Fast, Good and Cheap by KBRG

Sponsored by

Fast, Good and Cheap Why CFOs are moving financial systems to the cloud

Financial executives always want IT projects that are fast, good, and cheap, but project managers have traditionally told them they can only pick two. Cloud computing may be an exception.

Enterprises of all sizes are now increasingly moving on-premise solutions to the cloud and with good reason – reduced implementation times, decreased demand on IT resources, greater flexibility, and lower costs.

While initially limited primarily to solutions like CRM or email, cloud deployment is fast becoming mainstream for applications considered mission critical. Organizations now trust the cloud with ERP and even financial management solutions, which was almost unheard of even a few years ago.

• Scott County, Minnesota, which covers 365 square miles and is the ninth-largest county in the state, moved its financial management system to the cloud. By doing so, they freed up 2.5 IT FTEs to focus on value-added work instead of database architecture, made procurement a paperless process, reduced risks associated with disaster recovery, and improved customer service.

• Gloucester Engineering, a global leader in plastics extrusion, got the scalability needed to support future growth without increasing its IT and administrative costs. “Having data in the cloud enables us to focus on our core business and leave system and hardware administration and backup to our external vendor,” says Adrian King, CFO. • Harsco Rail had a heavily modified ERP solution in place with aging hardware and an unsupported operating system. These challenges were brought to a head when the opportunity for a joint venture in China arose – they needed to bring a new environment online in less than 120 days. By implementing a single solution for all locations in the cloud, they were able to increase scalability and flexibility. The site in China was deployed in just 60 days, and a site in Germany followed shortly after. The company can also now more easily support plans to deploy in Italy, India, Australia, Brazil, and additional US locations.

With results like these, the shift toward cloud deployment isn’t surprising. “[Cloud deployment has]grown steadily over the past five years, but the last three in particular have been very, very strong,” says Steve Player, Program Manager for the Beyond Budgeting Round Table - North America. “Now, every major vendor has announced a cloud initiative. I don’t see many people investing in on-premise enterprise-wide software platforms.”

Karlo A. Bustos CEO & Chief Analyst M: 617.898.7476 E: kbustos@kbrg.co l www.kbrg.co l

1

However, as is the case with most enterprise software initiatives, moving to the cloud is not a decision to be made lightly, and executives should enter into it with their eyes open. This paper looks first at the advantages many CFOs have found in moving applications to the cloud; second, at myth versus reality when it comes to the risks associated with cloud deployment; and finally, at some best practices suggested by CFOs and software project managers to make a successful transition.

Why CFOs Are Moving Financial Systems to the Cloud

|

|

Sponsored by

Why move to the cloud?

CFOs of cloud-savvy enterprises report that substantial benefits can be achieved by moving to the cloud. While some of these advantages are business-specific, a number are common to all enterprises: A fresh start. Moving applications to the cloud often forces the company to do a good housecleaning of its finance and IT processes and can help rationalize the use of overlapping systems. The end result is generally an IT infrastructure that is less complex and therefore, easier and more cost-effective to maintain.

“It makes you rethink everything – and that’s a good exercise to go through.” says Janet Pirus, acting CFO for Project Pie, a San Diego-based fast casual dining startup. “Over time as a company grows and you have changes in management…you end up layering things on instead of adding and taking away. Having to go through that overhaul is to your benefit.”

Up-to-date software. Keeping software up-to-date is, for many organizations, an on-going battle. Customizations, lack of integration between systems, and aging technology platforms often make upgrading synonymous with starting over. While moving to the cloud isn’t a carefree walk in the park, it does deliver a major payoff in terms of keeping technology current.

Subscribe to the cloud and “you’re always on the latest version, accessible over the Internet, and completely device independent…If you’ve got a tablet, smartphone or laptop, you’re sitting on top of the technology stack,” says Peter Barnes, Account Director for Infor, a leading provider of enterprise software solutions.

With cloud hosting, upgrades become the responsibility of the software vendor, rather than the organization itself. Companies can keep systems running at optimal levels, take advantage of new functionality, and ensure their technology platforms are sustainable over the long term.

A more scalable system. The cloud allows companies to scale IT capacity up or down as business needs change and puts to rest questions about buying new servers or hiring additional IT staff to support initiatives. The result is greater flexibility and also some reduction of the risks associated with pursuing new business strategies.

“By letting a cloud provider host your applications, you pass the burden of supporting them to your vendor,” explains Fred Welles, Senior Program Manager at Infor. “Our customers find that this allows them to focus on their core business.”

This scalability allows companies to respond more quickly to business changes.

For Michael Rist, a New York-based Chief Financial Officer, the transition to the cloud was an easy decision. “I knew we had to radically improve and streamline our systems, allow them to scale easily and provide everyone access from wherever they were working. Moving to the cloud has exceeded my expectations and in many cases, resulted in cost reduction, increased employee satisfaction and improved compliance with policy and procedures,” he says.

