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Cloud - or blue-sky thinking? [SME Advisor Middle East](SME Advisor Middle East Via Acquire Media NewsEdge) Cloud computing is offering the world a number of advantages which are streamlining business practices. By helping to cut costs and centralise a company's data, more and more enterprises are turning to the service. Despite the advance of the trend however, a range of quirks and gaps in the cloud are worth understanding before jumping aboard. The principles of accounting haven't altered much over the past 500 years. Over the last few decades however, the needs of businesses have changed dramatically. The explosion of information requirements, the changing global economic landscape, the evolving regulatory and competitive environment, and the rapid adoption of the internet and mobile technologies has led to a need for smarter and faster systems to keep pace with the times. As a result the floodgates for ERP finance and accounting systems have been opened to meet the demand. Cloud-based financial management architecture enables businesses to address current challenges with precision. This virtual advent provides on-premises accounting systems at its core while also offering improved business insight, increased agility, and the strengthening of internal controls. The finance department has a particular responsibility which include the funding of departmental budgets, the investment of a company's capital, and the adherence to strict compliance rules. And since finance often has the final say on major IT investments, it stands to reason that finance decision makers should additionally have a grasp on evaluating the benefits of cloud computing. "Based on many recent analyst reports, a cloud computing model helps customers save up to 50 to 67 per cent in the life cycle costs of computer equipment and infrastructure. It also delivers greater investment returns and shorter payback periods when compared to traditional on-premises delivery options," says Sajeev K. Perunnelly, Division Manager at Alpha Data. "Government and public sector customers are compelled to move towards a government initiated community cloud model while small and medium business will greatly gravitate towards public cloud offerings of local and internationally prominent players. Banking and telecom sector enterprises are large enough to build their own private cloud infrastructure." Configuring the cloud Cloud computing is evolving at a rapid rate and with good reason. Companies of all shapes and sizes are adapting to this new technology due to a number of reasons. With economic instability and reductions in capital expenditure (CAPEX) budgets, SMEs are keen to trade owned IT costs for solutions that can be logged as operating expenditures (OPEX). With cloud computing, instead of making a large up-front investment in IT infrastructure, staff, and resources, customers rent computer capacity, saving the CAPEX budget for revenue-generating efforts. Cloud offerings such as Oracle Cloud Services, for example, offer a manageable operating cost that can be scaled up or down based on need. Cloud computing reduces the cost of hiring, training, and managing IT staff. Managers are also able to reduce their spending on tech solutions. In the end, this means managers spend less time working on IT and more time thinking about the business. When enterprise IT is managed by a cloud service, it is faster to implement and easier to change. This helps companies go about their business more quickly and reduces long-term costs. Despite the vast number of advantages, there are a few pitfalls which may impact those relying too heavily on the cloud. Security is the biggest concern due to a company essentially giving away private data and information in order to participate. Privacy concerns exist hand in hand with companies having their security exposed in the cloud. A large scale dose of trust must exist due to users needing to believe that their cloud service vendors will protect their data from unauthorised users. Another major disadvantage is the implicit dependency on the provider which companies must rely upon. It is difficult, and sometimes impossible, to migrate from a provider once you have used its service. If you wish to switch to a different provider, it can be incredibly cumbersome to transfer huge data from the old provider to the new one. The entire setup is dependent on internet access, thus any network or connectivity problems present will render the setup useless. All systems may face dysfunctional behavior from time to time. Outage and downtime is existent within even the finest of cloud service providers. Since the applications and services run on remote, third-party virtual environments, companies and users have limited control over the function and execution of the hardware and software. Moreover, since remote software is being used, it usually lacks the features of an application running locally. The Cloud in the UAE Many CIOs in the country are seeking cloud based solutions to provide the performance, scalability and accessibility demand, which has led to increased awareness of the opportunities offered by cloud computing. "Customers in the UAE have realised that the change to the cloud is inevitable. The question today is not whether to change or not, but how soon," poses Perunnelly. "Infrastructure as a service (IaaS) has been very popular among customers who are in the initial stages of consuming public cloud solutions. Microsoft has been successful to a large extent in positioning their cloud solutions such as Office 365, Microsoft online services and Azure, in the top bracket. In software, early adopters such as salesforce.com have made good inroads into customers' cloud strategy. Many additional organisations will start evaluating and considering software as a service in the areas of CRM, HRMS, incentives and compensation applications, big data and analytics, etc." "The UAE has been at the forefront of Business Analytics and big data adoption in the Middle East with over 40 per cent of CIOs in the country planning investments in these sectors. With ever increasing demands and expectations of customers and citizens, big data and analytics will be the key to success in the areas of government services and population statistics, health care, retail, banking and telecom." "High competition, dramatic increase in claim events and eroding underwriting profits have forced many demanding industries like health care insurance providers to follow alternative approaches to conventional methods of delivering IT services to their internal as well as external customers," he says. Many organisations in the UAE now want to take advantage of the major cloud benefits like quick deployment of IT resources, shared resource usage, and the ability to monitor usage. According to the research firm International Data Corporation (IDC) total spending on cloud delivery in the UAE is expected to record an increase of 33.6 per cent year on year. IDC states that growth is happening in the private cloud, but expects public cloud to catch up in the near future as more and more global providers begin to push their offerings aggressively in the region. Only a handful of organisations in the UAE have gone the full distance in terms of converting these highly virtualised environments to full-fledged private cloud deployments. Switching to the cloud The very idea of another system overhaul can terrify an IT or finance manager. But ultimately, this transition is easier and more cost-effective than continuing to operate an obsolete ERP system whose annual maintenance cost runs from 20 per cent to 25 per cent of the original system cost. Because cloud services are typically sold on a subscription/contract basis, spending is redirected from capital acquisition to pay-as-you-go operations. Organisations should look for the right opportunity to change their financial management systems to cloud-based systems. They should seriously consider switching to the cloud if they have a pending ERP upgrade, a change in company leadership or strategy, a merger or acquisition, or any changes that require an accounting reformat, new regulatory requirements, or a need for improved governance. (c) 2014 Corporate Publishing International. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info). |