Sunday, October 3, 2010

6 questions CFO’s should ask about cloud computing

1. What is the right strategy for our company? 
Cloud computing is such a broad term; just because you hear the CIO say cloud computing does not mean that her definition matches yours.  There are multiple types of cloud offerings: infrastructure as a service (e.g., disk drive storage in the cloud), platform as a service (allows the ability to build applications using someone else's infrastructure) and applications as a service (salesforce.com).  With cloud computing services just now reaching 1st grade, it will be a while before the industry sorts out the winning business models.  Utilize cloud computing if there is a clear ROI or it enables your business strategy in a way that nothing else will. 

Open up any trade magazine and you are bound to see an article on cloud computing.  Do not buy into the hype that cloud computing always equals the best ROI.  The best approach is to engage the organization in a dialogue that is centered on the business problem to be solved: lower cost of IT for Finance; improve speed to market for shared service for accounting functions, etc.  Require that the CIO come up with a list of options and review the hard and soft benefits and costs associated with each.  If cloud computing comes out on top, so be it. 

Alternatively, if your accounting staff is touting cloud computing as a faster path to market, take caution.  The last thing you want to do is to create a shadow IT function within your organization: Accounting and Finance owning IT functions outside of the span of IT control.  Cloud computing is making this easier to do than ever before.  As a leader of the business, you want to be seen as an enabler of the business, not someone who creates silos.

2. What solutions are available for Finance and Accounting functions?
Consider the applications that support the finance and accounting function; to name a few:
·   ERP
·   General Leger
·   Planning software
·   Reconciliation software

Depending the size of your organization, there may or may not be a cloud strategy suitable for your organization.  While there are cloud based ERP solutions, do they have the history that the major ERP players have?  If your ERP solution is in need of an upgrade, can you create a strategy that gets you from your current state to a future cloud state with minimal business disruption.  Consider the migration of your historical product data that would need to be migrated.  The sweet spot for cloud computing for F&A might be companies that don't have an existing software solution and are meeting their processing needs with Excel and manpower. 

3. Can the solution scale to meet my business needs?
The key benefit of cloud computing is being able to purchase as much as you need, only when you need it.  Depending on the solution you need, a formal RFP may or may not be in order.  In either case, you do want to feel comfortable that the vendor can provide for your firm. The essential question: Can the solution scale up or down to match your business needs?  And, what is the pricing structure?  If you are in acquisition mode, can the vendor support 2x the user base from your company overnight?  If you are in divestiture mode, does the pricing and contract structure allow you to de-provision users quickly? 

4. How does cloud computing support my shared service finance function?
Are you considering consolidating any of your Finance and Accounting functions into a shared service center?  This type of project might be a good catalyst to pursue a cloud solution in parallel.  However, as CFO, you should also ask about plans to make sure the data is integrated between the shared service center and the home office.  If you are planning on using a cloud solution for a HR shared service center, how will this data interface with the general ledger software?  What other systems rely on HR data and how will they be integrated? 

5. How do I audit a cloud computing solution?
Existing regulatory requirements were created at a time (not that long ago by the way) when almost all data existed on your network.  While some facilities exist, such as SAS70, that may be used to understand how the vendor has approached security, none are specifically directed at cloud computing.  As one who signs off on the financial control environment, the CFO needs assurance that customer and company data are being handled appropriately.  Beyond financial reporting, cloud computing introduces additional issues, such as jurisdiction (is your data being stored in a location that is allowed by regulatores and a location that would be approved by shareholders?).  These types of issues need to be feed into your enterprise risk management assessment as well.

6. What makes this different?
Vendors have been providing some type of outsourced IT for a long time.  Outsourced mainframe environments are nothing new.  In a way, cloud computing is the new virtualization, which was the new client server, which was the new mainframe.  With all the hype, a sage CFO will ask "why is this different".  Challenging your peers to come up with a value statement on “why” will keep everyone grounded in what is important: growing the business.



No comments:

Post a Comment