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Gartner, PwC: COVID-19 Drives Demand for Cloud-Based ERP

DESPITE the economic fallout from the COVID-19 pandemic, spending on cloud-based systems is expected to rise this year as the move to virtual work underscores the need for scalable, secure, reliable and cost-effective off-premises technology services. In fact, cloud spending rose 37 percent to $29 billion during the first quarter of 2020, and the industry analyst Gartner expects it to rise 19 percent for the entire year, even as IT spending as a whole is forecast to fall 8 percent.

Even before the pandemic, companies were increasingly looking at a variable cost model for their core computing, storage and networking capabilities, the accounting and consulting company PwC says. The current crisis has only intensified the demand for cloud-based systems.

In a recent PwC survey, almost 75 percent of finance leaders said they were planning for a more agile business environment made possible by cloud-based solutions. In the same survey, 83 percent of CFOs said they planned to scale back capital expenses. This bodes well for industry players such as NetSuite, which provides the leading integrated cloud business software suite, including business accounting, enterprise resource planning, customer relationship management and e-commerce software.

While companies and government agencies are likely to need greater computing, storage and networking capacity, they are increasingly seeking cloud-based hybrid systems to provide these services.

Technology companies that want to tap into this demand need to do three things, PwC says—strengthen customer relationships, build internal capabilities and rethink their go-to-market strategy. They need to focus on generating value rather than merely making a sale. These three steps, PwC says, will help companies transition to a cloud-based model:

1. Double down on customer relationships.

Customers have rearranged their needs and expectations in the wake of COVID-19, and these needs and expectations vary across industry verticals. In a post-crisis world, a fresh look through an industry lens is critical to better positioning infrastructure solutions by customer need.

To provide the right mix of on-premises equipment and scalable cloud-based services, technology infrastructure companies need to understand exactly what each customer is facing.

In health care, for example, as telemedicine becomes more ubiquitous, health organizations require more secure interoperability to enable patients to connect quickly and conveniently with different health care providers. On the other hand, companies in retail  may urgently need to reduce the risk on their balance sheets,  and find ways to adjust service and costs as needed.

As technology suppliers move from a revenue model based more on services than equipment, it will be increasingly important to understand and forecast their customers’ evolving needs for services. That should enable them to help establish or deepen long-term partnerships that offer true business value for their customers.

2. Consider going outside the company to address gaps in technology and talent.

Technology suppliers need to assess their workforce, their own technology infrastructure and their internal processes for the ability to develop and implement cloud-based services. Then move swiftly to fill any gaps.

As gaps in technology and talent are identified, technology suppliers may want to consider making deals to fill them. Valuations for many smaller cloud companies have leveled off during the current crisis, and there may be buying opportunities, PwC says.

Some early stage, pre-IPO companies have top-notch talent and exciting product portfolios, which larger companies could scale up and market — if their finance and marketing teams have the right capabilities.

3. Evolve your go-to-market approach.

When cloud style offerings constitute a larger component of the business model, technology suppliers need to rethink their approach to channel partners, consider those that work best in the new cloud-based environment.

Companies may also want to consider whether they should interact directly with some segments or customers. In addition, they will likely need to upgrade digital capabilities for direct and indirect partners as well as new and old sales channels.

Technology suppliers need to treat their  most valuable channel partners as they would your best customers. Listen carefully to their concerns and tailor offerings to meet their customers’ needs. Offer technical support to help them understand the company’s cloud-based offerings and provide tools to automate their interactions with the company.