moves into the
cloud, will CFOs
sleep better at
Finance in the cloud
The better the question. The better the answer.
The better the world works.
Executive summary 2
2 Cloudy forecast 3
3 A silver lining 6
4 Ride the lightning, don’t crash like thunder 8
5 Conclusion 13
Finance in the cloud
What CFOs need to know about cloud
A new era of cloud-based technology brings an unprecedented period of disruption and
innovation. However, cloud technology is still immature and has many associated risks. Despite
this, forward-looking CFOs recognize the shifting dynamics and are increasingly looking to cloud
solutions to address a variety of business needs.
While there are many tangible business benefits to implementing cloud offerings, including
flexibility, scalability and enhanced analytics, delivering cloud transformation is extremely
challenging. Cloud computing requires a considerable shift from traditional computing methods,
roles and business processes. Moreover, there are some key misconceptions surrounding the
adoption of cloud services that must be addressed.
In order to gain optimal benefits from cloud computing technology, organizations must first
conduct due diligence based on business needs and required IT functionality in order to determine
business readiness for cloud adoption.
Adopting hybrid cloud solutions uses agile innovation to maximize the benefits of cloud
computing while minimizing disruption and maintaining operational excellence.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 2
systems and local
offerings and early
centers, APIs and
1960s 1970s 1980s 1990s Today
Is the cloud just smoke and dust?
The landscape for IT-enabled transformation is
experiencing another major paradigm shift, and
“cloud” is the latest buzzword. Organizations of all
sizes are taking flight into the nebula, including
governmental bodies such as the UK’s G-Cloud
program and the Federal Cloud Computing Initiative in
EY’s Global Technology Center (GTC) has hailed the
era of cloud computing as bringing about change
faster, more continuously and from more directions
than ever as a dizzying array of hardware and
software services available over the internet have
emerged over the past few years. 1 According to EY’s
2014 Global Information Security Survey (GISS), 39%
of respondent organizations plan to spend more on
cloud computing compared with the previous year. 2
Yet, despite the rapid escalation of cloud services use,
EY’s Insights on governance, risk and compliance
shows many executives remain hesitant to endorse a
“cloud-first” approach. 3 Moreover, 17% of
respondents to EY’s GISS indicated cloud computing to
be a first-priority vulnerability and potential source of
increased risk. 2
As such, finance decision-makers increasingly walk
under the shadow of cloud offerings.
The benefits of cloud adoption are highly touted.
However, over a decade ago, on-premise enterprise
resource planning (ERP) solutions made similar
promises. Although the trigger for rushed ERP
implementations in the 1990s was the much-fretted
Y2K calamity. Y2K concerns turned out to be largely
unfounded, and many finance executives would now
argue that they have yet to reap genuine, tangible
benefits from investing in costly ERP systems.
Although a company’s financial management system is
critical to success, EY is finding that many
organizations have systems averaging from 10 to15
years old, with upgrade cycles ranging from 5 to 10
years. Despite aging legacy systems, many finance
decision-makers are hazy on how cloud solutions are
really any different from the ERP solutions hyped in
the previous decade.
Is cloud computing the answer to disparate systems
and unstandardized process woes, or is the cloud just
a nebulous solution that will inevitably lead to yet
another costly and disruptive IT-enabled
Thirty-nine percent of respondent organizations plan to
spend more on cloud computing compared with the previous
Source: EY’s GISS, 2014.
Seventeen percent of respondents indicated cloud computing
as a first-priority vulnerability and as a source of increased
risk exposure over the last 12 months.
1 EY, Top of Mind, Issues facing technology companies: Navigating the four themes of technology, 2015.
2 EY, Get ahead of cybercrime: EY’s Global Information Security Survey 2014, 2014.
3 EY, Building trust in the cloud: Creating confidence in your cloud ecosystem.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 3
What does “cloud” mean?
Cloud computing allows users to rent access to a
variety of virtual computing options, conveniently,
ranging from network-accessible data storage and
software development environments to fully featured
applications. 1 As such, the data and applications are
not required to be stored on local servers or “onpremise”;
rather, they are hosted and managed by
third-party cloud service providers (CSPs).
