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Cloud Computing and Finance and Accounting Operations | Gaining Altitude in the Cloud

I recently spent time surveying the cloud computing landscape, and was struck by the minimal information focused on back-office services; nearly everything I read was generic and/or IT-centric. So I decided to look at cloud-based service offerings for Finance and Accounting (F&A).

Given the conservative nature and outlook of accounting professionals, you would probably think that F&A would be a laggard in the adoption of cloud computing models, right? Wrong! In fact, the American Institute of Certified Public Accountants promotes and recommends F&A Software-as-a-Service (SaaS) solutions to both accounting firms and their clients in industry. A number of firms – including NetSuite, Intacct, and Adaptive Planning – are marketing solutions for F&A that they developed specifically to run in the cloud, as opposed to retrofitting pre-existing software applications for deployment to a cloud infrastructure. In addition, SAP and Oracle are developing strategies and service offerings for cloud-based ERP solutions. Available F&A applications for the cloud are a mixture of both point solutions and ERP-like suites that cover all transactional activities, as well as other more judgment-based activities such as management reporting and budgeting & forecasting. Auditing and treasury activities are probably the least served areas right now.

The adoption of cloud computing for F&A has been limited primarily to small- and medium-sized businesses. This is counter to an industry trend in which large-cap companies have been the most likely to adopt cloud computing models. Why is this? As above, many of the F&A applications have been developed specifically for the cloud. While this makes them easy to deploy, in many instances they still have limited functionality. There is also the ongoing concern regarding the security of data stored in a public cloud, but this issue is slowly losing ground as an inhibitor to adoption. The single largest barrier to the adoption of cloud computing models by large-cap firms is the significant investment many have made in the deployment and customization of ERP Finance and Accounting platforms.

Going forward, I predict these barriers will gradually recede, especially as ERP vendors develop offerings to move large- and mid-sized firms toward the cloud. In addition, as the functionality of the current generation of applications continues to improve, it becomes increasingly likely that larger firms may leverage them for a low cost solution to replace a legacy application or meet a need that is currently unmet by their ERP system. We need to remember that some of the most significant SaaS vendors in the marketplace are focused on F&A point solutions. Prime examples are ADP for payroll and Concur for T&E. F&A cloud solutions may also be attractive in a situation in which a large firm is in the process of starting up a new business segment or integrating a smaller acquisition.

Is Cloud-Based F&A Right for You?

When deploying F&A applications in the cloud, you need to consider the appropriate industry dynamics and requirements as well as your current inventory of application workload types. Industry dynamics such as large volumes of M&A or industry-wide margin pressures may make the deployment of cloud solutions more attractive. On the other hand, industry requirements and regulatory constraints may dictate a less aggressive approach. In any event, you will need to evaluate both the applications that are good candidates for deployment to the cloud, and which of the three cloud models – public, private, or hybrid –makes the most sense for a particular application workload type. You would probably only move mission critical and/or proprietary systems with significant data privacy requirements to a private cloud environment, while non-proprietary back-office applications may be more easily deployed into a public cloud environment.

There are other factors to consider when evaluating how to potentially leverage F&A cloud solutions, e.g., what is your company’s approach to its global services model for back-office functions like F&A, HR and Procurement? While many firms have made significant investments in time and resources to deploy shared services and outsourcing solutions for back-office functions, few have been able to fully achieve the benefits associated with standardization and transformation leading to an end-to-end global delivery model. Cloud services can be part of the solution to help a company address the technology and process barriers in a more timely and cost-effective manner. For example, a company might look at deploying cloud-based reporting and control tools for better oversight across all divisions and regions.

CFO Imperatives

CFOs and other financial leaders in large firms have an obligation to ensure that their function does not lag other areas of the enterprise in adopting cloud computing models. They must understand the hype and the reality of cloud computing across functional areas and within their industry. This requires that they:

  • Recognize cloud-related benefits like faster deployment times and reduced CAPEX and OPEX
  • Balance the challenges inherent in cloud computing such as data security and system interoperability
  • Target adoption to high value areas by developing a robust set of evaluation criteria and insisting on a broad assessment of opportunities
  • Define a global strategy roadmap, and map opportunities to the criteria and strategy

Hopefully my thoughts have shed some light on the current landscape for cloud-based F&A services, and will generate some further discussion.

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