3 Essential Tips For Implementing IFRS 9 With Confidence

Arif Esa and Uwe Erdtmann

Einstein once said calculating income tax requires a philosopher, rather than a mathematician. I can see his point. There’s a lot of uncertainty in putting new regulations into practice, particularly with regard to IFRS 9. It’s a topic we’ve spent a lot of time reviewing internally. That’s why I want to give you some practical tips and advice for implementing IFRS 9 with confidence.

  1. Plan your path and start now. The first of January 2018 may seem like a long way away, but there are a lot of internal considerations and discussions that need to take place first – so start now. Yes, now. IFRS 9 is more principles-based than any other standard that’s gone before it, which means it can be open to interpretation. An early assessment of the impacts on provision levels is an absolute necessity. Talk to your auditors to find out different ways of implementing that are right for your business. You need to know the best strategy for reducing the cost of the system, given your structure. Now is also the time to be speaking with your internal colleagues to identify the wider considerations and implications of any decisions. If you haven’t already started, you’re late. Get going.
  1. Think widely and cross-functionally, then go step-by-step. IFRS 9 is something that should be done stepwise. One of the main reasons for a step-by-step approach is because each step may lead to changes that could have a knock-on effect elsewhere. IFRS 9 provision calculation requires integration of multiple processes across different areas, including risk, finance, and accounting. That means you need to look at the holistic picture with each step you take. Make the most of the transition phase as it will help you understand the wider implications. Think widely and cross-functionally to get the best understanding of your economic exposures, and don’t try to boil the ocean by doing it all in one go.
  1. Put a dedicated budget in place – One of the biggest “lessons learned” we hear from companies going through this process is that they failed to put a dedicated budget in place at the outset. They’ve then had to scramble to pull time and resources together as they progress across different steps. Everyone focuses on the compliance requirements and the hard deadline, but regulation budgets are often overlooked. They can consume considerable resources and software. Yet reporting, by nature, involves at least two parties (and usually more), so there will always be an impact on someone. Companies often say they are surprised at the time and budget of changing content and technical requirements around reconciliation efforts, for example. Avoid the pitfalls by thinking ahead about what’s required.

For the sake of brevity, I’ve only included three of the most important guidelines above, but there are many others I could discuss in more detail for a well-governed approach. As technology continues to automate much of the operational work, your role as treasurer is evolving. You’re able to take a wider view of the business with consultative input, rather than just keeping the books clean. With that in mind, IFRS 9 gives you an opportunity to take a fresh look at some of your own processes and strategies.

For example, are your accounting systems tightly integrated to your treasury solution, or do you need to upload all the data, replicate the system, and bring all the data back again? Part of your consultative remit means looking ahead to future-proof your systems for seamless integration and a smooth implementation path.

The good news is that there’s no shortage of information available in the form of conferences, customer councils, external events, and peer-level user organizations that are all focused on this topic. I’d urge you to get involved. Given the evolutionary nature of IFRS 9, iterating model development cycles and learning from others are time well spent. Whether you choose to put any of it into practice, of course, is up to you.

For more on IFRS 9, read Is Your Investment Accounting Software Ready for IFRS 9?

A great resource for finance executives is available now at the SAP Finance Content Hub, a rich library of research and insights into the most relevant topics in the world of finance.

Follow SAP Finance online: @SAPFinance (Twitter)  | LinkedIn | FacebookYouTube

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Arif Esa

About Arif Esa

Dr Arif Esa is director of solution management, Treasury and Risk Management for Finance at SAP.

Uwe Erdtmann

About Uwe Erdtmann

Uwe Erdtmann leads product marketing for SAP Treasury. With SAP since 2004, Uwe has a background of business studies and computer sciences, which has helped him bridge the gap between market reality and development theory.

Why Tech-Savvy CFOs Are Teaming Up With CIOs To Propel Efficiency

Richard McLean

Part 3 in the 4-part Finance and IT Collaboration series

Automation is already reshaping the future of work in the finance function, and the opportunity to boost performance is fueling the trend. A report from McKinsey & Company states that currently available technologies can fully automate 42% of finance activities and mostly automate another 19% using software robotics and advanced cognitive-automation technologies, like machine-learning algorithms and natural-language tools.

