Just over three years ago I first heard the term “SaaS” and “Cloud” being used. I was working on a shared Services project for a pharmaceutical company. One of the deliverables was to select an Enterprise Resource Planning (ERP) finance system for the regional Shared Service Centre. The initial assessment suggested it would take circa 5 years to develop and implement an ERP system in this region. Following a discussion with an IT colleague I was working with, he introduced the “SaaS” concept to me. SaaS is the acronym of Software as a Service. It is a delivery model in which software and associated data are centrally hosted by SaaS vendors on the Cloud and users can access the data through web browser and pay a subscription fee to the vendor. The main risk for most organisations is losing the control of data security.
For anyone whom this concept is new to, this seemed a bit alien! Rather than buying a car outright, just lease it. As a risk-averse finance person, I felt very sceptical about this solution. I imagined that risk- aware CFOs would be reluctant to trust a stranger to manage their organisation’s information. Asking them to adopt “SaaS” could be just like asking for sleepless nights! CFOs were conventionally labelled the last adopter for SaaS. I’d like to look at some of the reasons for this and ask if there is any prospect of SaaS making inroads into the realm of the enterprise CFO.
Even if a modern Finance Department is more focused on the roles of Business Partner/ catalyst, the “stewardship” role is still paramount for most Financial Chiefs in order to provide control over assets, ensure compliance is met and to mitigate risks. Therefore, the biggest concern for Financial Chiefs is around maintaining the security, availability and reliability of the financial data that relates to suppliers, employees and customers’ information.
Change has been brewing over the last few years. Many IT providers have moved from a stage of initial development to fast innovation for Cloud Computing. Now Cloud vendors can offer a portfolio of delivery models which includes Public Clouds, Private Clouds and Hybrid Clouds. The delivery models have become more legitimate, which has convinced CFOs that the SaaS Financial Management software is as secure as software running on their own in-house servers.
As the Cloud environment has matured, CFOs have warmed to Cloud computing. A CFO survey conducted by The CFO Publishing LLC in May 2012 revealed that 76% of respondents said that they believe Cloud Computing would be important for their company’s success in the next 12 to 18 months.
The CFOs’ attitude change is not only influenced by developments in Cloud but also ongoing internal pressure on cost reduction. If the SaaS Finance software can transform finance processes to be more automatic, information access to be simpler, individuals to be more productive and business decisions to be more informed, the improvement of efficiency will eventually lead to a lower cost of Finance. I believe the CFOs will feel very enthusiastic for the SaaS Finance Software.
In most cases, the overall IT budget of an organisation will need to be approved by finance. The eventual IT expense is controlled by the CFO instead of the CIO. If a healthy Cash Flow is generated by removing the traditional IT investment in infrastructure, software and staff, and adding “Cloud subscription” to P&L, easing the financial strain, why would the CFO not give the “green” light to Cloud?
I forecast a shift in attitudes for SaaS in Finance function from “out of the question” to “let’s see what can work”. The combination of increased budget squeezing, experience gained from other SaaS projects in the organisation and an increase in big vendor offerings for finance will compel many CFOs to evaluate SaaS in 2014. Concerns around data security may still prevent significant adoption for core enterprise financials but we are now seeing growth in other previously “out of bounds” functions, for example Human Capital Management (HCM). In addition alternative delivery models such as hybrid cloud and private cloud may sufficiently mitigate the risks associated with cloud computing for Finance. Robust due diligence and evaluation of solutions, architectures and vendors will be a key of vital importance.