Digital Finance: Avoiding the Pitfalls of Moving to the Cloud

As cloud computing continues to come of age, it is playing a foundational role in the digital transformation efforts of many organizations. CFOs who still regard moving to the cloud as primarily an information-technology opportunity, however, may miss out on the chance to help their companies leverage cloud’s many advantages.

To some extent, senior financial executives understand that cloud has serious momentum: In the Q3 2016 CFO Signals™ survey of 122 North American CFOs, cloud computing easily outpaced other emerging digital technologies in terms of its deployment, with 80% of respondents saying they use cloud in some form, and 30% saying they use it broadly.

According to one estimate by industry researcher Gartner, cloud-based solutions will account for 65% of total market spend on financial management applications by 2025

But as cloud moves from the cutting edge to the mainstream, from applications that primarily augment core systems to cloud-based applications that replace core systems, it is important that CFOs move beyond a basic conceptual understanding and take a closer look at the cloud’s nuances.

One reason: financial applications—which, by and large, were not a major part of early cloud migration— are quickly becoming common. In fact, according to one estimate by industry researcher Gartner, cloud-based solutions will account for 65% of total market spend on financial management applications by 2025.

But while cloud computing offers many advantages, it is not a panacea. Although large organizations may have had success in pilots and smaller scale adoption, they may nonetheless encounter both unpleasant surprises and missed opportunities if they do not proceed with adequate caution.

In this article, we will outline the potential opportunities presented by the cloud and pose a series of questions that CFOs should ask to avoid the pitfalls.

First, the upside

The basic concept behind cloud computing is not new. Cloud is essentially a form of outsourcing in which client organizations use the Internet to connect to a variety of applications, storage services, hardware resources, platforms, and other IT capabilities offered by cloud service providers.

Companies can buy as much or as little as needed, typically in a per-user/per-month subscription model often dubbed software as a service (SaaS). The cloud service provider owns the required hardware and other resources needed to provide these services and employs the staff necessary to support them.

The potential advantages do not stop there. By subscribing to everything from basic e-mail to larger applications, such as customer relationship management (CRM) solutions, human resources (HR) suites, and enterprise resource management (ERP) systems, companies can avoid both the one-time expenses associated with buying such software outright and the cost (in staff and computing infrastructure) needed to maintain those applications.

In addition, by obtaining such services in a cloud model, companies do not have to worry about when and whether to upgrade to the latest version of the software. The cloud service provider takes care of that, as well as routine maintenance chores.

Service-level agreements (SLAs) include pre-determined levels of uptime and responsiveness, may provide clients with recourse should the software not perform as intended.

Moreover, the time needed to implement new software is usually faster for a cloud model, because rather than requiring on-premise installation at each company site (and the possible accompanying need to buy hardware), a new client simply accesses the software over the Internet. 

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