Cloud-based EPM solutions offer corporate finance and operational users significant opportunity for improvement in key business processes such as planning, financial consolidation and close, and management reporting. However, many people incorrectly assume lower IT costs are the primary driver for shifting finance functions to the cloud. While total cost of ownership is a key point of value, the cloud also offers the opportunity to more easily adopt best practices, and provides greater agility in core finance functions. Let's take a look at each of these value drivers.
The total cost of ownership for EPM processes is materially lower in the cloud because common overhead functions are taken on by the cloud service provider rather than the customer. TCO is frequently miscalculated and understated when comparing on-premises costs to cloud EPM solutions. The most common mistake is to simply compare current on-premises license and support costs to the subscription costs of a new cloud service; this is an apples-to-oranges comparison. The cloud service subscription includes the following material benefits that are separate line items when calculating TCO for on-premises EPM solutions:
Large upfront costs such as new hardware are eliminated with the cloud; this can materially lower TCO over the course of several years. Many will argue that the cost of on-premises hardware is not relevant for existing EPM processes since the cost is already borne. However, even if investments in current on-premises hardware are fully capitalized, the ongoing cost of hardware can be considerable. First, hardware must be periodically upgraded, which can amount to significant one-time costs over the life of a business process. Second, the cost of new hardware often represents an obstacle when considering new business processes (such as launching a new operational planning process to complement the existing corporate planning process).
It’s common for the IT service costs associated with on-premises EPM solutions to be cross-charged back to finance. This includes support of hardware, data backups, periodic maintenance, application monitoring, disaster recovery, and so on. In the cloud, however, the costs of these services are much lower, because most of them are performed by the cloud service provider and included in the subscription price.
Most on-premises EPM processes must be periodically upgraded to ensure compliance with the supported platforms as well as to take advantage of new product features. The costs associated with upgrades can be substantial, and include implementation consultants, hardware refreshes, and time spent by staff on the upgrade and testing. This cost is dramatically reduced by shifting to the cloud because it is usually included in the subscription. In fact, in a recent survey conducted by Oracle, this is cited as one of the top reasons to shift to the cloud.
You may have a strong inclination to just lift and shift current EPM processes to the cloud. While this may seem the fastest route to the cloud, it overlooks the opportunity to adopt best practices. Lift-and-shift may be appropriate for unique company-specific EPM processes. But for the most common EPM business processes—such as expense planning, workforce planning, financial consolidation and so on—adoption of best practices built into the cloud should be seriously considered as a key benefit.
The adoption of best practices should be a key consideration when evaluating the shift to Oracle EPM Cloud. EPM Cloud represents a paradigm shift when compared to traditional on-premises software, because it offers out-of-box frameworks for automating many common finance functions. This allows the customer to take advantage of best practices that have evolved over 20 years of technology adoption in finance. There is a shift away from traditional requirements-gathering and custom build, toward leveraging best practices to realize quick wins and making incremental extensions later as necessary. By adopting best practices, customers can elevate the current processes to best-in-class and see increased benefits from the Oracle roadmap. It's important to flag a couple of considerations when adopting best practices:
Flexible frameworks: Best-practice frameworks are not one-size-fits-all. Instead, the frameworks in Oracle EPM Cloud are fully configurable, and are designed to meet the unique needs of each customer. Furthermore, the frameworks are completely connected, facilitating one single version of the data. Configurability allows for greater flexibility when addressing industry-specific or geography-specific requirements.
Maturity model: The best-practice frameworks are designed to account for the fact that many companies prefer to adopt best practices over time, instead of making wholesale shifts in their current business processes; they allow capabilities to be enabled incrementally. For example, the Financials planning framework in Oracle EPM Cloud enables the full trial balance (e.g. income statement, balance sheet, and cash flow) to be planned. However, many companies may want to simply start with expense planning, then mature their planning processes over time. Furthermore, the best-practice frameworks are designed to allow custom business processes to be combined with the frameworks.
Agility in financial and operational EPM processes is perhaps the most overlooked benefit of Oracle EPM Cloud. Organizations need to be able to react quickly to market opportunities and threats. Oracle EPM Cloud answers this need by enabling the following:
Reimagined business processes. One of the biggest benefits that creates agility is the fact that Oracle EPM Cloud is delivered on one integrated platform. The current on-premises Hyperion suite has proven successful for thousands of companies around the world, but it rested upon two different pillars of technology: HFM and Planning. In the cloud, this has dramatically changed: Oracle EPM Cloud allows you to design business processes supported by the common platform as well as cross-functional navigation flows that allow users to seamlessly use capability across EPM application domains in a single user experience. You can now enable fact-based planning decisions through granular profitability insights; eliminate the boundaries across financial consolidation, tax provisioning, close-process orchestration, and management reporting; or bring additional executive-level users into EPM processes using intuitive mobile access on tablets and smartphones. The possibilities are endless.
Optimized administration. Oracle has invested heavily in features that lower the skills bar and reduce the effort related to the administration and ongoing management of Oracle EPM Cloud applications. This is particularly important when addressing operational use cases outside of corporate finance, where having a full-time system administrator is less practical. It is also an important consideration when evaluating the long-term costs of administration.
Connecting operational planning with corporate planning. While many organizations recognize the need to address operational planning processes with formal EPM software, they have been constrained by the complexity of the on-premises deployment model. The cloud makes it much easier to streamline operational planning processes and align them with corporate financial planning. Over the last few years, the Oracle EPM Product Development team has been executing on a stated strategy of building specific offerings and capabilities for operational planning use cases, such as Strategic Workforce Planning for the HCM function, IT Financial Management (ITFM) for the IT function, and Quota and Territory Planning for the Sales function. This, combined with the fact that the cloud offers both lower cost of adoption and easier administration, makes it much more practical to connect the operational planning processes with corporate planning and forecasting.
Hybrid deployments. Oracle EPM Cloud allows you to leverage your investment in on-premises Hyperion software. The EPM Product Development team recognizes that a switch to the cloud cannot be accomplished overnight—there may be a period of many years where cloud and on-premises systems coexist. To this end, many features have been introduced to ensure that Oracle EPM Cloud can interoperate with existing on-premises software.
Figure A: "Businesses supported by agile finance leaders are considerably more likely to report positive revenue growth (89% vs. 63%) and increasing profitability (95% vs. 70%)." Source: "Agile Finance Revealed," AICPA, 2017
Becoming a more agile finance organization has substantial benefits. In fact, a growing body of evidence reveals that agile finance functions significantly outperform their peers in both top-line and bottom-line growth. Cloud-based finance solutions such as Oracle EPM Cloud are being adopted by leading corporate finance functions around the world for precisely these reasons.