For many organisations, cloud computing really is the question of “when” not “if”. There are significant advantages of the transition to the cloud, and not just from an IT perspective. The finance functions should be able to reap rewards from this trend as well.
For CFOs, the key business drivers for cloud adoption are:
- Cost savings
- Lowered risks
- Increased business agility
In a KPMG survey in 2013, 70% of respondents believed cloud computing is delivering efficiency and cost savings. When a cloud-based system, whether it is ERP or financial management software, is deployed using SaaS (software-as-a-service) model, a majority of its TCO (total cost of ownership) is shifted from capital expenditure to operational expenditure, which helps reduce risk and uncertainty.
That is because organisations can avoid costly upfront investment of on-premises systems and only pay for what they need. They do not need to pay hefty licence fees and invest in necessary hardware for hosting and running the system on-premises.
SaaS software’s clients will instead pay a monthly subscription fee to the cloud vendor, who will also be responsible for managing, maintaining and supporting the system’s operations, as well as cyber security. The size of the IT team required to run the system is minimised. Consequently, CFOs can better align the cost of IT with their organisations’ growth.
While IT professionals often inclined to rush in and adopt new and expensive technology, sometimes without adequate analysis of costs, risk and ROI, CFOs are much less eager to spend money and constantly worried about risk-based costs. Especially, if the legacy system still works, why bother messing with it?
As the cloud technology begins to mature, the risk associated with early adopters has significantly been reduced. CFOs can further mitigate risks by opting for hybrid deployment approach, in which certain new applications are moved to the cloud while some legacy applications are maintained on-premises.
Initially, cloud software vendors were predominantly small and highly specialised and mostly targeted SMEs. And there were legitimate concerns about the level of industry expertise, track record, customer support and financial viability of those vendors.
There is now a wider range of cloud offerings to choose from. More important, most well-established vendors have shifted their focus to the cloud. In addition to new solutions built specially for the cloud environment, they also redevelop and repurpose existing solutions for the cloud, which further reduce the risks of moving away from legacy systems. CFOs would understandably be more comfortable dealing with experienced vendors whose products are familiar and widely adopted.
Increased business agility
Compared to on-premises software, cloud computing is faster to deploy and easier to scale, and therefore would be invaluable to businesses seeking to expand into new markets.
Cloud-based systems also help facilitate mergers and acquisitions. The newly formed businesses can get their systems up and running within a much shorter timeframe than they would with on-premises systems.
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