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Financing out of the cloud

Financing out of the cloud

A look at what is driving current adoption of cloud and financial management tools today

Despite the widespread take-up of cloud-based systems in sales and HR, finance has been slower to make the change. But as the market has matured, and concerns around security and privacy have been allayed, adoption of cloud-based financial systems is starting to rise, particularly among smaller and mid-size companies.

Given many big corporations have spent years investing heavily in centralising and standardising their finance systems, often as part of an ERP initiative, making a complete switch from on-premise to cloud is unviable. Instead, a hybrid approach is proving a popular way of accessing new capabilities for other divisions or specific tasks, while keeping the holistic management platform intact.

At the same time, the impetus for a finance shake-up is increasingly driven by factors outside the department’s four walls, such as demand for accounting visibility across the organisation, and the changing relationship between IT and finance. Other motivators include improving cashflow management and streamlining processes – all of course, in the name of cost cutting and efficiency.

Bottom-line benefits

One such example can be found at engineering, operations and maintenance firm Transfield Services, which recently secured the contract to build the National Broadband Network (NBN) in Sydney. The company is in the midst of rolling out a hybrid model SAP ERP platform to replace disparate systems and processes with a single global platform. Dubbed Project Quantum, the rollout is being undertaken in parallel with a payroll system implementation.

Undertaken partly as a cost-cutting measure, the project will see IT and shared services, including accounts payable, accounts receivable and payroll, outsourced to India. Down the track, there may be more opportunities to offshore other corporate support services if regulatory requirements can be met.

Having been completed in the US, Project Quantum is being implemented in stages across Australia and New Zealand and is due for completion in the second quarter of 2014. Transfield CIO, Stephen Phillips, says business benefits are already emerging in the United States.

“We are able to implement new contracts, or make changes to existing contracts, in less than 50 per cent of time it took before, which has a real impact on cost,” he comments.

“Because we are able to invoice quicker than we have to pay contractors, we are seeing real cashflow benefits. It has also prevented revenue leakage, and led to a reduction in the number of manual checks from up to 10 per cent to less than 1 per cent.

“We have earlier visibility and more detailed insight at the commercial management level, and are able to see early indicators that something is off track, which we can remedy before there is a financial impact.”

In addition, the move away from fragmented systems and processes has led to a reduction in roles, especially in finance, HR and front-end processing support, generating further cost savings. Phillips says the company chose SAP because of the software giant’s direct and ongoing investment into its HR module. “It makes sense for our business to align with where they’ll be investing in the future.”

While the balance of the system is run by SAP’s on-premise suite, the human resources management tool is delivered via the cloud. Transfield Services received the Cloud Vision award from Success Factors for its on-time and on-budget implementation.

As to why the company didn’t embrace the cloud for the whole system, Phillips points out many large organisations are still using on-premises systems. “Also, the full SAP suite we’re deploying is not available in the cloud environment; it is available for mid-size organisations but not large ones,” he explains.

“Over time I would expect cloud-based versions will become available and we will upgrade too.”

It’s academic

Like Transfield Services, the University of NSW (UNSW) retains a premises-based finance system. Its finance division is in the process of modernising systems to improve management reporting, simplify accounting systems and build a new, more streamlined process of procuring goods and services. It claims much of the innovation is actually being driven from outside the finance department.

“We use PeopleSoft for general ledger and accounts, which was installed in 2000 and was most recently upgraded 18 months ago, and Calumo for management reporting,” explains director of finance, Stephen Rees.

“Many parts of the university are already using cloud-based applications, and while finance is not currently using cloud systems at all, it is something we may look at in the future as we continue to seek efficiencies in our business.

Financial forecasting

According to Gartner’s 2012 IT Market Clock for Financial Management Applications, financial management applications are at different stages of their market lifecycles, and CIOs and CFOs need to base strategies for their finance systems on how different market segments evolve.

The research points to convergence and mutual reinforcement of four interdependent trends: Social interaction, mobility, cloud, and information on moving cloud solutions forward in their market lifecycle. This is also driving the creation of new mobile applications for the domain of finance.

Cloud-based systems are particularly relevant to the next generation of ecommerce-based businesses and in the face of globalisation, says Mark Troselj, NetSuite MD and vice-president of Asia Pacific.

“It is incredibly important to us as an economy that we can transact globally, manage multiple subsidiaries, cost centres, currencies and languages in real time, in a single system, and get one accurate version of the truth,” he says.

A case in point is software developer Atlassian, which implemented NetSuite’s OneWorld after experiencing rapid growth and outgrowing its small business accounting software. Its previous platform was unable to keep up with the need to consolidate financials for seven subsidiaries, or handle currency conversions at the pace required without manual intervention.

“In the past, the Internet was about looking into products or services that a company might offer, but the next big thing will be the ability to enable ecommerce interactions across multiple channels – the so called omni-economy,” Troselj adds.

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Tags CloudfinancepeoplesoftatlassianTransfield ServicesUniversity of NSWSparke Helmore

More about AtlassianGartnerNetSuiteNetSuiteOneWorldPeopleSoftQuantumSAP AustraliaTransfield Services AustraliaUniversity of NSWUNSW

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