The financial benefits of cloud computing

Finance directors in businesses across Europe are looking for innovative ways to ensure that they are getting the most out of their budgets. They also want to ensure that they are able to justify all of the costs they incur and that all new expenditure adds strategic value to their operations. Every penny spent today is under strict scrutiny like never before.

Even in challenging times, businesses need to focus on the future and ensure that they have the people, systems, processes and infrastructure in place to promote collaboration and effective communication. Just remaining competitive is hard enough so how do you get competitive advantage?

Sadly, in many board rooms the perception persists that business technology is an additional overhead that impacts the bottom line, sometimes without adding true value. This can be a misunderstanding between business leaders and the IT department if there is not clarity of strategy and alignment between what the business needs and what IT delivers.

However, IT can be the vehicle through which business operations will be transformed and drives such long term gains as boosting customer sales, enhancing staff productivity and efficiency, cutting costs and improving customer service. IT is therefore, much more than just controlling costs, but the current fixation on financial performance, although justified, sometimes clouds this issue.

Better business technology costs less

Being asked to reduce costs whilst still adding value to the business is no easy task but there are smart investments that can be made to tackle this problem. Now is the time to invest in solutions that will ensure the business is well equipped to harness an efficient, flexible IT infrastructure with the very latest applications to enable greater efficiencies.

So, what is the answer for businesses looking to make the best use of their cash flow and still have access to the latest technologies? There is a fundamental shift taking place in the way business people use IT and pay for technology. The recent explosion in ‘cloud computing’ solutions – made available through the Internet on a ‘pay as you go’ basis – now offers an appealing alternative for every Finance Director.

Cloud computing gives organisations an alternative to buying and maintaining costly in house infrastructure and allows users to securely access their business applications whenever they want to and wherever they are. Because there is no hardware or software to buy, businesses can avoid all up-front costs and eradicate the unpredictable nature of IT and demand more investment over time. Suddenly, being able to predict IT budgets far in advance looks like an overdue and welcome reality.

Why IT needs to change

The business of the future will not need to invest vast sums of money to own its own IT infrastructure and employ teams of highly skilled people to manage everything. This traditional method not only has a high cost to bear but is also steeped in operational and financial risks. As technology becomes more complex, and employing the necessary people and skills becomes more difficult, there could potentially be a growing divide between large and small enterprises.

Big companies, with their vast resources are better protected against the growing costs of IT, however, smaller business still want access to enterprise grade technologies, but without the associated issues of cost, complexity and risk. Instead, smaller organisations can now access the latest technologies without having to finance and pay for them in the traditional way.

In the past, businesses would pay for hardware and software through capital expenditure and take on all the associated risks and headaches that come with that approach. The business would have to invest in servers and software up-front and with no guarantees of success or a return on the investment.

Following on from the initial expenditure on hardware and servers, businesses would then be forced to fund the ongoing, and often unpredictable costs of maintenance, support, upgrades, migration, disaster recovery, back-up, archiving and fixing any issues that may arise. All of this presents massive operational and financial risk to any size of business. Overall this model is not particularly appealing for any CFO, particularly as there can be numerous problems during the initial roll-out stage and slow user adoption can lead to some systems being scrapped entirely.

Managing relationships not technology

Cloud computing offers a means by which businesses can bypass these problems, achieve a faster return-on-investment and reduce costs in the long-term. Instead of wasting resources managing technology they simply manage relationships and re-focus their attention and resources on core business activities.

Advanced computing services and solutions are now being delivered via the internet, at a fraction of the cost and management overhead of doing it yourself. Better still, these services can be consumed at a fixed and predictable cost, as businesses would pay for any other utility. Businesses only need pay for what is used, with costs structured at a fixed monthly fee; giving greater financial control and predictability.

This presents a much lower risk and provides a fast track to accessing the IT solutions businesses need to deliver real competitive advantage. The service provider can take on the responsibility of the technical aspects of hosting applications, deploying wide area networks, managing remote and mobile workers and ensuring the security and integrity of an organisation’s data is maintained to the highest levels possible.

An opportunity for businesses and IT departments

Cloud computing means businesses no longer need to spend large sums to access the important systems that will help them achieve success, such as; Email, Customer Relationship Management (CRM), Document Management, voice and data communications and virtualisation, to name but a few.

Making the switch to the cloud also takes the worry out of ensuring that IT systems and data are kept safe. Company data is housed in an environment which is monitored and managed 24/7 by professional staff, with advanced and multi-layered security measures in place that many businesses would find prohibitively expensive to try to emulate in-house.

Additionally, by placing company data into a data centre, businesses also benefit from instant business continuity and resiliency as data is backed up and protected in accordance with strict service levels.

Changing the way we think

For the CFO, the challenge is to think of new ways to utilise technology in the business that helps deliver the strategic objective of the company but at an acceptable cost. Removing the burden of routine maintenance and management and accessing business applications via the cloud, also offers IT departments a prime opportunity to re-focus their energy on more strategic aspects of their operations, freeing up time and resources which can be used on growing the business.

CFOs can now get excited about technology

Cloud computing is providing businesses with the ability to securely access enterprise level IT solutions which are transformational for businesses. What this means to the CFO is that they are now able to plan their budgets better with none of the unwelcome surprises they are used to when in-house solutions go wrong. This also frees up company resources so that employees are able to focus more on what they do best, serving their customers.

The challenge for CFOs is to show their IT departments that cloud computing is not something to be feared. It is just as much an opportunity for IT professionals as it is for the companies they work for, provided they are helping to drive the strategy forward and utilising cloud computing as a component of delivering business objectives.

For IT departments that stick their heads in the sand and are paralysed by the fear of the unknown, then unfortunately they are more likely to become victims of their own self fulfilling prophecy.

Once the business wakes up to the world of opportunities on offer from cloud computing and that their own IT department is not engaged in delivering these benefits then the situation will undoubtedly become uncomfortable.

The state of the world economy has placed huge pressure on CFO’s faced with the conundrum of doing more with less, however, the good news is that there are practical, cost effective solutions that provide UK businesses with access to the most innovative technologies and at a lower cost.

In this way businesses will not only ride the current challenges more effectively but will be better placed to take advantage of the growth that will come when the economy bounces back.

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John Leese john joined Star in 2005, having started his corporate career at Content Technologies in 2000 where he managed its operational finance team through a period of significant change, including its £600 million acquisition by Baltimore and subsequent sale to Clearswift in 2002. John joined Star from Clearswift where he was Group Financial Controller. John began his career at Deloitte & Touche, where he qualified as a Chartered Accountant. He then moved to Ernst & Young, spending over three years on the West Coast of the US in its Software Industry Group.