momentum management shifting · financial management momentum shifting to the cloud executive...
TRANSCRIPT
executive report
MomentumShiftingto theCloud
sponsored by
FINANCIAL MANAGEMENT
1
Financial Management
Momentum Shifting to the Cloud
Executive Summary
David Pleasance, senior partner at Deloitte Consulting LLP and a member of FEI’s Committee on
Finance & IT (CFIT), believes the shift to digitally-enabled business models is both a CFO issue and a
CFO opportunity. He says, “First, CFOs are the stewards of corporate value. Second, they can act as
catalysts of business model change. And most importantly, digital transformation provides CFOs
with a significant opportunity to be leaders and strategists.”
Over the past several years, a consensus has grown among CFOs and IT executives about the
viability of Cloud-based finance systems. After successfully implementing Cloud-based functions
such as e-mail, CRM, human capital management, expenses, procurement, and collaboration
applications, increasing numbers of organizations are moving core finance systems to Cloud-based,
Software-as-a-Service (SaaS) solutions.
This report provides an overview of the current state of legacy finance systems and insights behind
the increasing shift to the Cloud.
The Postmodern ERP Era
Changing Times, Changing Business: Why Finance Management is Moving to Cloud 1, a research
report released by Saugatuck Technology in June 2013 based on a survey of 270 financial and IT
executives, concluded that:
Finance needs more and better ways to deliver value to the enterprise;
Legacy finance systems are seen by both finance and IT leaders as unable to keep pace with
current business demands, let alone cost-effectively adapt to expected market, compliance,
usage, technology and management changes;
Consideration and use of Cloud for core finance is growing much faster than had been
previously seen; and
2
Finance and IT leaders have clear expectations regarding how Cloud can and does deliver
value – and what Cloud solutions and providers must deliver.
These insights, combined with the ever-changing business landscape, have driven the need for a
new breed of Cloud-based finance technologies that deliver data in real-time, are more agile, mobile
and provide a modern user experience. Cloud-based financial management applications are
increasingly replacing on-premises financials. In November 2014, Workday engaged Saugatuck
Technology to execute a “pulse” web survey to gauge levels of change regarding consideration,
adoption, and value of Cloud-based financial management applications.2 Over 200 Finance and IT
executives participated in this survey.
The survey results indicate the climate for financial management systems change continues to
improve. Over 60 percent of firms surveyed are unhappy with the current financial management
systems. Over half (57 percent) of firms surveyed are in the process of, or planning to, replace their
legacy finance systems. Only four percent want to change, but lack the budget to replace their
existing systems.
Forces Behind the Shift to the Cloud
In their latest research, Saugatuck refers to a new Master Architecture (a.k.a. Postmodern ERP) that
has emerged to address the needs of today’s finance organizations. 3
Saugatuck describes three sets of factors driving the need and desire for change: 1
Finance must deliver more value to the enterprise. Executives overwhelmingly indicated
that finance does not deliver up to its potential as a strategic enterprise asset. They believe
Indicated they are not satisfied with current financial
management systems and the majority are in the process
of, or planning to, replace their legacy finance systems. 2 60%
3
that the value of finance depends on providing useful business data and guidance; and that
existing systems limit its ability to deliver this value.
Finance systems are not up to today’s needs. When asked how, where and why existing
systems hindered finance’s abilities, Saugatuck found that systems are too fragmented,
disassociated, and expensive to maintain or upgrade. They lack speed and timely access to
financial and performance information, which results in a lack of visibility and insights to
drive decision-making. Recent innovations in finance systems from true Cloud solutions
include in-memory computing technology and real-time consolidation at their core which
can significantly improve the speed of information available to finance and business decision
makers.
Meanwhile, the business changes. Saugatuck found that significant business change is
closely correlated to the consideration of and switching to Cloud-based systems. The relative
frequency of change drives most enterprise Finance groups to rethink what they have, and
how they use it.
In addition, finance is being asked to rise above traditional transaction processing and play a more
strategic role to the business supporting activities such as performance monitoring, strategic
decision making and identifying revenue growth opportunities. Yet there are considerable gaps
between these finance priorities and the effectiveness of today’s systems to support such activities.
The chart below illustrates these “effectiveness gaps” as identified by Saugatuck’s study, further
illustrating the need for modern finance technologies.
“Driving demand is not only the power of the new Master Architecture to deliver better,
cheaper and faster outcomes – and addressing the highly fragmented nature of today’s
finance system deployments – but enabling the finance function to provide greater agility,
flexibility and value to the business.” 3
4
Source: Saugatuck Technology’s 2014 CFO / CIO Survey: Cloud Financials – The Third Wave Emerges, December 2014. 3
The largest gaps exist for planning, budgeting and forecasting; strategic decision making, managing
risk, and improving revenue growth, indicating a significant opportunity to improve the finance
function. A recent 2015 report from KPMG states that “while CFOs might already recognize the need
to create enterprise analytics and unlock critical business insights from their data, this is often easier
said than done. Insights generally are buried in disconnected, aging enterprise resource planning
(ERP) platforms – replete with bolt-on customizations and manual workarounds – struggling to keep
pace with the business.” 4
0% 20% 40% 60% 80% 100%
Managing shareholder information / relations
Processing transactions
Drive continuous enterprise cost reduction
Improve revenue growth opportunity …
Managing / mitigate business risk
Managing compliance / internal controls
Providing input for strategic decision making
Monitoring / measuring performance
Effective planning, budgeting and forecasting
The "Effectiveness Gaps" Between Finance Priorities and System Effectiveness
Relative Priority Relative System Effectiveness
5
Reimagining Finance
Recent studies among senior-level finance executives show that the Cloud has the most
transformative potential for their organizations. KPMG suggests taking a proactive approach: “Now
is the time to reinvent the finance department, but organizations often lack the incentive to break
the vicious cycle of finance merely meeting expectations.”4
By leveraging the Cloud, many industry leaders are already realizing better business outcomes:
Recommendations
Here are a few recommendations to prepare your finance organization for the shift to the Cloud.
