After years of doubt and prevarication CFOs have finally accepted the inevitability of moving core financial processes to the cloud. After all, the cloud holds such promise…doesn’t it?
But recent FSN research, “The Future of Planning, Budgeting and Forecasting” exposes the unpalatable truth that few organisations are fully benefiting from the cloud……..and that’s because they have simply replicated what they had on-premises, but in the cloud instead!
The research, one of the largest studies of senior finance professionals in 2016 showed that for planning, budgeting and forecasting (PBF) processes, only 11% of organisations had implemented the cloud in every business unit. And this fell well short of cloud ‘Utopia’ i.e. one centralised planning model, from one software vendor, shared by all stakeholders who need access to it.
In fact, of those that had completely moved to the cloud, only 50% use one business model, under 50% use only one software vendor and only 55% increased the number of stakeholders able to update the plan for themselves
So what’s been going wrong?
1. The business case lacked ambition
For many early adopters, the business case was all about the basic advantages of the cloud, for example, the perceived cost-savings, the affordability of a monthly subscription, the ability to only pay for what you need (scalability), the ability to dispense with in-house IT resources and the opportunity to cede responsibility for software upgrades and maintenance to a third party.
CFOs could tick the “We’ve moved to the cloud” box and congratulate themselves on a job well done without fully realizing the benefits the cloud had to offer.
2. Processes did not change
Deeply collaborative processes such as Planning, Budgeting and Forecasting lend themselves to the cloud. The immediacy, and accessibility of the cloud removes many of the barriers to enterprise deployment, enabling businesses to distribute applications wherever they are needed and engage with larger populations of users, which enhances management control and visibility, improves forecast accuracy and accelerates decision making. In an era in which modern finance organizations are striving to reduce business complexity and improve user productivity through process standardization, the ease with which cloud solutions can be deployed holds obvious appeal.
But fully realizing these advantages hinges on the user population sharing in one business model and ensuring that all stakeholders have shared visibility of planning models. The research shows that in most cases organisations simply implemented what they had before. For example, if they had different planning models in different business units that is what they implemented in the cloud. And if they used different software solutions in different divisions that is what they continued to do.
The question is why?
3. There has been too little innovation
The truth is that many software solutions are still not up to the job. Many solutions are old on-premise solutions that have been re-purposed for the cloud instead of being designed specifically for the cloud. Despite advances in hardware and software many of the solutions are not capable of resolving different operational and reporting requirements between business units in one single forecasting and planning model. Neither do they readily accommodate the volume and variety of data sources, including non-financial data.
But it would be misleading to conclude that early adopters of PBF in the cloud have not benefitted. The research shows clearly that a third of them are more likely to forecast earnings to within plus or minus 5% and they are also one-and-a-half times more likely to be able to reforecast within 24 hours.
Cloud “Utopia” is, by definition, an idealised proposition, ‘shooting for the stars’ if you like, but the research shows that it is well worth CFOs aiming for it.