Tech-savvy CFOs who are considering automation to propel a new wave of efficiency and performance will be well-positioned to thrive. The finance organization at SAP has been undergoing a transformation for the past several years, enabled by the guidance of our IT team and SAP technology. We often use our own organizational processes as an example to others of how a best-run business can thrive in the digital era. Here are some of the top ways we’re using technology to get ahead.

Automation at SAP

Automated workflow is a big part of what we do in finance. We have a lot of processes that are governed by delegations of authority, which means that different people review and approve tasks in certain orders. When I first joined SAP, we all sat behind our computers working a GAF system for commercial deal reviews that was neither flexible nor mobile-enabled. Now we have applications that work on our phones and tablets, notification emails when we own a task, and transparency well in advance into what approvals are coming our way. The whole process is so much more efficient and transparent and gives us the agility to plan ahead and work on the move. It has made a huge difference for our team’s productivity.

Centralized analytics

To a large extent, we have centralized our analytical capabilities in an Enterprise Analytics Group. We now have access to standard reports based on SAP analytics technology and the SAP Cloud Platform that bring together key metrics and data and help ensure consistency in the way we steer the business. This allows our people to make decisions faster across the company. Rather than ask IT for support or do it ourselves, the reports are readily available so we can immediately use the information to better manage the business. That’s another big productivity gain for us.

Machine learning in the shared-services organization

We are looking at ways to use machine learning to further streamline our processes. For example, IT is currently running cash-matching trials that we’ll build into our shared services environment. That’s going to be the next horizon of automation becoming mainstream in the coming years.

We’re looking at how to match our bank receipts to customer invoices. This typically requires an intensive manual effort simply because of the unstructured nature of the data involved in the process. It becomes more complicated when there are partial payments, multiple invoices are issued simultaneously, different currencies are involved, and so on.

We’ve taken a process that was very manual, applied machine intelligence to it, and now have over 65% success rate on the matches. This automation alleviates a good deal of the workload for simpler tasks, enabling the people in finance to better use their time.

Travel and expense management

Everyone knows the traditional way to process travel and entertainment expenses. People make copies of receipts, scan them, package them up, and submit them for reimbursement. The whole process is time-consuming and manual and, quite frankly, pretty tedious for everyone involved. To automate travel and expense management, we implemented solutions from SAP Concur and coupled them with some policy changes in the finance organization. By automating each phase of travel – such as preapprovals, booking travel, reimbursement, analysis, and expense reporting – the whole process is much more streamlined and efficient.

For example, Concur Expense automatically facilitates compliance by linking to our preferred hotels and airlines, including online travel booking sites. The solution populates expense claims using electronic receipts from those suppliers without requiring employees to capture an image of a receipt or enter expenses manually.

With rigorous T&E processes that are easy to use, our employees are more likely to plan ahead and comply with policy – and in so doing, realize the macro- and micro-level benefits that can have a positive impact on business performance.

Dedication to ongoing improvement

These projects are not the end goal for us. They’re just a starting point to explore what new technology can do for us across the company. Every routine task that we can automate gives us the ability to scale our operations and keep pace with the growing demands of our business – and that has a significant impact on performance.

Read the next post in this series on April 30 to see how finance is pairing up with IT to set an example of how to be a purpose-led organization.

Read why finance leaders are pioneers in using technology in the infographic “Next-Gen Finance Solutions.”

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | Facebook | YouTube

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Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 16,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.

How Machine Learning Helps Improve Security: Part 1

Lane Leskela

As our businesses become more digital in all dimensions, high-profile information security breaches are making the news headlines with increasing frequency. The recently announced card-hacking activity at online travel service Orbitz is just one of the latest examples. On March 20, Orbitz announced a security breach that exposed information derived from at least 880,000 customer payment cards. The breach took place between October and December 2017 involving customer transaction records dating from 2016 and 2017. Although data captured on Orbitz.com was not affected, the company advised customers using Orbitz travel services within the past two years to check their credit and debit card billing statements from this period and to contact their banks if fraudulent charges were identified.

At-risk organizations around the world are increasing their investments in cybersecurity protection. According to Gartner, worldwide cybersecurity spending will climb to US$96 billion in 2018. Unfortunately, some of this spending is not aligned with actual security threats and their known sources. Surveys continue to show that solutions such as network antivirus, malware detection, and website firewalls continue to receive the most investment, although misuse and abuse of user credentials is the most common source of data breaches.

