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Why Cloud For Finance Solutions are Becoming Increasingly Popular
If you aren’t yet convinced that we have reached the tipping point of Finance adopting cloud-based applications, you might be after reading this post. The adoption of cloud-based applications was further validated by a recent Gartner research report titled “Finance Moving to the Cloud: The Steps to Take and the Benefits You Can Expect”. Gartner expects that spending on cloud or SaaS-based applications will increase from 30% of the total market spend in 2015 to 47% by 2020 – and that cloud for finance will become the dominant deployment model across all areas of financial management applications by 2025.
The report – authored by Gartner analysts Nigel Rayner, Chris Iervolino, and John Van Decker – states, “After years of lagging behind other domains in cloud adoption, cloud is hot in all areas of financial applications. CFOs and IT leaders need to understand how to capitalize on the opportunities of transitioning finance systems and processes to the cloud without being caught out by the challenges.”
Why Are Businesses Considering Cloud For Finance Solutions?
- Sophistication – As cloud-based core financial management applications become more sophisticated for medium and large enterprises, most firms in this market are focusing their strategies on cloud-based applications.
- Security – As a result of the increasing sophistication of cloud-based applications, CFOs and other finance leaders are becoming less concerned about the potential security risks of cloud-based systems. The increasing maturity and proven track record in security have allowed CFOs to feel more confident in the cloud option.
- Time to Upgrade – After 10-15 years, all organizations need to upgrade their current core financial management applications. When deciding what application to utilize, many finance organizations are choosing to adopt a cloud-based system, favoring them over on-premises solutions. This replacement cycle is another factor that answers the question, “Why is finance moving to the cloud?”
- Transformation – Most importantly, CFOs and other finance leaders see cloud-based applications as a brilliant opportunity to replace legacy applications with systems that will truly improve and transform key Finance processes.
What Are The Benefits of Cloud-Based Financial Services?
- Cost Savings – on subscriptions vs. license and maintenance, as well as reduced infrastructure and upgrade costs.
- Faster Adoption of New Functionality – quarterly feature releases with automatic upgrades
- Improved Usability – including reporting, analytics and mobile support
- Opportunities for Process Improvement and Agility – e.g., faster reporting, shorter planning cycles
- Enabling Growth– the ability to start small and expand over time, grow big
- Supporting Business Transformation – upgrading finance systems and processes
Regarding Business Transformation, Gartner suggests that organizations group their financial applications into two segments – Mode 1 and Mode 2. Mode 1 consists of core financial applications, and Mode 2 consists of add-on applications, such as budgeting & planning, financial consolidation & reporting, account reconciliations, and travel and expense management. Gartner recommends taking a structured approach to migrating Mode 1 applications. But if an organization is not quite ready to move its Mode 1 finance applications to the cloud, moving Mode 2 applications to the cloud can provide rapid process improvement benefits, with lower risk.
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