The pursuit of “cloud first” and “ground to cloud” policies has swept up many organisations’ financial enterprise resource planning (ERP) applications without much thought as to how they are best optimised.
Fulfilling crucial functions, financial applications make the lives of CFOs and other finance staff much easier, by streamlining processes and reducing manual processing, as well as the opportunity for human error. They are often part of a larger ERP system, like Oracle E-Business Suite (EBS), and inter-operate with customer relationship management (CRM), supply chain management, human resource capital management, procurement, and dozens of other reporting applications.
According to Market.us, cloud adoption is set to rise, with the global accounting cloud market being projected to grow at a compound annual growth rate of 7.8% to 2029. But can CFOs derive more value from their back-office finance and accounting applications by hosting them on cloud infrastructure?
Why have organisations been so risk adverse?
Entrusting accounting and finance functions with cloud technology has traditionally been met with caution. A Sage survey of accountants found that 67% of respondents believed cloud computing would make their business more successful, but only a minority (37%) report using cloud-based applications.
Security and compliance are two big reasons organisations have expressed concern over moving their financial applications to cloud infrastructure. A company running its servers on-premise can retain control over security and the measures it has in place. The responsibility of prompt patch updates, firewall and antivirus software installations, and fending off cyber-attacks, lies with the in-house IT staff or a third-party managed service provider.
Changes to compliance regulations like IFRS16, and other legislature such as HMRC’s Furlough Scheme, also means that many CFOs want to retain a degree of control to customise and align their systems with these changes.
Additionally, ERP systems that contain scalable financial and accounting applications for large enterprises are high-ticket purchase items. The total cost of ownership occupies a vast amount of investment, which organisations are reluctant to add to or risk derailing. Implementing new cloud-based applications is like implementing a new product, and companies want to squeeze everything they possibly can out of their current IT investments.
As a result, ERP systems largely remain on-premise. For instance, Claremont’s latest managed services study found that 69% of organisation still host EBS on-premise.
Cloud hosting in generation COVID-19
Hosting financial applications on cloud infrastructure has a lot of generic benefits that can be met with a variety of platforms. Recent research from Aptum, found that 38% of businesses have scaled cloud infrastructure to meet new levels of demand during the pandemic. Scalability, remote working with ease, increased efficiency and switching from a CapEx model to an OpEx model are some of the most notable general benefits the research highlights. But cloud is somewhat of a ubiquitous term, and different platforms and hosting options offer organisations different benefits and challenges.
“Cloud” can mean Software-as-a-Service (SaaS). SaaS applications provide organisations with a standardised set of finance functions that can be accessed over the internet. With the rapid rise in remote working, SaaS has become increasingly popular across all industries and functions.
However, most SaaS options don’t offer the flexibility that many complex or multi-national organisations require for their finance and accounting application sets. Procuring SaaS and migrating workloads to a SaaS platform can also be an arduous and expensive process, especially without third-party expertise.
IaaS vs PaaS
“Cloud” can also mean Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) where organisations have more flexibility and can make customisations to their finance applications to keep up with legislation and security patching. Businesses can also move their finance and accounting applications that are traditionally hosted on-premise, such as Oracle Financials on EBS, to both platforms without having to undergo a complete system overhaul.
In an IaaS environment, an organisation rents the underlying infrastructure (e.g., the data centre and servers) from a Cloud Hosting Provider, but the business runs its own software. Organisations running Oracle Financials on IaaS cloud will therefore need in-house expertise, or to engage a third party, to deploy and manage the required systems. Additionally, the migration process will need to be managed closely. A “lift and shift” approach will only change the location of IT and will not optimise the performance of finance applications. This can add substantially to the total cost of ownership.
In a Platform-as-a-Service environment, the Cloud Hosting Provider maintains control over the virtualisation software and hardware. Consequentially, all servers, storage and networking can be managed as part of the cloud package. This reduces the need for customers to manage the solution, freeing up time and resources.
For Oracle Cloud Infrastructure there are many organisations that can provide further wrap around services, as highlighted in Gartner’s 2021 Market Guide for Oracle Cloud Infrastructure Professional and Managed Services.
The Gartner report also asserts that organisations have evolved from simply “cloud-first” to the adoption of “cloud right/smart” strategies, looking for best-in-class providers to aid their transformation into a competitive hybrid cloud market.
Community cloud is an example of this, which allows organisations to customise their applications and enjoy the service benefits that are typically associated with PaaS platforms. The bespoke skill sets the cloud hosting provider possesses in a community cloud and the specific infrastructure that is deployed are where financial applications can be optimised.
A community cloud that hosts Oracle Financials, for example, will be designed with that application in mind, and built on Oracle’s own virtualisation architecture. The level of support can then be tailored to the customer’s needs with a variety of services available. The end-user in a finance department can then enjoy a customised, fully managed, and up to date solution that on the surface replicates the simplicity of SaaS.
Additionally, a full-service wrapper, scalable options for compute and storage resource, and lower licensing costs can lower the total cost of ownership in a community cloud.
Delivering a complex application like Oracle Financials and providing a seamless experience to the end-user in finance, requires a lot of back-office IT dedication and planning. Similar, to a Formula 1 car, it requires a team of expert engineers, each with specific skillsets to win the race. Choosing the right cloud hosting provider, the right team of engineers is key to optimising finance and accounting applications.