First, familiarize yourself with the new breed of Cloud-based systems for core financial management
and the evolving landscape of Postmodern ERP technologies. Gain an understanding of how modern
financial management applications can close effectiveness gaps, and allow finance to be more
efficient and strategic. Second, formulate a plan to replace aging finance systems when catalysts for
change exist within your business. Current systems may no longer be able to adapt quickly enough
to meet changing business requirements (e.g. new compliance mandates, new processes). If your
company is experiencing significant growth (i.e. expanding into global markets, going public, adding
new business entities or product lines, etc.), this may be another compelling reason to consider
Real time access to data for smarter
decisions.
Improved agility to keep up with
business changes.
Simplified cost structure, moving
capital expenditures to operating
expenses.
Automated governance, risk and
compliance.
Instant software updates.
6
making a switch to the Cloud. Third, follow best practices for success. In The Cloud How-to Guide 5,
FERF offers finance executives seven steps to success to effectively move core business operations
to the Cloud:
Evaluate your existing and future business process needs
Define your requirements
Define the vendor selection process
Identify key security and compliance issues
Make the decision
Negotiate a favorable contract
Organize and plan the implementation effort
Citations
1. Changing Times, Changing Business: Why Finance Management is Moving to Cloud, June
2013, Saugatuck Technology.
2. Cloud Business Software - Finance Pulse Survey, November 2014, Saugatuck Technology and
Workday.
3. CFO - CIO Survey: Cloud Financials – The Third Wave Emerges!, December 2014, Saugatuck
Technology.
4. The Finance Organization of the Future: How Cloud is Driving Finance Transformation, 2015,
KPMG.
5. The Cloud How-to Guide – Seven Steps to Success, 2014, Financial Executives Research
Foundation (FERF).
7
About this Report
“Stamford, CT-based Saugatuck Technology, an ISG business – as a research partner of FERF – has
authorized FERF to leverage some of its intellectual property for purposes of this paper."
About the Sponsor – Workday Workday is a leading provider of enterprise cloud applications for finance and human resources. Founded in 2005, Workday delivers financial management, human capital management and analytics applications designed for the world's largest companies, educational institutions and government agencies. Hundreds of organizations, ranging from medium-sized businesses to Fortune 50 enterprises, have selected Workday.
About Financial Executives Research Foundation, Inc. (FERF) FERF is the non-profit 501(c)(3) research affiliate of FEI. FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and non-members alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals. This and more than 140 other Research Foundation publications can be ordered by logging onto http://www.ferf.org. Questions about FERF can be directed to [email protected].
The views set forth in this publication are those of the author and do not necessarily represent those of the FERF Board as a whole, individual trustees, employees, or the members of the Research Committee. FERF shall be held harmless against any claims, demands, suits, damages, injuries, costs, or expenses of any kind or nature whatsoever, except such liabilities as may result solely from misconduct or improper performance by the Foundation or any of its representatives.
Copyright © 2015 by Financial Executives Research Foundation, Inc.
All rights reserved. No part of this publication may be reproduced in any form or by any means without
written permission from the publisher.
International Standard Book Number: 978-1-61509-164-5. Printed in the United States of America
First Publication
Authorization to photocopy items for internal or personal use, or the internal or personal use of specific
clients, is granted by Financial Executives Research Foundation, Inc., provided that an appropriate fee is
paid to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. Fee inquiries can be
directed to Copyright Clearance Center at 978-750-8400. For further information, please check Copyright
Clearance Center online at: http://www.copyright.com.
© Fishbones / iStock / Thinkstock
Financial Executives Research Foundation (FERF) gratefully acknowledges these companies for their support and generosity
PLATINUM MAJOR GIFT | $50,000 + Exxon Mobil Corporation Microsoft Corporation
GOLD PRESIDENT’S CIRCLE | $10,000 - $14,999
Cisco Systems, Inc. Dow Chemical Company
General Electric Co Wells Fargo & Company
SILVER PRESIDENT’S CIRCLE | $5,000 - $9,999
Accenture LLP Apple, Inc.
The Boeing Company Comcast Corporation Corning Incorporated
Cummins Inc Dell, Inc.
DuPont Eli Lilly and Company
GM Foundation Halliburton
IBM Corporation
Johnson & Johnson Lockheed Martin Corp. McDonald’s Corporation Medtronic, Inc. MetLife PepsiCo, Inc. Pfizer Inc. Procter & Gamble Co. Tenneco Tyco International Wal-Mart Stores, Inc
GOLD CORPORATE LEADERSHIP - $2,500 - $4,999
Aetna, Inc Intel Corporation
Raytheon, Inc.
Select Medical Corp. Time Warner, Inc. The Walt Disney Company
SILVER CORPORATE LEADERSHIP - $1,000 - $2,499 American Financial Group, Inc.
Barnes Group, Inc. Edward Jones
Graham Holdings J.M. Smucker Company
McCormick & Company, Inc. OMNOVA Solutions, Inc. Paychex Scripps Networks Interactive, Inc. Trinity Industries, Inc.