With just under half the finance executives in a CFO Publishing survey identifying lack of flexibility as the system-related issue that most interferes with performance, and a similar number naming increased flexibility as the greatest perceived benefit of cloud financial management systems, you have to wonder: What's the holdup?
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How could more than half of the 202 survey respondents be on the fence about cloud-based financial management systems or flat out opposed? According to Laurie Wood, director of product marketing for financials at survey sponsor Workday, a Pleasanton, Calif.-based vendor of cloud HR and finance software, the hesitance makes sense, and is reflected in other studies. Software as a Service (SaaS) for finance is much earlier in its development than in other business areas, like sales and HR. But like their colleagues, Wood said, finance executives are bound to take to the cloud eventually.
SaaS financial management software adoption to climb
Reviewing the survey, Wood said the financial management systems at the companies surveyed were on average 10-15 years old, and upgrade cycles at over half of respondents' organizations ranged from every five years to more than 10 years.
Given the average age, it wasn't surprising that feedback about current systems was overwhelmingly negative. Besides systems being inflexible, Wood relayed user comments about costly upgrades, time-consuming manual workarounds and slow adaptability to change throughout the discussion. But however dissatisfied with legacy systems these finance executives may be, the cloud adoption statistic made it clear that they aren't jumping to SaaS to solve their problems.
Wood put the split attitude on cloud-based financial systems into perspective by citing research from Saugatuck Technology Inc., a consultancy based in Westport, Conn. "This divisiveness is aligned with the maturity cycle of the financial cloud segment, [but] we see an upward trajectory," she said. "[In 2012], the cloud adoption rate was only 25% -- and that was aligned with the amount of CFOs who said they would consider cloud at that time for their business."
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Data security issues arising from the use of SaaS products often prevent CFOs from taking the leap, and Mark Peek, Workday's CFO, chimed in to offer his take: "With services like ADP and Salesforce.com, you're providing very valuable data," he said. "I would argue that your sales lead and your HR information is more valuable than what's in the general ledger."
Peek's history puts him in a unique position to provide advice to CFOs wary of the cloud, as he was a Workday and Salesforce.com customer before he was an employee. Peek was previously CFO at VMware, a virtualization software vendor based in Palo Alto, Calif., where he oversaw implementation of the new human capital management (HCM) and customer relationship management systems.
When Peek began the search for VMware's new HR system, he started by reviewing on-premises products, but since he reasoned that VMware was facilitating cloud computing, he eventually decided on Workday's cloud-based HCM, which required a shift in mindset.
"I had the preconceived notion that you hand over the keys and they run things," he said. "Cloud computing particularly in those deployment stages isn't necessarily a silver bullet -- there is work and planning to be done just like [with] any other enterprise application."
When and how CFOs consider system replacement
As for the factors that would drive finance executives to switch financial management systems, Wood said the top response was to "reduce cost/increase efficiency." Other answers included changing regulatory requirements, technology advancements and organizational growth.
When approaching a system replacement, 65% of respondents said they took a long-term view, and Wood illustrated this point with a user anecdote. "A [large] financial services firm we talked to was experiencing rapid growth, and according to the vice president, the firm [wanted] to 'future proof' its financial system," she said. "They asked themselves what technology was going to be around in 2020, and what was going to be in transition in 2013 -- and they wanted to avoid those transition spots." The company ultimately decided to implement a cloud-based financial management system, she said.
The consumerization of technology purchasing also came up during the webinar, with one attendee asking how to keep the relationship between finance and IT positive in a time of changing roles. "For the IT organization, it's a very big culture shift," Peek said. "Finance has traditionally been an important aspect of change management; help the IT organization manage this change."
And far from painting SaaS as a panacea, Peek said a major benefit of implementing cloud-based systems is to free up time and money to focus on organization-specific technology initiatives.
"Your HR or financial system doesn't differentiate you from your competition," he said. "So to the extent that you can take those applications off your plate and focus your IT resources on applications that make real differences in the productivity and profitability of your business, the more of a competitive advantage it will have," he said.
Emma Snider is the associate site editor for SearchFinancialApplications.com. Follow her on Twitter: @emmajs24.