The IT department was cloud’s natural early adopter. In spite of some initial resistance driven by security concerns and the apparent risks to job roles, the benefits of cost and scalability made the business case for pay-as-you-go computing hard to resist.
Sales and marketing came next, as companies offered CRM and other applications as software-as-a-service (SaaS) – ideal for teams often on the road and needing regular access to shared data and assets.
Cloud computing is continuing to prove itself across the enterprise, and CFOs and finance teams should be jumping on board. However, confusion about pricing, advantages, and how to make the transition from on-premise systems is holding many potential decision makers back.
Cloud’s potential for finance
Gartner reported last year that around 36% of all transactional systems will move to the cloud by 2020. Finance applications form a big part of that, and more will move to the cloud with each passing year.
The shift began with small and midsize businesses because bigger organizations were less enthusiastic about moving large datasets over the Internet. It’s normal for an organization’s keeper of financial probity to want hard evidence of value before investing in something new, but as proof has become more apparent, resistance to the cloud has begun to break down.
Regardless of company size, CFOs are always looking to reduce costs and improve the bottom line. An increasing number are seeing the cloud’s potential as a money saver – as well as a way to make their own departments more efficient and effective.
What’s making those early finance adopters make the move? Efficiency and cost savings, flexibility, and access to big-company capabilities.
The financial benefits of the cloud
Transferring responsibility for hosting and maintaining applications over to a cloud vendor can be quite empowering. The cloud provider does all the heavy lifting in terms of management of the hosting environment, securing data, and making sure applications are available to end users at top performance and across devices.
There are well-known risk factors associated with traditional IT systems. Sometimes they fail to deliver the promised benefits. Sometimes they fail due to lack of end-user acceptance
The cloud’s subscription-based pricing model eliminates much of that uncertainty. Budget moves from CAPEX to OPEX. The freedom to pay only for the capacity, capabilities, and user licenses you need allows organizations to avoid the high up-front costs of on-premise solutions. In that way, the cloud makes it easier to align technology expenditure with growth.
When French electrical-supplies distributor Rexel Group migrated its IT infrastructure to the cloud in 2016, the company was able to adopt an IT operational-expenditure model that lowered costs by 35%, while allowing the office of finance to generate financial reporting five times faster.
Rexel found that the costs of managing cloud-based systems are lower and that the experience of using cloud software is more satisfying for end users, who always have the latest versions and the latest functions. Patches, upgrades, and migrations from old to new software versions all happen invisibly in the background.
Cloud-based systems can also respond more flexibly to changing business requirements. Because they can be deployed without installing new hardware and software, the cloud allows companies to support new business models, harmonize systems with new acquisitions, and more easily test new markets.
As a result, organizations can afford to be more progressive and disruptive by introducing the latest innovations in a manner that is easily digestible, and at a pace that complements its technological maturity.
Other cloud benefits for finance are:
- The finance-focused cloud is growing: More cloud solutions supporting core financial applications like ERP and EPM are entering the market and are geared to organizations of all sizes.
- Spreadsheet farewell: The cloud provides a low-risk path to move processes away from spreadsheets.
- CFOs can keep IT costs in-sync with business levels: Since cloud assets can be scaled upward and downward quickly against an agreed cost structure, IT spend can be more closely aligned with growth.
- That includes costs for IT security: The cost of keeping IT security up-to-date is significant, and the costs of a breach can be severe. The cloud initially raised safety concerns for some, but time and innovation have given cloud vendors some of the strongest security protections available in IT.
- Improved productivity: Since the cloud makes core applications more accessible, employees can accomplish more. Rather than being bound to a single location or machine, they can access the tools they need when traveling, offsite, or outside of business hours.
- Reduced redundancy: Cloud environments eliminate the contingency expenditure built into on-premise systems. Any necessary redundancy is the vendor’s responsibility and built into the data centers where infrastructure and applications are hosted.
With organizations of all sizes adopting cloud technologies at a rapid pace, it’s also worth evaluating what the competition is doing. No one wants to be left at a disadvantage.
Demystifying the cloud for CFOs: Can you go it alone?
While the benefits of the cloud seem to be transparent and superficially require just a PC and fast Internet connection to use, migrating data and processes from traditional IT to SaaS can be complex. There is much more to it than handing over access to your databases to the cloud vendor and assuming all will be fine.
Integrating systems and creating new processes can be a lot of work. Significant planning is required in order to achieve data portability and interoperability with the cloud. The stages of migration and deployment can be costly and resource-heavy if not handled correctly.
CFOs should consider working with an experienced implementation partner who can help answer the following questions:
- How much time and expense will we need to invest in evaluating cloud vendors?
- How can we make the implementation work for finance requirements, time cycles, and processes?
- How much can we save by purchasing licenses as needed rather than having to project our needs up front?
- Will we need entirely new processes or can we migrate those as well?
- Looking beyond costs savings, where can cloud software give us a strategic advantage?
The benefits of the cloud are compelling, but making the move alone is unwise, at least at the beginning. Consider working with an expert who can help you design a bespoke approach to cloud computing that meets your company’s specific needs and business goals.
For more insight on cloud adoption, see Using The Cloud To Accelerate Your Intelligent ERP Journey.