CFOS ARE SLEEPWALKING INTO THE CLOUD!

Most CFOs have ‘bought-into’ the cloud in some shape or form. If they are not moving to the cloud now then it is definitely on the near-term horizon. IDC the analyst firm says that public IT cloud services spending will grow to more than $127 billion in 2018, representing a compound annual growth rate of 22.8%, which is about six times the rate of growth for the overall IT market. But in an unseemly rush to exploit the advantages of the cloud some CFOs are throwing caution to the wind, by deploying financial processes in multiple-clouds that will create “Islands of Information” that they may regret for decades to come.

The way companies are hurtling towards the cloud is a little reminiscent of the computing landscape three decades ago. We used to talk about “Islands of information” and those of us who worked during this era remember the extraordinary lengths we had to go to simply to move data between one environment and another.  It wasn’t the fault of the end-user community, but a measure of the immaturity of the computer market and the lack of standardisation in operating systems and physical file formats, as each computer manufacturer sought to carve out its own market share.  However this time around, the ability to get it ‘right’ or ‘wrong’ is entirely within our gift – there is nobody else to blame.  So what’s the problem?

This generation’s “Islands of Information” are not the physical mini-computers of the eighties that didn’t talk to each other but the virtual deployment of financial applications and processes partly on-premise or in the cloud or scattered through multiple clouds, for example, a bit of ‘Purchase-to-Pay’ processing here, a ‘Quote-to-Cash’ cycle there and an isolated budgeting application somewhere else.

Of course the software industry claims it has invented a whole new breed of integration products that can provide the glue that allows seamless transfer of information between one process or application and another.  But the cracks are already beginning to appear. According to one recent study, 54% of respondents say their department has experienced staff downtime in the last six months due to cloud integration problems, and 75% have had their ability to innovate impaired by poor integration of their cloud applications, which has left applications isolated from the rest of their business functions[1]. This is obviously not the way forward forfinance functions of the future, with process automation, standardisation and innovation front of mind.

Multiple-clouds signal a much deeper problem. It may be alluringly cheap to move to a monthly subscription, or perhaps a business can meet a specific need much more quickly by leveraging a ‘point solution’ in the cloud, but what CFOs may be sacrificing is the profound advantages of heightened collaboration, better business partnering and process visibility that arises from having core financial processes in one environment.  So what should worried CFOs do?

The key point for CFOs is to judge cloud applications not from the standpoint of an individual application or sub-process but to take a wider perspective of the platform on which the processes reside. For example, is the budgeting application part of a CPM (Corporate Performance Management) application on a single cloud platform, or a dead-end? Or is the financial application part of a broader ERP solution on a single platform in the cloud? 

After decades of striving to join-up core financial processes the unwitting adoption of multiple-clouds threatens to throw many of the process gains into reverse.  The cloud is a wonderful enabler if you take a holistic view, but left to its own devices multiple-clouds could undermine growth, decision-making and competitiveness.  Smart CFOs need to wake up and take charge.

 

Note1 Research Study: Cloud for Business Managers: the Good, the Bad and the Ugly, Dynamic Markets, May 2013.

 

The challenge of multiple-clouds is just one of the topics we will be discussing at FSN’s “The Future of the Finance Function” conference on 10th/11th November 2015 in London. I hope to see you there!

  • 2015-06-01 14:58:32
  • Gary Simon, CEO
  • Cloud, DIgitalCFO