Guest blog by Christine Lau, Manager, Management Consulting and Advisory, KPMG Australia
“By 2016, at least 25% of enterprise finance organizations will move to the cloud for specific CPM processes, and many will use a hybrid approach through a combination of cloud and on-premises solutions.”1
This prediction from Gartner—along with the total cost of ownership for cloud-based solutions that’s an average of 77% less than that of on-premises software solutions—makes me believe that the corporate finance space is at a tipping point of finance transformation that clearly leads to the cloud.
So what does this actually mean for modern finance leaders and departments, and what are some of the trends that modern CFOs are starting to recognize?
Traditionally, less mature finance organizations gravitate towards on-premises spreadsheets to handle the majority of their financial budgeting and planning processes. While a spreadsheet is easy to use and does not incur additional cost, it is not an easy tool to scale up to share large amounts of data or perform complex calculations. It is difficult to use as a collaboration tool among teams, and it is not secure. Moreover, using spreadsheets alone to manage the entire business is manual, slow, and prone to errors.
Moving beyond spreadsheets, organizations have the option to implement proprietary enterprise systems. Although these applications have powerful features, they are often cobbled together through years of acquisitions and include technology that debuted decades ago. They are slow to deploy, costly to maintain, and notoriously complex to upgrade.
The limitations of on-premises spreadsheets and legacy enterprise applications have opened an opportunity for new solution providers to disrupt the market. With modern, cloud-based tools built for modern businesses, cloud-based solution providers are leading a transformation and opening us up to a new, next generation of finance applications. True cloud-based applications are built in the cloud, not cobbled together and then pushed into the cloud. They are comprehensive, full-featured, easy to use, and quick to deploy. All users are on the same software, and software upgrades are done automatically in hours instead of manually in weeks.
It’s no longer enough for finance teams to use on-premises spreadsheets as the centerpiece solution for all FP&A processes. Emailing sheets to multiple users to be modified and sent back is no longer sufficient or practical. Cloud solutions are collaborative and scalable, easily accessible from multiple computers, and are based on a simple dashboard that includes performance data across a variety of different business functions. They allow varying levels of access, so your precious 2017 predictions and calculations don’t disappear with the touch of a keystroke when you send them on for review.
So what is changing?
As the changes in business markets happen faster, the need becomes greater for finance organizations to provide more strategic analysis to guide the business in the right direction. Companies have to react more quickly and accurately, and they need modern financial tools that allow them to take fast action in real time using advanced analytics.
Simply put, modern finance tools enable finance teams to move from performance measurement and management reporting (simple profit and loss, key performance indicators, scorecards, and metrics), to unified and collaborative planning, budgeting, and forecasting.
There is a perception that, as part of this transformation, finance organizations are being asked to work strategically for the first time. In reality, finance has always been a strategic business function. Today’s challenge is to deliver even more value using more data, and to do so fast enough to keep pace with quick-changing, modern markets. The goal of the finance transformation that’s happening now is to align people, process, data, and technology to streamline planning, reporting, and analysis. With the right tools and proper execution, finance teams have the insight and ability to propel their organizations towards a more sustainable and profitable future.
¹ John E. Van Decker, Christopher Iervolino, “Leverage a Hybrid Approach to Corporate Performance Management,” Gartner, March 31, 2014.
The original version of this post appeared on the KPMG Australia Newsroom website.