The reasons for persistent misalignment of security breach causes and remediation solutions are not well documented. One of the reasons may be the proliferation of specific security tools in IT departments over a fair number of years. The fact remains that human (mis)behavior confounds, supersedes, or works around many of the go-to security technology “fixes.”

With regard to this gap, a number of interesting findings were revealed in a recently released Dow Jones Customer Intelligence study (learn more in “CEO Disconnect on Cybersecurity Increases Risk of Breaches”). Among other revelations, this study found that:

  • 55% of responding CEOs admit their organizations have experienced at least one breach, while 79% of CTOs acknowledge breaches have occurred. One in four CEOs (24%) was not aware whether their companies have had even a single security breach.
  • 68% of responding executives whose companies experienced “significant” breaches now believe that these incidents could have been prevented by more mature identity and access management strategies.

One of the most valuable findings from this study was that CEOs can reduce the risk of a security breach by improving their identity and access management capabilities. Nevertheless, 62% of the responding CEOs said they believe that “multi-factor authentication” is difficult to manage. Thus, a related primary concern of these CEOs is how to avoid delivering poor user experiences with an increase in user security controls.

In the context of this general misunderstanding, machine learning approaches can help strengthen the foundation of authentication and screening techniques to improve security effectiveness without complicating user experiences.

Role of machine learning in preventing major security issues

Machine learning tools can help resolve an ongoing dilemma faced by many organizations. The problem is, we spend millions of dollars each year to strengthen information security, yet experience major breaches that threaten our stability and ability to grow. Thus, we continue to look for better answers.

It turns out there are many ways machine learning can be used to help improve enterprise security. With identity authentication and password authorization being primary points of attack, there are several ways machine learning can be leveraged to help minimize data breach incidents.

In Part 2 of this series, we’ll examine some key examples of machine learning applied to user access authorizations that improve information security. In addition, we’ll highlight some related areas in which machine-learning security capabilities are being embedded today.

The SAP GRC team will be exhibiting at several events related to cybersecurity this year. We hope you’ll join us there.

Learn more about the full range of SAP security offerings, and please continue to read all of the blogs in our GRC series.

This article originally appeared on the SAP Analytics blog and is republished by permission.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | Facebook | YouTube

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Lane Leskela

About Lane Leskela

Lane Leskela, global business development director, Finance and Risk, for SAP, is an accomplished enterprise software leader with years of experience in customer advisory, marketing, market research, and business development. He is an expert in risk and compliance management software functions, solution road maps, implementation strategy, and channel partner management.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
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Cloud Computing: Separating Myth From Reality

Misa Rawlins and Krishnakant Dave

Across industries, many enterprise leaders believe and understand that cloud computing is here to stay. Globally, public cloud services market revenue is projected to reach US$411 billion by 2020, compared with $260 billion in 2017, according to research firm Gartner, Inc. Cloud technology in all its forms—software, platform, or infrastructure as a service—is rapidly becoming essential to the needs of business today. With cloud computing, organizations can simplify IT, save costs, scale rapidly, drive standardization and user adoption, and start getting ahead of tomorrow’s needs when it comes to customer engagement, the supply chain, the workforce, a simplified finance function, and more.

Despite the short- and long-term advantages, some executives remain uncertain about the next steps or have lingering questions about the benefits of moving to the cloud. For many leaders, separating the cloud myths from the facts can prove daunting. Start here, with these insights that can help you bust big myths about the cloud and start moving confidently toward a cloud-enabled transformation of your organization.

Myth No. 1: Moving to the cloud is too costly. “Costly” is a relative term. The cloud can be costly – but costs should be weighed against benefit and return once requirements and migration plans are in place. Rapidly evolving business demands, for example, can dramatically alter cloud-related requirements. Meanwhile, new technologies are dramatically redefining the art of the possible with the cloud. Because migrating to the cloud is not a true “plug-and-play” proposition, and many enterprise leaders underestimate what a migration or implementation involves, some organizations can be surprised by the costs of a cloud transformation. Without a clear understanding of the potential benefits—without a clear business case for moving to the cloud—the focus on costs can overshadow the return on investment. Knowing the value that cloud solutions can bring—not just the costs—can help manage expectations.

