PARIS—Amid shifting consumer demographics and expectations, chief financial officers can’t afford not to consider cloud computing to help meet the demands of their jobs, said Oracle CEO Mark Hurd on Tuesday at the opening of the Oracle CFO Summit held at the Hotel d’Evreux here.
Most companies are boosting earnings by cutting costs rather than growing revenue, which isn’t a sustainable long-term business strategy, Hurd said. Meanwhile, the millennial generation, which by 2020 will account for 40% of US GDP, has been empowered by social media and other digital tools to switch brands more easily than previous generations did, making it more incumbent than ever on companies to become more responsive to their demands.
According to a Harris Interactive survey commissioned by Oracle, 86% of consumers say they’re willing to spend more for a better customer experience, 89% said they’ve switched to a competitor after a poor experience, and only 1% feel their expectations are being met. Clearly, something has to change, and fast.
In this context, Hurd said, mission-critical applications such as enterprise resource planning, which companies use to run their businesses and develop long-term plans, need to run in the cloud so that companies can make faster short- and long-term decisions, he said. The benefits include:
IT budgets represent a total of only 3% of GDP, Hurd said, and are unlikely to grow significantly. “There’s a strong need to redo IT, but not a lot of money to get it done,” he said. That means companies will have to take advantage of lower-cost IT innovations such as software as a service (SaaS) and platform as a service (PaaS) to improve their ability to plan quickly and shift gears as needed, he said.
Hurd noted that Oracle has signed 1,350 new cloud ERP contracts over the past five quarters. “This is as much about the macro-economy as it is just about software,” he said. “You’ve bought an innovation engine.”
Companies using cloud software benefit not only from more frequent upgrades from their providers, but also from lower-cost test and development cloud platforms they can use to create customized extensions that make their software even more useful. This is an important consideration given that “one-third of all IT spending is the development of applications,” Hurd said.
Among the demands on CFOs: aligning corporate balance sheets and income statements; providing real-time analysis of up-to-the-minute cash positions; closing quarterly and annual books in a timely manner; and leading long-range planning cycles.
Other corporate functions, such as human resources, marketing, and sales, also need the real-time capabilities made possible by cloud computing, Hurd said. And while IT has in the past been able to dictate technology choices based on the idiosyncratic designs of their in-house systems, cloud computing is “democratizing” IT decision-making, he said.
According to Hurd, 70% of all computing workloads will take place in the cloud by 2025. “The rest will be either homegrown applications that no vendor provides, or else applications that have to run in-house for regulatory reasons,” he said.
Cloud computing, he said, represents “a more material change for this industry than anything we’ve seen in the last 23 years.”
That said, companies are unlikely to immediately junk on-premises systems representing decades of investment, so it’s imperative to use cloud software and development platforms that are also compatible with legacy systems. Said Hurd: “We’re going to have on-premises and cloud coexisting for years to come.”
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