by Tom Adams, managing director, Americas Region, HP Financial Services
Cloud computing has the potential to dramatically change the IT and business landscape. However, the journey to the cloud is not an overnight trip. For most large organizations, the move to cloud will be an evolutionary process not a revolutionary phenomenon. This evolutionary journey requires a proactive and thoughtful approach that combines a technology and financial roadmap.
Business benefits of cloud are significant
The business benefits of cloud computing can be significant. However, as with any truly disruptive technology, there are a number of pitfalls (both technical and financial) that must be avoided. These factors create a necessity for CFOs and CIOs to work collaboratively on developing a strategic roadmap to cloud that helps uncover these pitfalls. Having a strategic plan up-front will be critical for enterprises to maximize the benefits and minimizing the risks of cloud.
The potential business and financial benefits of cloud computing are great — reduced cost, increased speed, flexibility and instant access to innovation, to name a few. However, CFOs and CIOs must understand how to work together to build an effective roadmap to attain these benefits.
Understanding the cost of cloud
Since the costs of cloud can vary depending upon the cloud strategy, it is important for CFOs and CIOs to be in lock-step as the enterprise-wide move to cloud gets underway. Many companies will want to adopt cloud in a manner that allows them to continue to maximize investments in their existing infrastructure. This means strategically integrating a customized combination of public, private and managed cloud solutions with existing IT. CFOs and CIOs will need to work together to set a budget that makes sense for their specific organization and then work against it.
However, it’s not just about the initial costs of cloud. CFOs also need to understand how to balance the subscription-based costs of cloud services with the cost of onsite IT maintenance. The CIO can provide insight into the service level agreements (SLA) costs and technology roadmap needed to migrate legacy systems as they evolve to cloud based services.
Understanding financial implications
We’ve all heard time and again that cloud can significantly reduce a company’s capex to create a more agile business environment. While many consider this to be a good thing, CFO’s need to understand that any capex reduction cloud presents may also come with an increased opex expense that can present challenges of its own.
The CFO will need the CIO’s insight to accurately anticipate any such change. Because the CIO will be closely monitoring the company’s evolution to cloud, they will be in a position to advise the CFO on any potential shifts in costs and cash flow. This is critical for the CFO who needs to provide Wall Street with accurate forecasts on the company’s capital and operating expenses on a quarterly basis.
Anticipating changes in compliance and data security
As cloud solutions are selected and deployed within an enterprise, CFOs will need to establish new processes and policies to ensure that a cloud service provider meets all industry standards and security requirements. In some cases, an audit may be required to understand if the data associated with a cloud solution resides with the service provider or if it has been further outsourced or subcontracted to third-parties.
Closely linked to the issue of compliance, is the issue of data security. For many CFOs and CIOs this is the primary concern associated with moving to a cloud-based solution provided by a third party. In addition, different types of cloud solutions — public, private and hybrid — offer different levels of security protection.
Thoughtfully determining which business applications are ready for “public” cloud solutions (operated from a platform used by multiple businesses) and those that require more “private” or dedicated operation is an important area for CFO and CIO collaboration.
Managing the threat of “Shadow IT”
The emergence of cloud solutions has made technology much more accessible to users outside of the IT department. Applications and solutions that were previously only accessible through IT specialists who had to build and operate them, are potentially now available to anyone in an organization with access to a credit card. For the business side of an enterprise, cloud solutions may offer a quick way around the approval process and complexity of receiving access to applications from the IT department.
For the CFO, however, this represents a challenge that could undermine years of IT investments and open them up to potential financial reporting inaccuracies. As empowering as it may seem for functional business leaders to “procure” their own IT solutions, CFOs need to work with their CIO to ensure that right processes and models are put in place to fully assess investment choices and to ensure optimal realization of their value.
This new reality will inevitably lead to an evolution in the role of the IT department that will require even tighter alignment between the CIO and the CFO.
With a technical understanding of the data and infrastructure requirements needed, the CIO can help the CFO understand the associated risks associated with cloud and how they will be able to address likely CFO concerns such as data governance, compliance and required investment. Together the CIO and CFO can both raise their profile with the CEO and executive board by presenting a united front, and offering their shared insights on the business benefits of cloud.
Tom Adams is the managing director of HP Financial Services, Americas Region. He works for the Americas region which is comprised of the United States, Canada, Latin America and the Caribbean. Mr. Adams is responsible for business direction and management of sales, credit, operations, customer relationships and portfolio management. Prior to his current position, he served as the CFO for HP Financial Services with worldwide responsibility for business and tax planning, treasury, financial reporting, and risk and portfolio management. Mr. Adams is a graduate of Rutgers University with a degree in accounting and successfully completed the CPA exam.