Myth No. 2: The benefits of the cloud aren’t substantial enough. As vendors adopt a “cloud-first” stance for many solutions and product updates, organizations that move to the cloud may have a competitive advantage—no matter the size of the enterprise. Cloud solutions continue to offer abundant and increasing functionality. And with the help of an end-to-end solution provider, you can configure cloud solutions to the specific needs of your industry and your business. For larger organizations, rapidly deployable cloud solutions can help support growth or the unique needs of certain business units, such as new acquisitions or foreign subsidiaries, for example. For smaller organizations, the cloud can help you position your organization to tap new opportunities and tame growth challenges.

Myth No. 3: Cloud is too risky. All digital technologies and all business models come with inherent risk. In a hyperconnected world, no system is immune from cyber attacks, insider threats, data leakage, or related risks. No transformation project is a guaranteed success. Market changes, new competition, regulatory issues, and other factors can require you to change your cloud strategy overnight.

Because the risks are real, take advantage of resources and capabilities that can help reduce risk and ensure that your technology investments align tightly with clear business objectives. The maturity of the software goes a long way toward mitigating risk with cloud projects. You can add an extra layer of capabilities such as managed cloud services to provide active, hands-on oversight of cloud applications and infrastructure—helping you to avoid service interruptions and address issues proactively.

Myth No. 4: Cloud computing is still an immature technology. Like other evolving technologies, cloud is advancing every day. Those who wait for the next generation of cloud offerings may find themselves missing out on tangible benefits as competitors leverage cloud technology to sharpen their edge. Across industries, leading organizations are not waiting. Many view cloud technology as evolving but necessary, and they are leveraging it effectively today. Some, for example, are tightly integrating cloud software solutions to streamline supply chain processes, boost information transparency, and improve decision-making across the board—all the while tapping the cloud benefits of cost savings and scalability. Others are confidently turning to infrastructure solutions delivered and running solutions in a private or hybrid cloud. Still others are turning to cloud platform solutions to extend the power of existing applications, build modern analytics platforms, or support new Internet of Things business models. Turning the cloud to your advantage may depend less on the maturity of the technology and more on the power of your imagination.

Myth No. 5: Moving to the cloud will be easy. Cloud technology can help organizations streamline and simplify their IT landscapes and their business processes, reducing needs around capital expenses and infrastructure while helping to save costs. But migrating to the cloud requires more than simply plugging in technology. It requires an ability to address a host of considerations—data migration, the business-specific capabilities of solutions, change management, governance, systems integration, security, and more.

A cloud transformation is more than a plug-and-play project or a traditional system implementation. It requires progressive thinking and an ability to align technology with your business needs and processes— for today and for the future. Migrating to the cloud is a journey. Moving forward with the cloud will require a vision of your “to be” state—your destination—as well as a strategy for getting you there.

To learn more, and to find out what IDC thinks about the future of the cloud, please read this study that presents a strategic blueprint for enterprises on their digital transformation journey.

For more information on how to simplify innovation with cloud technology, learn more about SAP Cloud Platform.

Ready to reimagine the potential of the cloud? Contact us to get the conversation started.

Contact Krishnakant Dave at kdave@deloitte.com and follow him on Twitter: @kkdave

Contact Misa Rawlins at mrawlins@deloitte.com and follow her on Twitter: @misa_rawlins

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This article originally appeared on Deloitte.com and is republished by permission.

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Misa Rawlins

About Misa Rawlins

As a senior manager and consultant in Deloitte’s SAP practice, Misa Rawlins enjoys helping her clients not only to figure out how to solve their current business problems, but also to envision how a modern cloud platform can transform their organizations moving ahead. Within the practice, she has specifically chosen to take a leadership role around the sales and delivery of SAP S/4HANA Cloud because she considers it the wave of the future. She has made it her mission to deeply understand this technology to better advise clients on what moving to a cloud infrastructure really means.

Krishnakant Dave

About Krishnakant Dave

As a principal in Deloitte’s global SAP practice, KK Dave is a consulting leader for Deloitte’s largest clients; part of the U.S. SAP leadership team where he spearheads Deloitte's cloud offerings; and leader of global go-to-market efforts in the wholesale distribution and manufacturing sector. In these roles, he assists clients in their business transformation journeys using the absolute latest SAP toolset, which presently comprises SAP S/4HANA, SAP Cloud Platform, and SAP S/4HANA Cloud, among other technologies.