Enterprises essentially outsource varying levels of IT
functionality to CSPs, and users only need an internet
connection to access the data and applications via
virtual servers. By moving into the cloud,
organizations have the potential to reduce greatly, or
even eliminate, the total cost of ownership (TCO) of
the IT function, thereby forever altering their business
The US National Institute of Standards and Technology
(NIST) published a definition of cloud computing that
includes two key cloud models: Cloud Service and
Cloud Deployment. 1
The primary Cloud Service models or ‘stacks’ are
Infrastructure as a Service (IaaS), Platform as a
Service (PaaS) and Software as a Service (SaaS); each
with increased levels of IT functionality outsourced to
As the level of functionality increases, transparency
into data processing decreases.
SaaS is the model used for cloud ERP systems, thus
cloud accounting systems are often referred to as
These primary Cloud Service models can be
implemented via four Cloud Deployment models:
public, private, community or hybrid; each with
decreasing data control and privacy.
In order to truly comprehend and realize the benefits
that cloud computing brings, finance decision-makers
must understand the implications of deploying
different permutations of the cloud models. The
appropriate combination of the two cloud models will
vary based on an organization's requirements, as
different models of configuration will be appropriate
for different organizations.
In EY’s experience, CFOs who lack a solid
understanding of cloud configuration models are
increasingly at risk of missing key potential business
benefits that more informed competitors may well
seize, putting them at a competitive disadvantage. 3
Cloud adoption configurations
Network access to traditional computing
resources such as processing power and
1. Cloud Service model (aka stacks)
Environment for customers to use to build
and operate their own software
Access to software applications such as email
or office productivity tools
2. Cloud Deployment model
Operated solely for a single
May be managed by internal
or external IT
May be on or off premise
Available via the internet to
the general public or a large
industry group with thirdparty
Supports a specific community of
organizations that have shared
concerns via a private network
May be managed by internal or
external IT and may be on or off
Two or more clouds (public
or private, community)
bound by standardized
proprietary technology for
data and application
Note: illustration based on the US NIST cloud models. 1
1 The definitions of cloud computing and service models and deployment models excerpted from the US National Institute of Standards and Technology (Cloud Computing Synopsis and Recommendations
Special Publication 800-146).
2 EY, Into the cloud and out of the fog: EY’s Global Information Security Survey, 2011.
3 EY, Insights on governance, risk and compliance, Ready for takeoff: Preparing for your journey into the cloud, 2012.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 4
In order to truly comprehend and
realize the benefits that cloud
computing brings, finance decisionmakers
must understand and determine
the right blend of cloud models.
Christian Mertin, Advisory Partner (Ernst & Young, GmbH)
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 5
A silver lining
As many organizations continue to face challenges with existing ERP solutions, they are looking to cloud offerings as
an improvement over existing on-premise systems. CFOs looking to optimize and streamline their finance functions
for cost reduction and efficiency will find cloud solutions attractive. Cloud services have much to offer the finance
function, as there are several tangible benefits that don’t exist or cannot easily be gained within on-premise financial
systems. The cloud can also assist in distributed environments, such as across local finance and shared services, to
ease end-to-end processes. Moreover, as cloud solutions continue to mature, offerings supporting core financial
management applications are becoming more commonplace.
According to the Cloud Accounting Institute’s 2014
Cloud Accounting Solutions Best Practices Benchmark
Study, respondents’ finance teams indicated that
wasted effort represents a major drawback of current
systems, with as much as 70% of time spent on
manual or suboptimal efforts. 1 Outsourcing computing
capabilities to CSPs enables an organization's
resources to focus on more strategic activities.
Furthermore, traditional IT models demand massive
infrastructure investments with complex
architectures. Adopting a cloud model means
organizations no longer need to build and maintain
complex internal IT infrastructures, thus enabling cost
efficiencies through overhead reduction and reduced
costs of the IT function. This also increases time
savings while decreasing energy costs.
