A 2014 survey entitled "Empowering Modern Finance" illustrates that more CFOs are looking to the cloud to modernize finance. The study, carried out by Longitude Research on behalf of Accenture and Oracle, says that more than two-thirds of executives are moving their finance systems into the cloud, with 24% having already adopted a cloud-based system and 45% planning to do so in the near future. Even higher numbers are adopting cloud-based budgeting, planning and forecasting systems (BPF). Indeed, 28% are already deploying BPF in the cloud and 34% expect to be in the cloud within a year. Only a mere 17% say that they do not anticipate using the cloud for BPF.
It's easy to see why businesses are so effusive about the cloud. The scalability, immediacy, and accessibility of the cloud removes many of the barriers to enterprise deployment, enabling businesses to distribute BPF capability wherever it is needed and engage with larger populations of users, which in turn drives forecast accuracy, enhances management visibility, and accelerates decision making. In an era in which organizations are striving to reduce business complexity and improve user productivity through process standardization, the ease with which cloud solutions can be deployed holds obvious appeal.
But not all cloud solutions are "born equal". As organizations venture into the cloud, they are discovering the need to have an eye to the 'platform' if they are to avoid simply replicating the fragmented application architectures that historically pervaded the on-premises world. For the unwary, the very advantages of the cloud can be its downfall. For example, the subscription pricing model popularized by the Software-as-a-Service approach, together with the ability to pay only for what you need, puts cloud computing easily within the reach of most departmental budgets. This allows business units or functions to side-step prescribed standards of IT governance and the formal decision making processes that would otherwise accompany IT investments, adding to concerns that cloud-computing could lead to fragmented architectures.
The Empowering Modern Finance report already identifies that 29% of businesses have between two and five different BPF systems, 23% have six to ten systems, and a further 20 %have 11 or more systems in place. The worry is that left to its own devices, cloud computing purchased with just the swipe of a credit card could reinforce this pattern of disharmony, undermining many of the advantages of moving to the cloud.
At the heart of the problem is the way that the cloud industry has developed, spawning a new generation of 'best of breed' software vendors dedicated to point solutions, including budgeting, planning and forecasting applications. But BPF applications (or any other for that matter) do not reside in a vacuum - they are part of larger business processes.
For example, BPF is an essential part of Enterprise Performance Management (EPM), which is about linking plans and execution, and monitoring financial and operational results against goals. Even more important is the ability to integrate across business functions, and established vendors such as Oracle have invested in linking their ERP offerings to their EPM offerings, effectively unifying the transaction 'world' and analytics 'world'. So a large gap is now developing between the point solutions of the new SaaS vendors and the more holistic approach of enterprise vendors in being able to deliver complete, closed loop business processes for planning, budgeting, transacting, and measuring results.
It is the "platform" that is emerging as the crucial difference between the new SaaS vendors and the established vendors. Signs of strain are already appearing as organizations grapple with the complexities of integrating, say, BPF in the cloud and other critical applications such as ERP and EPM residing on-premises. The ability to easily share data across these hybrid environments is critical. Businesses can quickly find themselves mired in technical obstacles rather than being free to leverage the true agility conferred by the cloud.
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 functions1.
But the concerns run deeper than where the applications physically reside. The modern platform is also a shared development environment in which applications are created to common development standards, allowing any of them residing on the platform to securely share data with any other application, while presenting a common user interface, a common method of navigation, and common security methods.
New SaaS vendors talk about 'ecosystems' of software vendors that work collaboratively in the same space. But the provision of loosely-coupled applications is a poor substitute for a true platform in which applications are crafted to work seamlessly to common standards from day one. That's why established vendors such as Oracle have moved entire suites of unified applications of proven capability to a common platform in the cloud - reducing risk and uncertainty. Those businesses that make decisions based on multiple clouds of point solutions could find themselves seriously disadvantaged in the longer term, with limited access to leading edge functionality and apps, poor integration and unable to harness the liberating potential of cloud computing. It is the quality of the platform that holds the key to a robust cloud-based architecture.
Note1 Research Study: Cloud for Business Managers: the Good, the Bad and the Ugly, Dynamic Markets, May 2013.