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Friday, October 23, 2015

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What it Takes to Move to the Cloud – EVOLUTION Panel of Finance Leaders


Cloud-based applications continue to gain ground in a growing range of technology spaces, from platform-as-a-service to security, because of their flexibility and cost advantages over on-premises systems. The technology can help finance leaders focus on their core work, but they first have to build a strong business case and plan their cloud solutions wisely.

Making the case for the cloud
Companies are moving to cloud-based solutions because they are flexible, scalable and cost-effective, allowing users to run applications as needed without the overhead burden of legacy systems. To make the business case for cloud technology, finance leaders need to quantify these benefits in terms of direct costs―such as the savings on hardware―as well as time. 

 “A lot of it is quantifying the soft costs and predicting what we think is going to happen if we can be more efficient in our back office,” said Brian Kinion, group vice president of finance at marketing automation software firm Marketo, speaking on a panel at the recent Armanino EVOLUTION Client Conference.  As organizations use the cloud to automate processes, they can focus more on growing their core businesses. Implementing a financial close management tool, for example, helped Marketo’s finance team reduce the days-to-close from eight days to five days, which freed staff to work on projects such as analytics.

Because they are so flexible, cloud technologies can also help growing companies prevent future problems as they increase their headcount and add customers. “We’ve been able to scale our business significantly because of decisions and [cloud] investments we’ve made over the last three or four years,” said panelist Todd Bailey, controller at data management software company kCura. “We haven’t run into those scale problems as we’ve gone from 100 employees to 500 employees and gotten customers all over the world.“

When building a budget, says Kinion, it is important to “peel back the onion” and determine what it will really take to integrate a new technology. The best way to do this is to ask where a vendor has done other comparable integrations, then talk to those clients about how their integration is working. “Do your own references―they [vendors] should be absolutely willing to let you call a customer,” said panelist Dave Welsh, a general partner in private equity fund Adams Street Partners. 

“Is it out-of-the-box…is it just an export-import, what fields are you mapping?” said Kinion. “Call some references and make sure you’ve got that [validation], then, it’s a matter of scoping out what the costs of that integration might be.”

One step at a time
One mistake many new adopters make is trying to shift too many functions to the cloud too quickly. Welsh advises taking a more deliberate, step-by-step approach. “We certainly are pushing all of our portfolio companies to use the cloud, because there are so many cost benefits,” he said, “but we tell them to take it incrementally.”

Getting the core platform right is the first thing organizations should focus on, because the platform will be integrated with so many systems. “The core is the key,” said Kinion.  “Nail your core platform, because that’s your long-term strategy…you’ll have a lot of problems unwinding that [if it’s wrong].”  

In today’s cloud marketplace, where so many different vendors provide functionality in so many different areas, taking the time to find the best solution is also important. “You have to be careful,” said Welsh.  “You may make a choice of a company only to find that, in fact, they weren’t really the leader in the space…[then] once you’ve integrated, it is hard to remove.”

Although unwinding mistakes can be a challenge, current cloud technology has made integrations less difficult. “I find [the cloud] a lot easier than using on-premises systems to integrate,” said Kinion. “It’s a matter of building those open APIs, and how open they are to the environments.”

What’s next for the cloud?
Strategy consulting firm Access Markets International (AMI) Partners predicts that small and medium-sized businesses’ spending on cloud technology will surpass their on-premises spending by 2018. In addition, software companies are now focusing their development efforts on cloud-based solutions, which makes a move to the cloud look increasingly inevitable.

“It’s the paradigm shift that everyone knows has to happen,” said Welsh. “People don’t want to spend internal resources continuing to maintain legacy software…they recognize the benefit of having single-instance, upgraded software outside their own four walls.” 

Security, which has largely been an on-premises solution, is one area of technology that may see a big transition to the cloud in the next few years, both for securing cloud applications and for providing security infrastructure through the cloud.  This is particularly true given that companies can benefit from sharing information about things like the latest security threat.  “In the security space, there is a lot to be learned across organizations, and the cloud enables that,” Welsh said.

As cloud solutions continue to evolve into pure services that can simply be turned on, employees―and executive teams―will be able to concentrate on their core business, instead of being distracted by IT-related projects.  “You’ll have organizational focus,” said Welsh. “At a board level, that’s what we’re always looking for… how you move the business forward.”

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