Cloud computing special: Cloud nine

Cloud computing is a term that is bandied about without a clear outline of what the term means for business, let alone how it can bring real benefits. For finance directors it can seem like the same arguments of larger IT budgets today to “guarantee” future system efficiencies that never quite materialise before the next “big thing”. However, in this case the budget requests are not for upfront investment in expensive hardware and software but, instead, for clearly defined contracts that will be instantly familiar to FDs used to negotiating recurring costs for professional services.

For the finance function, the application of cloud computing is all about control. It allows FDs more control over what the organisation pays for and ensures that the company only pays for what it uses. Cloud computing also allows FDs control over who can use what and when. Added to this, cloud computing enables financial departments to have more control over the balance between operating spend and capital spend. Expensive applications and infrastructure don’t need to be on the balance sheet, which is something that is highly relevant in today’s cash-strapped environment.

But they should also keep in mind that it can be difficult to have control over where data is physically and that limits its application. It can also mean that, by not owning the assets, there is limited leverage when things go wrong. It is vital when reviewing cloud computing options that the finance director has up-front discussions to ensure that data storage can be tracked and complies with financial compliance regulations.

Cloud computing can bring two key benefits for senior finance professionals: An increased focus on business value drivers; and increased control over investments and expenditure.

What’s the value?
Most financial processes are standardised and not core to the business offering. Cloud computing offers a perfect way to outsource these processes, cut costs and focus on the key business value drivers.

FDs can use cloud computing to develop role-based access where users can log in anywhere and their desktop always looks the same. This will also allow FDs to monitor who is using what, when they are using certain applications or technology tools, as well as how much a specific tool is being used. As a result, the FD will have better insight into which tools are delivering value to the organisation as well as enabling the company to only pay for what it uses.

A constant challenge for finance departments is ensuring staff have the correct qualifications and skills to manage key processes. Cloud computing provides further assistance to help identify which processes are core to the business, find which skill sets are critical and focus on developing people rather than undifferentiated projects.

Stay in control
Cloud computing provides FDs with more information on the inventory of what is being used and how frequently. The “cloud” allows FDs to easily benchmark investments, as well as provide the necessary insight for making decisions. For instance, it only takes a few clicks to select the right options for, say, Google’s services to obtain an instant quote. This provides a useful negotiating tool for third party contracts or when challenging budgets for in- house IT projects.

In effect, cloud computing enables finance departments to drive waste out
of the business ­ taking investments away from IT projects that don’t drive better performance as well as removing technology that nobody uses.

Having more control over expenditure is always good for FDs, especially in the downturn and particularly as capital expenditure is limited. In the current climate, FDs are looking to squeeze every business unit to ensure they can retain as much cash as possible. They should be aware of the cloud computing options available to them in order to challenge any request to invest.

Although cloud computing is being presented as something revolutionary, the idea has been around for quite a while under different guises, such as “IT as a utility”. Cloud is simply a new term to communicate the huge surge in capacity that organisations such as Google and Amazon have created and that other organisations can take advantage of via the internet. There is a clear call to action for FDs to re-learn their mental model of how an organisation builds IT capacity. Traditional thinking proposes that the IT function exists to build capabilities for the organisation, yet FDs should see the IT function as a more of broker.

With the increased transparency that cloud computing brings to what IT delivers and costs, FDs will be better equipped to identify the performance and business value projects and technology delivers ­ and in turn save money and drive higher ROI.

Ultimately, the finance department will be leading the way in moving non-core services out of the business to focus on business competencies ­ allowing the business to specialise, which is a key enabler of growth.

David Doyle is vice president, head of finance and employee transformation consulting for Capgemini UK

WHAT IS THE CLOUD?

System in the cloud: An outsourced application which is maintained and hosted outside of the organisation e.g. Salesforce.com.

Proximity-latency-performance: The further away the service and the more data exchanged, the higher the risk that there is not enough bandwidth for an acceptable service level.

Infrastructure in the cloud: Processing and storage capacity which is outside of the organisation e.g. IBM Blue Cloud.

“Inventorisation”: The ability to monitor all applications and services, who uses them, when and how long for.

Carrier grade cloud: Cloud Computing but with guaranteed service levels that might use for critical business applications.

The cloud of clouds: Where the cloud is no longer proprietary e.g. an IBM, Google or Amazon cloud but is standardised in the way that the web is now.

CLOUD BUSTING

“Cloud computing is always cheaper”

This is not true – managing a third party provider and the cost associated with being able to exit a partnership can mean the cloud is not the cheapest option. Plus the benefits will vary by different business areas and the type of requirement for IT.

“The cloud raises some security questions”

You should not accept security “as-is” from the cloud provider and have more say about, or at least awareness of, where the data is stored. This is particularly important for financial directors, as the physical whereabouts of data is vital to comply with regulations e.g. Is the data being stored outside the EU?