As most cloud ERPs are out of the box, a baseline level
of standardization is built into most cloud services.
This forces a certain level of data and process
standardization upon cloud migration.
Moreover, system upgrades in the cloud ensure all
users of the financial management system have
access to the most up-to-date version. This also helps
to improve collaboration across different entities and
Cloud models generally enable companies to pay only
for cloud resources based on measured service or on a
‘per usage’ basis. This flexibility allows them to remain
a cloud customer and pay only for access to the
infrastructure and applications they need. Instead of
paying for it all up-front, including more capacity than
they may need right away, cloud customers pay only
for what they use – and only when they use it. 1 Thus,
cloud services shift upfront capital expenditures to
operating expenditures, which can ultimately result in
large cost savings to the organization.
Scalability or “elasticity” is inherent to any cloud
model, thus businesses have the ability to scale backoffice
functions rapidly in response to business growth
or reduce the size of the business during a downturn
The pace and ease with which cloud systems can be
deployed allow organizations to test new markets
more easily. This scalability allows for a truly agile
approach, to support organizational structure changes
as well as the ability to absorb acquired entities
quickly into the financial management system.
1 Cloud Accounting Institute: Cloud Accounting Solutions Best Practices Benchmark Survey, 2014.
2 EYInsights on governance, risk and compliance, Ready for takeoff: Preparing for your journey into the cloud, 2012.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 6
The role of finance has traditionally been as a record
keeper to the business. However, enhanced analytics
enable the CFO to become a strategic partner within
the enterprise. Whereas previously, analytics and
business intelligence capabilities resided in separate
applications, these capabilities are now embedded
within cloud-based applications.
Cloud models which employ ‘in-memory’ computing
provide the ability to access real-time data on demand,
allowing organizations to identify issues within the
business quickly and respond more efficiently.
Moreover, whereas on-premise solutions can only
provide analytics based on an organization's own data,
CSPs can now consolidate anonymized data across
cloud tenants, thus providing a much broader range of
business intelligence that could not otherwise be
accessed from an on-premise solution.
The enhanced analytic capabilities that cloud offerings
bring also help organizations to develop more robust
KPIs by which to measure their business performance.
“Close optimization” not “fast-close”
To become world-class, finance must evolve from a
traditional close process that follows sequential steps
and is riddled with the potential for errors. Instead,
savvy finance executives know that it’s not just about
a “fast-close” process, it’s about “close optimization.”
The availability of real-time data on demand enables
finance to manage financial information continuously,
right up to the start of the close process. This ability
not only allows for a much more rapid close cycle, it
also increases the accuracy of reported data.
Moreover, cloud computing can also automate the
close process, allowing key functions to run in parallel
during the close, thus optimizing the overall close
EY case study – creating a new finance and IT function in 90 days
Client: publicly held European technology company | Engagement: day-one readiness
The company announced that it was selling its core
operating division and engaged EY to support
The transaction, subject to intense anti-trust review
prior to regulatory approvals, was set to be
completed within 90 days and at year-end. The ERP
system, finance shared services and the majority of
employees would be transferred to the acquiring
firm on the deal date along with the back-office
The company needed to create a finance function
to ensure operational readiness within 90 days,
with no transitional service agreement for functions
EY assisted with a number of workstreams across
the day-one readiness program to implement
SAP’s Business ByDesign (BYD), a cloud-based
EY’s involvement included building the client’s IT
structure; planning and creating business critical
communications processes; and designing and
building their finance and controls capability.
EY had to be innovative and create approaches
that would suit the future business, including
building smart mobility into the cloud solution
and, enabling access to applications using
smartphones and a 4G connection.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 7
4 Ride the
Cautious cloud computing
Despite the many benefits of cloud solutions, cloud
offerings are still immature, and there is a lack of
authoritative literature and standards governing cloud
computing. As such, misconceptions regarding cloud
migration and adoption abound. It’s important that
finance decision-makers seek a greater understanding
of the deeper and often lesser-known challenges and
risks of cloud adoption.
