CFOs with information technology oversight responsibilities must inevitably weigh the merits of moving some or all of their company’s IT infrastructure to the cloud. Cloud computing replaces many of the IT technology assets a company owns on-premises with a leased Software-as-a-Service (SaaS) model delivered over the Internet.
To be sure, there may be some psychological comfort in owning and keeping the technology on-premises. Nevertheless, companies can now get higher quality IT resources at less cost, as good or better IT security and customer privacy protections (resulting in less liability and risk exposure), and a much more efficient computing environment with the cloud model.
The cost drivers and tax advantages of cloud computing are obviously attractive to CFOs. What was once a capital expenditure becomes an operating expense. The pay-as-you-go model allows you to buy only what you need. And a company can launch major new IT initiatives and access the latest technologies without large upfront investments.
But cost drivers are perhaps the least important of the cloud’s many benefits. Where CFOs can make the biggest positive impact for their companies is in improving employee productivity through cloud computing.
When I took on my current CFO position Datawatch, a Chelmsford, Mass.-based software company, two years ago, my initial motivation for moving to the cloud was purely self-interest. The company lacked powerful forecasting capabilities, which was not ideal for a publicly traded company that needed to provide future visibility and guidance to stockholders. Also, closing the books each quarter took weeks longer than it should have because of antiquated IT and accounting systems. Having worked at two SaaS companies previously, I knew the Cloud could help solve both of my key priorities.
But as I looked around the company I saw how our IT infrastructure was holding our employees back as well. While we are a small micro-cap company, we have many national and international offices as well as external partners we work with frequently. Unless you worked at corporate headquarters, even simple things like file sharing, voice communications, and access to key applications were challenging to use with our legacy infrastructure. Many of our internal “customers” were frustrated because it unfairly hampered their ability to perform at their best.
Fast-forward to today, and every IT resource is equally available to everyone via a carefully structured SaaS strategy. Having our CRM, ERP, HR, communications and office applications instantly available to all wherever they may be has significantly improved our operational efficiencies, while also making a lot of our employees a whole lot happier.
Annual IT costs are now shrinking rather than rising. IT security and regulatory compliance is much simpler to achieve. We now enjoy robust forecasting capabilities. And my department has been able to shrink our accounting close process by more than two weeks.
But moving our entire IT infrastructure was not a simple undertaking. We experienced many fits and starts along the way. Given that experience, I’d like to share with other CFOs considering the move the five key principles – or potential pitfalls to watch out for – we learned when while making the transition.
- Make sure there is tolerance for cloud computing in the corporate culture. Skepticism and uncertainty among the C-suite and board are inevitable when major changes to mission-critical systems are proposed. It’s critical to get everyone’s buy-in for the cloud initiative to succeed. You’re going to need to prepare well to sell this. We encountered some push-back with our proposed cloud initiative. But once the critics were able see how the cloud would drive growth and value – and recognize how this initiative was being driven by the guy whose job it is to manage risk in the company – we were able to forge a consensus.
- Make sure your user base is technologically capable. Cloud computing is supposed to make IT simpler. But any technological change requires some degree of retraining. Since we’re a software company, our users are technologically savvy and were able to make the transition without any trouble. But a complete Cloud transition may not be a good fit for some businesses in which employees are not as technologically sophisticated. Some examples of such businesses may be retail chains, fast food markets, or manufacturing facilities.
- Vet the cloud provider – Putting your mission-critical systems in someone else’s hands requires finding a vendor you trust and can forge a long-term relationship with. That’s why it is critical to due diligence in checking the vendor’s references; assessing its financial health; evaluating its IT infrastructure for redundancy, uptime, and recovery; understanding its onboarding processes; and clearly establishing enforceable service-level agreements (SLAs).
- Make sure you have a reliable, robust “pipe” into your organization. Your cloud vendor’s uptime and reliability will be all for naught if your Internet connection goes down. Apply the same due diligence to your service provider as your cloud vendor, and make sure you have redundant, automatic failover connections to all your sites.
- Think globally. If your company competes globally, select a cloud vendor with international reach. Having to deal with multiple vendors serving different regions can introduce unnecessary complexities and uncertainties when problems do arise. You want one neck to choke; not several.
James Eliason is CFO of Datawatch Corp.