What Can Finance Expect from the Cloud?
This is the second in a three-part series where we address the main hurdles facing finance today and identify some tools and technologies that can help you overcome these hurdles. (You may find the first blog at this link.) Here we look at how operating from the cloud offers more connectivity and innovation, while also providing remote access and a platform for growth and expansion, without sacrificing governance and control. The cloud can put visibility in the palm of your hand. View a dashboard, make decisions and take action right from your mobile device, making you more effective and more efficient.
Eight to ten years ago deployment options were hardly a consideration. Most accounting solutions were still licensed and deployed on your own premises, or perhaps licensed and hosted by a reputable third party. “Cloud” had yet to become part of the business vernacular and Software as a Service (SaaS) was still a relatively new and poorly understood concept. While other complementary solutions, particularly Customer Relationship Management (CRM), were headed in that direction, entrusting your accounting to the cloud required a higher level of trust that had not yet developed.
But now—how times have changed! Today, the majority of businesses have some sort of cloud strategy and the shift to the cloud and SaaS has begun in earnest. If you are currently or soon to be selecting a new solution, it should be a critical factor in your evaluation. You might think decisions about deployment could be deferred until after you have chosen a solution. But this must be considered up front because not all solution providers offer the same choices of deployment options.
Defining Deployment Options
In our last few annual enterprise solution studies (including our most recent in 2019), Mint Jutras asked how the participant’s current solution is deployed. In this study, we use “ERP” as shorthand for the software used to run the business, and that includes accounting and more. We offer the following options to choose from:
- Software as a Service (SaaS): Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another party’s) computer.
- Hosted and managed by your ERP vendor: Software is licensed by you, but you pay your solution provider to manage and maintain (host) hardware and software.
- Hosted by an independent 3rd party: Software is licensed by you, but you pay another party to manage and maintain (host) hardware and software.
- Traditional licensed on-premise: You license the software and are responsible for managing and maintaining it on your own premises.
- Hybrid: Parts are licensed and maintained on-premise and parts (e.g. add-on modules) are SaaS.
Web-enabled user interfaces cloud the issue (pun intended). Many non-technical users simply don’t know whether their organizations have licensed a specific version of the product (and perhaps pay maintenance in order to have access to updates) or if they subscribe to software as a service. But for those responsible for the purchase and deployment decisions, it is of paramount importance to understand all the potentially confusing options.
With almost every solution provider hopping on the cloud bandwagon today and many of the largest claiming victory in the race to be the biggest and the best, we fear many business users are also hopping on that wagon without truly understanding the benefits. And without this kind of knowledge, choices are being made without full understanding and some of those benefits are being left on the table.
Many solutions that were once only available as traditional, licensed deployments (on your own computer or a trusted service provider’s) now offer a choice. But some of these “cloud” choices are really hosted solutions, which contributes to the confusion. Other solutions that were born in the cloud may only be offered through SaaS. It is important to understand the difference between cloud and SaaS, as well as the different “flavors” of SaaS (multi-tenant and multi-instance).
Cloud Versus SaaS
Many use the terms “cloud” and “SaaS” interchangeably, but there are some important differences. So, let’s distinguish between the two:
- Cloud refers to access to computing, software, and storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
- SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or a third party’s) computer. It is generally paid for on a subscription basis and does not reside on your computers at all.
We can conclude: All SaaS is cloud computing, but not all cloud computing is SaaS.
Traditional on-premise or hosted solutions might (or might not) be accessed via the cloud, although this is more likely to be a private cloud. Those delivered as a service (SaaS) might be offered as multi-tenant or single-tenant (also known as multi-instance) or both.
Multi-tenant versus Single-tenant SaaS
With a multi-tenant solution there is only one instance of the software itself. The data belonging to each subscriber to the software as a service is segregated and secured. But everyone runs a common set of code; configuration settings may be used to tailor the look and feel and personalize business processes.
With a single-tenant (or multi-instance) SaaS solution each company is given its own instance of the (hosted) software, but may share common services, such as an integration platform, and security.
With the distinct advantage of only having to maintain a single line of code, solution providers that offer only a multi-tenant SaaS solution are typically able to deliver more innovation than those that offer the same solution with a choice of deployment options (on-premise, single-tenant and/or multi-tenant SaaS).
Solution providers that deliver on-premise solutions are forced to maintain multiple versions of the software. Very often the software is offered on a choice of operating systems and databases, and the vendor must support multiple release levels determined by its customers’ ability to keep pace with upgrades. For every person-day they spend on innovation, they spend another multiple of that day making sure it works across multiple environments. Those offering a multi-tenant SaaS solution exclusively can devote their entire development budget to innovation.
