The Greater Washington Society of CPAs recently asked us to instruct their members on how to advise their clients about cloud computing. They wanted to know the economics involved in cloud decisions, the security and compliance implications, and things to consider before entering into a contract. Briefly, we shared these ideas:
1. Economics. Finance professionals always need to know where the ROI is going to come from. With a cloud application, the hard-dollar ROI benefits come from lower up-front infrastructure costs and rapid deployment of applications. Many of your fixed IT costs become variable; Capex can become Opex. You can pay per use, so your operation (together with its costs) scales up and down easily.
The soft benefits are also compelling. Scalability in the cloud, coupled with the freedom to redeploy IT staff to more strategic activities than maintenance and support, makes the organization more adaptable to changing business conditions.
2. Compliance and security. Even when companies no longer have direct control over their IT systems, they remain responsible for ensuring that services outsourced to third-party providers – like the cloud vendor – meet performance and stability targets, and that these services remain in compliance with all applicable laws, regulations, and contracts. Data security is of primary concern.
A reputable cloud provider will tell you the specific governance, operational, and regulatory guidelines they follow to keep your data secure. And be aware that compared to what most IT budgets can afford, the cloud provider’s SAS 70-certified data center is Fort Knox. Most organizations report that security actually improves after moving to the cloud.
3. Before you sign that contract… Cloud contracts are different in some ways. The differences include a service level agreement with uptime guarantees as well as SLA penalties and penalty exclusions. The contract also specifies security and data privacy conditions, and spells out what business continuity and disaster recovery services you are due. Like any other contract, it contains clauses about suspension, termination of services, and liability.
The four top things to keep in mind before you sign are as follows. First, careful planning leads to proper provisioning. Be ready with numbers – users, expected baseline usage, growth rates and other relevant metrics. Second, many cloud vendors will negotiate terms for larger contracts. Third, review those SLAs; ask about uptime and availability. Last but not least, ask about alternative connectivity and backup planning. These are key enablers for data protection and business continuity.
Whether you are a CPA or a CFO, due diligence is a big part of your responsibility. We can help you with this. Our white paper, “35 Questions Every CFO Needs to Ask About ERP Software in the Cloud,” discusses in greater depth many of the issues summarized here.
Download your free copy of “35 Questions Every CFO Needs to Ask About ERP Software in the Cloud.”
Of course, if you know anyone else who would be interested in this white paper, share this post with them by using the bookmarking tools below and leave us a comment of what you thought of the white paper.