.

Some may say that the monthly billing offers a degree of flexibility that a perpetual type of license does not. Could be, except that 12 or 24 month deals with auto-renewal (plus a hidden cancelation option, self-service management console and a few extras Ryanair-style…) for subscriptions are not that different from a perpetual deal.

With the first two constraints dealt with in such practical manner, it is usual that there is some resistance from the buyer if someone suggests that the quality will differ from product A to product B, or more generally, that “You get what you pay for”.

So that’s what I was discussing with a prospective customer the other day. The cloud computing offering was priced at something like £60,000 per year, for up to 300 users. There’s tiers of user licensing, so they pick 300 although the company has little over 200 employees – that is for the sake of simplicity, I guess.

If they choose Dynamics NAV, the perpetual license will be sized according to the number of concurrent users, ie: they have 200 sporadic users which we can choose to serve with 200 user sessions (overkill), with 10 concurrent user  sessions (congestion!) or perhaps with 50 for year 1 to see how the concurrency pans out.

The price?

About £45,000 for year 1, £10,000 thereafter.

Now, since Microsoft has both perpetual and subscription pricing for Dynamics NAV, I could compare both alternatives. On the subscription side:

£24,000 per year. For 5 full users and 200 limited users.

There’s some maths to be done, and something perhaps unexpected happens before the end of year 4…

Surprising? It could be worse: they could be paying £60,000 per year to the Salesforce people for a set of disparate products and still think it’s good, cheap *and* fast.

What do you think?

 

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About Christo van Zyl

Christo van Zyl is the Managed IT Services Business Unit Director at Advantage Business Systems. Christo has over 14 years of working within the IT industry and specialises in Outsourced IT Services including support, consultancy, security and all things Microsoft Server side.

View all posts by Christo van Zyl →

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