Financial Management: Why Move to the Cloud?
By Kathryn Perry on Apr 11, 2012
I’ve spent my career designing and developing financial management systems, most of it at Oracle. Every single day I either meet with our customers or talk to them on the phone. The time is usually spent discussing various business challenges facing CFOs and Controllers, who are running Oracle’s Financials. Lately, we’ve been talking a lot about cloud computing and whether it makes sense for finance to go to the cloud. Here are some pros and cons that might help you make that decision.
Let’s start with the benefits of cloud solutions. The first is savings. With cloud services, you pay only for those commodities that you use. That makes you feel like you're getting better value for your money. Plus, you can preserve your cash for your core business and you can get a better matching of expenses and revenues. So, at the top of the list is lower total cost of ownership.
The second point has to do with optimization. With cloud services, you’ll need less IT infrastructure so you can optimize your IT resources for better-value, higher-end projects. This also leads to greater financial visibility, where there's a clear cost for the set of services or features replaced by cloud services.
And, the last benefit is what I call acceleration. You can save money by speeding up the initialization and deployment of the project. You don't have to deal with IT infrastructure and you can start implementing right away.
We did a quick survey of about 70 CFOs at the CFO Summit last month in New York City. We asked them why they were looking at cloud services, and not necessarily just for financials. The No. 1 response was perceived lower cost of ownership.
The next thing in the risk category is reliability. Is the provider proven? You’re taking what you have control over – for example, standards and policies and internal service level agreements – away from your IT department and giving it to someone else. Will you still be able to adapt to shifts in your business? Will the provider be able to grow with your business effectively? Reliability means having a provider that can give you the service infrastructure that you need.
And then there’s performance, which has two components in terms of risk. Going forward, will the provider be able to scale the infrastructure or service level if you have new employees or new businesses? And second, will the price you negotiate and the rate you lock in cover additional costs and rising service fees?
Another piece is cost. What happens if you don't get the service level you want? What if you end the service? What happens, if after a few years, you send the service out for bid and change service? Can you move your data? Can you move the applications? Do the integrations work? These are cost components people don’t always take into account.
And, the final piece is the business case. The perception is that you can get started really quickly with cloud. It has a perceived lower cost of total ownership and it feels cool because it's cloud. But do you have a good business case for moving to the cloud? Your total cost of ownership is over three years; then you’ll renew it, so your TCO is six years. Have you compared that to other internal services that you’re offering? You might already have product that you can run this new business or division on.
In that same survey at the CFO Summit, the execs thought the biggest perceived risks were security of data, ability to move data back, and the ability to create a business case to actually justify the risks.
So that’s the list of pros and cons.
Not to leave you hanging, I will do another post on how to balance these pros and cons and make the right decision for your business.