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USOver the past decade, enterprises have become more aware of their ecological impact. Whether or not they invest accordingly, most of today’s large businesses acknowledge some form of environmental responsibility.
The last decade has also seen the meteoric rise of the cloud. Once an emerging platform, the cloud is now top-of-mind in most business software searches. Gartner projects that the cloud will be the default option for software deployment by 2020.
Some sources claim that moving to the cloud brings environmental as well as financial benefits.
Is that true?
Before we can answer the question, we need to narrow its scope. ‘Cloud’ could mean anything from Amazon Web Services to web-enabled teddy bears.
In this article, we will address cloud-based software in the finance software market.
Is Cloud ERP more sustainable?
Before 2000, the majority of ERP buyers operated their own datacenters. ERP systems were installed on the customer’s premises. A new ERP system involved a wide range of cost drivers: software licenses, hardware replacement, consultants to integrate and customize the system, and technical staff to maintain it.
The environmental impacts mirrored these costs:
- Servers ran around the clock.
- Replaced hardware became toxic e-waste.
- Processes ranging from invoicing to bank reconciliation consumed paper.
Cloud computing introduced the concept of multi-tenancy. A single cloud provider can serve multiple customers on the same logical instance of their software. Multi-tenant providers can allocate resources according to need using continuous server virtualization and consolidation. This in turn eliminates the need for extra infrastructure, allowing customers to access the system with nothing more than a web browser. Meanwhile, certain cloud finance software digitizes processes like bank reconciliation, invoicing, and approval.
By now, the answer should be apparent:
- Paperless processes slash paper consumption.
- Economies of scale from high customer-instance ratios reduce both energy consumption and utility costs.
- Drastically lowered hardware requirements minimize e-waste.
So yes, the cloud has significant environmental promise.
But not all cloud products live up to it.
The popularity of ‘cloud’ has inspired many traditional vendors to revamp their on-premises ERP products for the new platform. Supposedly ‘cloud-based,’ such systems host very few customers on each software instance. This approach forces vendors to build new data centers for every new group of customers (if not for every new customer). Many new ‘cloud’ products mimic this approach.
In order to fully realize the cloud’s potential for sustainability, finance software providers must combine two features: a high degree of multi-tenancy, and an ongoing commitment to database renewal.
Imagine multi-tenancy as a spectrum, with private cloud vendors at one end and single-instance providers at the other. Remember that the lower the customer-instance ratio, the higher the required resources. Private cloud applications often maintain a 1:1 customer-instance ratio. This means more hardware, more energy consumption, and more long-term e-waste. By contrast, a single-instance provider like Xledger hosts its entire customer base on a single instance of the software. This means minimal requirements in e-waste, hardware, and energy expenditure.
Unfortunately, pure multi-tenancy has moved ever farther from the norm for ERP. So has the next predictor of eco-friendliness: a firm commitment to database renewal.
Without continual innovation, databases are subject to a kind of entropy. New versions and new clients mean new tables, new columns, and new CPU demands. The required disc space increases in proportion to the database’s size and complexity. As in the case of one prominent (and recently acquired) Cloud ERP vendor, this compels providers to regularly build new data centers, to the point that nearly every customer has a database instance in massive server facilities.
Xledger has countered this trend. With every release, our development team has optimized data types and slashed excess tables. Our database is now smaller, more efficient, and more sustainable than ever before.
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Here at Xledger, we believe that our environmental responsibility is as global as our business. Trusted by trusted partners PwC and BDO, Xledger takes you beyond ERP. As a result, we are committed to greening every aspect of our organization. We invest only in hyper-efficient infrastructure. We serve every one of our 10,000+ customers on a single software instance. We never stop renewing our database.