Lower, more predictable costs. Server capacity, support, maintenance, and upgrades are all included in what is most often structured as a per-user subscription. You pay only for what you need, software experts say – not what you think you may need. There’s also no need for a large capital expenditure, as cloud deployment can be structured as an operating expense.

For Pirus of Project Pie, this cost advantage was a key reason for moving to the cloud. “It was just much less expensive to have someone else worry about your mainframe and everything else so you could concentrate on the operation side,” Pirus says.

2

Why CFOs Are Moving Financial Systems to the Cloud

|

|

Ability to focus on more strategic issues. IT resources can be freed up to spend time on more strategic projects, rather than on labor-intensive, time-consuming tasks aimed at simply keeping the business operational. Companies can also more easily find qualified IT staff, as the highly specialized (and quickly disappearing) skill sets needed to support outdated technology platforms are no longer required.

On-premise solutions offer less for more:

Cloud solutions offer more for less:

• Higher costs over the long-term (software licenses, upgrades, support staff, maintenance, etc.)

• Lower, more predictable costs (subscription fees that include hardware, software, maintenance, support, and upgrades)

• Less flexibility – More difficult to scale up or down to meet business needs • Longer implementation timelines

• Greater scalability – Capacity can be scaled up or down; no incentive to buy more than is needed to gain a cost benefit • Up-to-date technology – Vendors manage upgrades for you • Shorter implementation times

Assessing the risks

Organizations evaluating the cloud (justifiably) have some concerns about risk; and certainly, pitfalls do exist. However, because cloud is still in the process of becoming fully main stream, misconceptions remain about exactly what those risks are. Some of the most common include: You’ll be hacked. “Everyone is concerned about security in the cloud but the reality is that most cloud solutions are more secure than the average corporate network,” says Tom FitzSimmons, CFO of Payfone, a New York-area provider of secure mobile identification technology. “A breach for [cloud] companies can destroy their business.”

Most small and medium-sized companies are objectively more secure as cloud tenants than when they self-host their IT services. For major cloud providers, security is a core part of their offering. They continually monitor for new threats and upgrade security protocols to prevent breaches. Cloud companies have resources (both human resources in terms of staff and physical resources in terms of highly secure data centers) that few companies can match independently, including comprehensive disaster recovery systems.

You’ll get locked in. Storing critical data in the cloud might seem like a good way to get trapped with a particular vendor; but in reality, the risks of being locked in are much lower than with an on-premise solution. Because the initial investment is lower, deciding to change vendors doesn’t demand a major new upfront expense (or the write-down of the old system’s remaining life). Moving between cloud providers is also easier than swapping out an onpremise system, as hardware investments have been minimal and fewer customizations to the software have usually been made.

However, there are some key issues that companies should investigate to avoid finding themselves tied to a specific provider, including policies about data ownership, data backup protocols, liability for data breaches, and the degree of support provided when a data transfer is requested.

3

Why CFOs Are Moving Financial Systems to the Cloud

|

|

Getting it right

As with any major outsourcing relationship, ensuring a solid partnership right from the beginning will ease transitions and boost subsequent performance. Cloud migration veterans say it’s important to: • Choose a vendor who knows your business. This should obviously be evaluated at both a software and hosting level. Companies should look for solutions that can meet their needs from a functional standpoint with zero or minimal customizations and make sure that any industry or business-specific requirements can be met at the hosting level as well (e.g. state or industry laws related to data hosting and breaches).

• Review your choice with experts. “Find a very strong CPA firm who has a technology arm, because CPAs are the ones who take you through an audit; they understand where all the weak points are,” says Pirus of Project Pie. • Plan ahead. “So often, in order to save cost and time, you’re tempted to just jump right in, but the planning stage is critical,” advises Pirus. “Make sure that you’ve addressed everything; not just the folks in finance and accounting but your in-house customers and development and operations teams as well – all the other disciplines.”

• Take the plunge. Some companies choose to move to the cloud incrementally. In the short run, this might seem like a safer way to test the waters, but it can actually drive up costs and create complexity, rather than reducing it. If a piecemeal approach is chosen initially, a review is warranted after no more than a couple of applications are deployed. Companies need an overall strategy to ensure that long-term objectives are met.

An industry step-change

After years of coping with security breaches, out of control IT budgets, and the demands of multiple legacy systems, companies are finding that cloud deployment can mitigate ageold problems, while also better preparing them for the future. If present trends continue, discussions about cloud versus on-premise will eventually feel like the debates people once had about whether cell phones were a luxury or a necessity. Signs point to cloud quickly becoming a de facto standard, so the time to start paying attention is now.

“You can’t close the barn door,” says Pirus. “There’s no going back. Things are just going to move in this direction – there’s too much opportunity there in terms of cost savings.”

Karlo A. Bustos CEO & Chief Analyst Karlo Bustos is a proven strategy and finance professional. Karlo has diverse industry knowledge focusing on financial performance and market analysis.

Karlo is a respected and trusted advisor, with his financial analysis and global commentary being published in all of the top world business publications.

4

Why CFOs Are Moving Financial Systems to the Cloud

|

|