The futures of finance and technology have never been so closely intertwined as they are today. Cloud computing underpins this. What are the challenges associated with moving finance functions to the cloud and how do you overcome them?
The migration of financial applications to the cloud is happening much faster than expected. Research firm Gartner estimates more than one in three enterprises will use the cloud to support more than half of transactional systems by 2020.
Cloud momentum is consistently higher across financial business applications year over year, with small and midsize organisations leading the charge. Nearly 45% of smaller organisations, about 40% of midsize and more than 40% of large organisations are planning a move to cloud-based IT systems during the next three years.
The report also found that 93% of enterprises see the cloud being used for half of enterprise transactions in the future. Finance departments within many organisations see strategic opportunity in moving to a virtualised environment that simplifies globalisation challenges.
Why finance has lagged other functions
Finance departments focus on cost control, managing operating budgets and supporting future growth plans. They place a high value on technology systems that are easy to use, combining superior risk and governance with efficient delivery of information.
While the move to cloud is primarily seen as a technology project, it can also act as a catalyst for the evolution of your finance functions. While this is not compulsory, it’s an opportunity to step back and rethink what finance will look like in the future and to determine how technology can help.
Although your finance team is traditionally risk averse, the move to cloud is now being viewed as a safe option as long as it’s managed effectively. This usually means starting small with non-critical applications to allay concerns before migrating core systems.
Blue skies and cloud migration
Whatever line of business you’re in, the ability to innovate has become more important than ever as we move into an increasingly digital economy. Doing things the same old way carries even greater risks than identifying and embracing the required change.
Cloud-based technology makes it easier to innovate and meet rapidly changing market demands. Operating on costly and outdated technology infrastructure with disjointed data feeds cannot sustain business in the 21st century.
The faster cadence of software and infrastructure updates that are a feature of cloud computing directly increases the pace of evolution within any business. Latest developments can be engaged more efficiently and total cost of ownership falls over time. Finance teams will be major beneficiaries of this more agile approach to technology.
Managing the potential challenges
Large-scale technology projects often bring longstanding issues to the surface. But they also provide a great opportunity to resolve them once and for all. For a cloud project to be successful, your IT department and key business stakeholders need to develop a truly collaborative partnership.
Working with customers across a broad range of industries globally, we’ve identified these main cloud migration challenges:
- Migration Costs – Technology vendors often position the benefits of cloud migration as a way for customers to get off the merry-go-round of infrastructure upgrades. While this is true, there are costs involved with any new investment. When your business has already made a large investment in technology infrastructure, it makes sense to align cloud migration plans with the upgrade cycle. There’s also benefit in dipping your toe in the water by adopting some cloud-based technology and getting a feel for it before launching into full-scale migration.
- Compliance Concerns – These are deeply embedded into the psyche of every finance department. Since the Sarbanes-Oxley Act was introduced to minimise the likelihood of corporate accounting scandals, financial compliance issues have spilled over into other parts of the business. From a technology perspective, the impact has been far reaching. It was a major stumbling block for the takeup of data virtualisation within finance departments, especially those operating across national borders. Fear of data loss has historically slowed the rate of cloud adoption but Gartner’s research shows these concerns are quickly being overcome.
- Fixed vs Variable – It can be difficult to decide which workloads to move from in-house to the cloud. Within the finance department, the most important consideration is whether migration makes financial sense. How will adopting cloud-based technology equip the business to improve operational effectiveness and what is the timeframe for this switch to deliver a return on investment? It makes sense to start with applications that have a low-risk profile but will deliver meaningful business impact. In our experience, corporate performance management and business intelligence are great places to start.
About the author
Dominic Parsons is the Chief Executive Officer of CALUMO, a business intelligence and corporate performance management platform.