Cloud

Insights

The CFO and Finance executive guide to Cloud

Answers to seven pressing questions

Everything you’ve ever wanted to know about cloud has been written somewhere. But what CFO has time to wade through it all? This guide offers answers to frequently asked questions from CFOs regarding cloud investments, whether Finance or other functions in the enterprise are potential users. Better understand the opportunities and challenges associated with cloud. By making more effective cloud decisions, you may get a jump on competitors in terms of innovation, agility, and cost.

Now or Later

Our CIO wants to move to the cloud. Should we do it now or wait until things settle down?

Few companies today don’t have some kind of cloud initiative underway. So there’s a good chance your business has already begun moving in that direction. Cloud represents a fundamental shift in how technology solutions are delivered. It’s increasingly becoming the new standard.

Leaders get excited about cloud for lots of good reasons. They see the real promise of lower costs, but more importantly, it’s strategic value such as reduced time-to-market, scalability, agility and innovation that often tilt the balance.

Cloud benefits are real, but that doesn’t mean cloud is easy.

Keep reading below to learn more and download the PDF at right for the full story.

The CFO and Finance executive guide to Cloud

By the numbers

Multiple surveys with Finance leaders and broader business audiences all point to significant momentum building around cloud experimentation and adoption. Consider these findings:

  • 93% of business executives surveyed by Deloitte are adopting or considering the cloud
  • 41% indicated they have cloud technologies in place, or underway. Another 16 percent are assessing cloud options.
  • Nearly half (49%) say cloud technology would be critical to the performance of Finance within two years

 

1. What should we pilot?

  • If you’re in the early stages of cloud thinking, ask yourself:
  • What products or services must continuously change to meet customer demand?
  • What information is critical to decision-making, but often isn’t available in a timely manner?
  • Which products have a high operating cost, but also have usage patterns that vary by day, week, or month?

This may point you to business areas ripe for a cloud pilot, as their performance may be suffering from outdated technology and processes.

The three flavours of cloud services:

Software-as-a-Service (SaaS).

The most commonly used cloud service. Pay for finished applications on a subscription basis.

Infrastructure-as-a-Service (IaaS).

Allows customers to obtain resources without purchasing hardware. It has the potential to limit capital expenses.

Platform-as-a-Service (PaaS).

Used by organisations to develop new software applications, or get access to innovative

2. The cloud value proposition

Is cloud mostly about cost-savings or are there other advantages? How can we realise sustainable savings?

CFOs are often skeptics when it comes to spending based on the promise of savings. So when your company is building the business case for any type of cloud implementation, make sure you’re looking at the bigger picture. Finance needs a seat at the table. No one else is likely to bring up the tough questions that need to be asked.

Bottom line? Some companies are achieving returns of more than 10X on their cloud investments when they account for all the costs and benefits. These companies push hard to build a compelling business case – and even harder to deliver exceptional value. That’s a high bar, but we’ve seen it cleared by many businesses and in many functions.

Building the business case

Be sure to include familiar categories of costs like infrastructure, licensing, and real estate, as well as categories you might not be thinking about, such as operating model optimisation, speed-to-market, and innovation.

Example: An insurance company is using cloud to leverage innovations such as sensors, drones, and image analytics to quickly gather information relating to storm damage. As a result, the company is able to address claims 3X faster than competitors, while achieving superior customer satisfaction and gaining new business. 

3. Accounting treatments 

I’m having a hard time getting my head around the accounting and tax implications of moving to the cloud. What are others doing?

Reporting and tax regulations for the financial treatment of cloud investments are complicated and have changed significantly in the past year. They will likely continue to evolve. You can find the latest technical information on our website

Highlights:

  • When a company moves to the cloud, those hardware costs can become operating expenses instead of capital expenses. Cloud software is typically – but not always – bought and paid for on a monthly or annual basis.
  • Infrastructure services, on the other hand, can be billed in real-time based on usage.
  • Current tax structures can be affected by moves to the cloud. The devil is in the details, so make sure your tax department is involved in discussions from the outset.
  • Look at the phase-out of on-premises technology depreciation and the phase-in of cloud services expenditures at the same time. 
  • The regulatory landscape may continue to change with new accounting rules for cloud investments.

4. Contracting

What cloud-specific issues should we be thinking about?

In contract negotiations for cloud services, there are many new methods and considerations to watch out for. Volume discounts, service levels, security, and customisation are just the beginning. Other issues such as lock-in, liability, indemnification, and intellectual property can also be considerations. Finance – as a partner to the business and a steward of the company – has a unique and indispensable role in working through all these issues. Even when Finance won’t be the user.

5. Security and risk

I’ve heard the risks associated with cloud aren’t better or worse— they’re simply different. How so?

Every technology comes with unique risks, and cloud is no exception. Here are several broad areas of risk to keep in mind as you contemplate cloud migration:

  • Data security and privacy. The risk management practices of major cloud providers are often more sophisticated than those of their customers – companies like yours. Just be sure appropriate controls are established and enforced.
  • Lock-in. Migrating a large IT portfolio from one cloud platform to another provider can be challenging and costly. Being locked-in can mean significant financial penalties for terminating services early – or an inability to adjust pricing if commercial costs change.
  • Compliance and regulatory risks. Cloud-related compliance requirements can involve a broad range of regulations. CFOs should approach cloud in a way that preserves their good compliance and regulatory standing.
  • Cost savings and other benefits don’t materialise. Large providers, particularly those offering infrastructure-as-a-service, say they can deliver computing at a price point that on-premises solutions simply can’t match. As with most large programs, however, diligence and sustained effort are required.

6. Talent Model

What skills are needed to run a cloud-first organisation? How are they different from what we have now?

Major cloud service providers are attracting many of the best developers and analysts, leaving other companies hard-pressed to get the people they need. Make sure you’re looking at your operating and talent model in conjunction with any cloud migration.

7. Finance opportunities

We’re looking at a new core finance platform. Are cloud versions of ERP software ready for prime time for a company like ours? What else should we be thinking about?

Major ERP providers are favoring the cloud-optimised versions of their software, while some offer only cloud-native options. Though they’ll likely continue to support on-premises technology for the next ten years or so, much of their investment in innovation is now tied directly to cloud services. As a result, cloud solutions should be the default starting position for most companies looking at core finance platforms today. There may be specific components that need to remain on-premises for now, but that need won’t likely last long.

It's Crunch time

Like so many important projects, the key to effectiveness with cloud is to have a workable plan and keep moving. Ramping up pilots can be a smart way to go. It gives you a taste of what’s possible, while allowing time to bring other parts of the business along.With Finance on board, you can be sure that new initiatives can be extended across the enterprise when the time is right.

To find out more, download the report.

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