When Will Finance Fully Embrace the Cloud?
By John O’Rourke, Vice President, Host Analytics
For years now, there’s been much speculation on when finance would move fully to the cloud. The conversation is heating up again as investments in SaaS are growing by more than 20 percent per year, according to Forrester Research. Based on insight from Forrester, some of the strongest drivers for this are:
- The need for business agility
- The speed of implementing software
- The ability to focus valuable resources on other critical projects
- The ability to reduce costs
- The ability to deliver new functionality fast
- The ability to regulate and automate how enterprise software is upgraded
- The ability to support innovations with advanced capabilities
- The ability to do away with large, upfront capital expenses and shift those to lower monthly operational expenses.
The research showsthat finance was among the last to explore, much less embrace, cloud-based platforms. Their biggest concerns being performance and security. This has changed as more organizations have proven success with cloud-based applications for CRM, HCM and now Finance. And the adoption has accelerated as organizations have realized the advantages of cloud-based EPM solutions over spreadsheets and legacy on-premises solutions.
A recent study by Aberdeen showed that customers who adopted cloud-based budgeting and planning applications achieve greater benefits than those using on-premises solutions. This includes better access to real-time business information, better collaboration and coordination across departments, and better self-service reporting capabilities.
Achieving those benefits has not been lost on finance pros, which is why there’s no lack of options when it comes to cloud-based EPM solutions. Finding the right fit for your organization will vary by the size of the organization and finance team, culture, and business needs.
When it comes to evaluating cloud-based EPM solutions, there are three non-negotiables that every organization should consider. First is the ability to provide strong internal and external reporting for historical perspectives. Second is delivering valuable perspectives on the present. Third is exemplary planning, budgeting, forecasting, and modeling to inform future decisions.
As CFOs rely more on cloud-based EPM to go beyond the limits of traditional spreadsheets and on-premises solutions, and provide a more strategic way to align the business, they are steadily moving more of the finance function to the cloud. Yet there’s still a healthy amount of software that remains on-premises. The bigger question remains, when will finance move fully to the cloud, if ever?
The answers vary from immediately, to soon, to never. A recent survey of finance pros conducted by Host Analytics and Radius Global Market Research found that 41 percent of respondents currently have a cloud-based EPM solution, 29 percent are evaluating them, 23 percent plan to move to the cloud in the next few years, five percent are planning to move to the cloud in the next two to three years, and only two percent reportedly have no intentions to move to the cloud. This means that at least two-thirds of businesses will have a cloud-based EPM solution in place by the year 2020. The key drivers being the benefits cited above as well as flexibility, lower total cost of ownership, and autonomy from IT.
Still, while EPM cloud adoption is steadily on the rise, the hybrid model, with cloud and on-premises applications coexisting, will continue to be in place for the foreseeable future. What’s more likely is that the balance between hybrid and full cloud will continue to shift with CFOs relying more on cloud-based solutions. There may continue to be some on premises solutions in place in certain industries and companies that are under strict privacy and compliance requirements. But a recent Gartner Research report, “Finance Moving to the Cloud: The Steps to Take and The Benefits You Can Expect,” cites that the cloud will become the dominant model across all areas of financial management applications by 2025.
While full cloud will not be fully embraced in 2017, finance professionals are moving closer to it though it’s not likely to ever reach 100 percent.
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