Are FDs avoiding the cloud?
The pros and cons of cloud computing may be regularly debated by the IT team but what about the rest of the business? How many financial directors (FDs) are still afraid to take the plunge? Most are familiar with the compelling benefits of lower capital expenditure, improved financial control and rapid deployment – all key issues when facing an overworked IT department struggling to find the time to even discuss business requirements, let alone oversee the delivery of new software. So why the reticence?
It is, perhaps, understandable that an FD or CFO may be unwilling to rush headlong into the cloud with a business-critical application such as the core financial software. But there are other aspects of the financial portfolio that provide a fantastic opportunity for testing the viability of the hosted model. Karen Conneely takes a look at the benefits of the cloud and exposes the long-term viability of the hosted model for the entire software portfolio.
Demand is growing globally for hosted solutions, as organisations wrestle with continuing financial constraints that are now seriously hampering ongoing business development. With many organisations continuing to pare back internal IT resources, business managers are having to wait months to get access to critical IT skills. They are facing a near complete lockdown on the capital expenditure required to deploy much needed new software solutions; indeed they are even struggling to ensure compliance-critical upgrades of financial software are completed on time.
In contrast, the option to leverage a highly secure, hosted third-party solution that can be delivered within days, rather than months, is compelling. Add in the appeal of monthly or annual subscription, rather than the huge upfront cost of a perpetual licence, and the hosted model has clear financial and business value.
So why is it that the IT department, rather than the FD, is driving the move to the cloud? Is this reticence based on educated mistrust and a justifiable decision not to hand over responsibility for critical financial data to a third party or a simple fear of the unknown?
The decision on whether or not to exploit the benefits that the hosted model can offer is business critical – and while FDs will be understandably reluctant to trial this approach with the core ERP or financial software – a toe in the water with other key applications, such as fixed asset management, might be more appropriate. Indeed, a hosted fixed asset register offers a raft of additional benefits. Automated upgrades ensure the software is always up-to-date – a key consideration for compliance requirements, particularly in relation to the latest International Financial Reporting Standards (IFRS) and Statement of Recommended Practice (SORP) regulations affecting UK organisations – while the hosted model also ensures the upgrade process can be achieved without any disruption or dent in user productivity.
Furthermore, a hosted model provides access to the system from any location, allowing the FD – or other members of the finance team – to run reports, analyse asset information and check depreciation at any time, further boosting productivity.
With the option to get the new solution up-and-running within just five working days, organisations can rapidly meet corporate demands for improved fixed asset management, including the adoption of mobile asset recording via PDAs. With minimal upfront expenditure, the improvement in asset accuracy, combined with the reduction in manual overhead, delivers a very quick return on investment (ROI).
Of course, before any such buying decision can be made, FDs need to understand exactly what is on offer. Security is obviously key – no organisation wants to expose its list of fixed assets to the world at large.
There are a number of options; does the business want to opt for a dedicated hosted server or the slightly less secure and less expensive, cloud-based solution where resources are shared on a virtual machine? Either way, the servers will be located in highly secure, multi-million pound data centre facilities that will offer security far higher than that of inhouse systems.
You will also need to consider how the business accesses the system? Preferably a dedicated virtual private network (VPN), which would further reinforce the security level, but would require that you ensure the communications bandwidth will deliver the required performance.
Whatever route a business decides to explore, there is growing pressure on FDs to at least explore the hosted model. Yes, a large proportion of risk-averse FDs may well be unwilling to opt for a major financials implementation as a first venture into the hosted model, but even if the global financial situation radically improves and IT suddenly receives a massive input of resources, the finance team should at least be considering the financial and speed-to-delivery benefits on offer. It is time to test the waters of cloud computing.
Karen Conneely, group commercial manager, Real Asset Management
ITAdviser 67 Autumn 2011