Solution providers offering single-tenant solutions might not have to deal with different operating systems and data bases, but the vendor still doesn’t have the luxury of maintaining a single line of code because not every customer will be upgraded simultaneously. Indeed, some promote this as a “feature” that offers the customer more control over the timing. Some vendors choose to not deliver their SaaS solutions as multi-tenant for one of two reasons: Either their solution is not architected to support this, or because they feel they can deliver a more customized solution through multiple instances. But with a modern architecture and a strong platform, Mint Jutras would question whether invasive customization is even necessary or advisable.
If the customization truly differentiates your business, it may be worth it. If it does not, if its only purpose is to perpetuate the way things have always been done (sometimes for no better reason than because an employee was unwilling to change), then don’t do it. Don’t risk building barriers to further innovation. It’s really as simple as that.
Potential Benefits of SaaS
If you are still undecided about your preferred deployment options, we share with you the possible benefits of moving to a SaaS solution. These benefits can be summarized into the following categories:
- Improved access and transparency
- Cost considerations
- Growth and distributed environments
The access any time, from anywhere nature of a cloud solution provides you a level of access to data that is simply not available through more traditional deployment options. As a finance leader you have a select set of key performance indicators that helps you keep a finger on the pulse of the business. In the past, you relied on laptop and desktop access behind a secure firewall. Today that level of security can be preserved but accessibility can be put in the palm of your hand. Don’t wait to get back to the office or your hotel room. Don’t wait for an email or text message alerting you to a significant change or event. View dashboards from a mobile device and with a truly connected cloud solution, take action immediately.
Cost savings can come from eliminating the ongoing cost of hardware and associated maintenance, along with the sheer cost of obsolescence. They can also come from lower startup costs. We found SaaS implementations typically shaved a full month off the time to reach a first “go live” milestone. Cost savings can also be derived from reducing the cost and effort of upgrades. The SaaS solution provider does the heavy lifting, which also leads to more innovation.
SaaS solution providers can potentially deliver more innovation through more frequent and robust upgrades, particularly those maintaining a single line of code through multi-tenant solutions. But investigate this thoroughly—just because they can doesn’t mean they do.
The access any time, from anywhere nature of a cloud solution is also conducive to supporting distributed users and bringing up remote sites rapidly and easily. Even if you don’t have a highly distributed environment, chances are you have remote workers or workers that are currently on the go and must access applications and data remotely, often from mobile devices. Or you might (just now) be expanding globally. The Internet has leveled the playing field, enabling even tiny companies to establish a global presence.
Historically the best opportunity for expansion was in established economies. The likelihood of that continuing is low. Today completely new markets are opening up in emerging economies. Innovation, advanced technology and the Internet have combined to create new consumer middle classes in countries that were hardly industrialized a short decade ago, creating unprecedented growth opportunity. Not only does this result in increasingly remote and distributed environments, it also adds risk and creates new challenges in maintaining governance and control. These opportunities also bring companies into uncharted territory. To capitalize on this opportunity, growing companies will need to take some chances and be willing to fail but fail (or succeed) fast in order to move on to the next opportunity. They will need to leverage technology in order to manage, maintain control, and reduce risk, and do so at a rapid pace.
When SaaS was far less popular, participants worked hard at analyzing the pros and cons of SaaS. Now with all the media and vendor hype, it appears to simply be a given. Like the tide, the surge towards cloud seems to be unstoppable. And as people and companies accept the inevitable, they stop looking at the decision with a critical and questioning eye.
The depth and breadth of choice between solutions and deployment options have never been greater. Look for these choices to continue to expand. But with more choice comes the requirement for better due diligence and good decisions. Don’t be held back by pre-conceived notions and misperceptions about technology that is rapidly advancing. Not all deployment options are available from all solution providers and not all SaaS solutions are created equal—don’t treat them as a commodity. Make a careful choice that is right for your business.
Our final installment will explore how financial applications built for the cloud can open new doors to help you make better decisions, faster.
Cindy Jutras is a widely recognized expert in analyzing the impact of enterprise applications on business performance. Utilizing over 45 years of corporate experience and specific expertise in manufacturing, supply chain, customer service and business performance management, Cindy has spent the past 14 years benchmarking the performance of software solutions in the context of the business benefits of technology. In 2011 Cindy founded Mint Jutras (www.mintjutras.com), specializing in analyzing and communicating the business value enterprise applications bring to the enterprise.