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Advice and Information for Finance Professionals

3 reasons why scale is important in the cloud

Rudolph Lukez
Director, ERP Product Marketing, Oracle

In the technology world, scalability defines a solution’s ability to process large volumes of data quickly—without slowing down or breaking. 

Typically measured in transactions per second, an inability to handle large volumes can reduce performance—leading to inefficiencies and end user frustrations.

Scale is sometimes overlooked when evaluating cloud ERP solutions. But it’s important. Most organizations require fast data processing not only for efficiency, but to get insight into the most-current data. If you have to wait until a batch of transactions run overnight—which, until recently, was common in the banking industry—you’re already looking a data that’s a day old.

Your company might not need to handle millions of transactions, but cloud scalability is an important consideration for any business. Here are three reasons why.

1. Growth creates an increase in transactions

Most anyone would agree that the more a company grows, the more transactions it will process. Most businesses are looking for growth, so it makes sense to ensure that your company is ready for it. When you’re choosing a cloud application, you should include a full exploration of its proven processing capabilities. This will ensure your business will never have to worry about handling future data volumes.

2. Transactions multiply exponentially

Financial transactions never happen by themselves. A single transaction is only a step in a particular business flow and leads to several more transactions. For example, issuing bi-weekly payroll checks might look like just one transaction for each employee, but it generates another 30 or more. A single payroll cycle for a 500-person company can easily generate 15,000 or more transactions every payday.

How? Consider all the payroll deductions associated with each check. There are deductions for taxes, retirement savings plans, insurance, and possibly stock options. Dig deeper, and each of these transactions can spawn additional activity. For example, a deduction from the employee paycheck for a retirement plan contribution can launch a transaction for a company match—which in turn creates multiple transactions to a third-party financial services company that manages the retirement plan.

Predicting the number of variations—from one transaction turning into many downstream transactions—is hard to do, even for a small payroll run. 

3. Transaction volumes constantly fluctuate

In every business, there are significant periodic events that require extra scalabiity. Payroll happens 2-3  times a month. Now add in other recurring activities like month-end close, or billing cycles for customer invoices. Each event generates an increase in data volume.

What happens when multiple periodic events happen on the same day? What if the payroll, month-end close, and tax reporting processes all happen on the last day of the month? This spike in transactions will test a system that can’t handle data surges.

Testing scalability with real scenarios

We wanted to understand how our cloud would hold up to the real-world transaction volumes that our customers face daily. Using a model based on a large global business with a diverse mix of thousands of accounts, vendors and customers, the outcome was astonishing.

Financial transaction throughput: 360 million per hour.

You can read the details in the complete report and see an overview in our infographic. The paper presents several scenarios that show how a company can find itself reaching millions of transactions every second (one example: processing credit cards at gasoline station pumps) and clearly outlines why this capability is important for any enterprise using cloud applications.

Some clouds have low ceilings

Businesses may tend to think of the cloud as a limitless supply and therefore infinitely scalable. But not all cloud providers have the same capabilities. Some cloud applications work with flat files (instead of relational databases) that generate performance issues. And since most SaaS companies rent their hardware from third parties, like Amazon or Rackspace, they have limited scalability. If a SaaS provider has too many customers running their application at once, they need to purchase extra processing power. If a customer finds that their cloud service is not keeping up with demand, they’re likely going to switch to a solution that will.

When evaluating any cloud solution, you should consider high-volume data transaction rates. The risk of picking a limited solution could lead to downstream problems across your company.

The ability to expand your business capabilities at a moment’s notice is a necessity for some, and a lifesaver for many. When using a tested, high-volume, high-velocity transaction system, there will be one less operational worry for you and your team.

Read the full report or view the infographic.

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