EY has noted that, like most technological evolutions,
the cloud presents its share of risks and challenges,
which are often overlooked or not fully understood by
businesses quick to embrace it. 1
Right cloud model
The most critical decision an organization must make
is to determine the right blend of cloud models;
specifically which service and deployment models are
best suited for the organization in the long term. This
will determine the level of functionality, control and
privacy necessary for cloud adoption and
sustainability. It is critical to get this right premigration.
EY have noted that organizations that adopt a public
cloud strategy for cost reasons often later discover
that they are essentially subsidizing the costs of cloud
upgrades for joint tenants. Within a public cloud, there
is no pre-established standard to share costs with
other tenants, let alone find out easily who they share
joint tenancy with.
Furthermore, private clouds must also be approached
with caution, as customization can be costly and there
is limited interoperability with on-premise systems.
Third-party data management and storage open up
new areas of risk that did not previously exist.
Processing data over the internet, as opposed to
processing it internally on a company’s network,
massively increases data vulnerability. The cloud also
brings new challenges when it comes to identity and
access management as well as authentication and
encryption. Moreover, backup of data may not be
entirely transparent in a cloud solution.
CSPs often claim that cloud security is more robust
than on-premise solutions; however, on-premise
security can vary by organization and across
industries. As cloud computing is still an emerging
technology, the full risks of adoption and long term
tenancy remain an unknown.
Before organizations hand over the keys to the
enterprise kingdom to a CSP, EY recommends rigorous
review of cloud-based SLAs. CSPs often offer standard
SLAs that generally limit liability of the CSP. For some
organizations, there may be a need for increased SLA
negotiation in order to mitigate increased security
1 EY, Insights on IT risk Business Briefing: Ready for takeoff, preparing for your journey into the cloud, 2012.
© Finance 2015 EYGM in Limited. the cloud All rights reserved. 8
EY approach for
solutions and adoption
What are the change
How can the cloud help?
What are the transactional
benefits in the cloud?
Cloud compliance challenges
CFOs are also concerned when it comes to compliance
issues within the cloud. It is often not clear where the
data actually resides, creating real challenges for legal
compliance and privacy. This is particularly true within
the banking and insurance industries. As such, cloud
adoption within the financial services industry lags far
behind other industries.
While cloud computing is largely considered
borderless, compliance is not, and organizations must
be aware of where a CSP’s servers are physically
located. US Securities and Exchange Commission
(SEC) listed companies with overseas operations, such
as in Europe, must take into account the risks of using
an overseas public cloud, whereby resources are
shared among entities on the same cloud server.
Furthermore, many organizations must comply with
laws that restrict transborder information flow.
For many publicly listed US companies, cloud adoption
may not be an option if the servers are based
Cloud integration isn’t a breeze
Many CFOs may have the preconceived notion that
they hand over the data and CSPs will take care of
everything. However, cloud adoption is much more
involved. Cloud migration, especially for large
multinational organizations, can often be highly
complex, with an enormous amount of systems
integration activity. Much planning is required in order
to get to data portability and interoperability with the
cloud. Moreover, the deployment stages can be very
costly and resource intensive.
Furthermore, implementing cloud computing requires
a considerable shift from traditional computing
methods and business processes. The key is
determining what tasks need to be accomplished, and
whether the enterprise is more concerned with the
time taken to complete the project or with the ongoing
costs once it’s completed.
Genuinely reduced TCO?
There is also a common belief that cloud migration has the potential to reduce internal IT operations significantly
or eliminate them altogether. Ideally, the cost reduction should enable the business to free up IT resources to
engage in technology-led innovations. But there is a question about whether IT resources that have traditionally
maintained systems have the innovative skillsets to truly contribute toward corporate strategy.
Organizations must also consider the skillsets of existing IT and finance staff and determine what skills will be
needed, not just for cloud migration but also for ongoing cloud residency. CSPs generally only offer tiered support
within cloud solutions. Moreover, required training for ongoing cloud usage is largely self-service, and
organizations must allot adequate time to accommodate a learning curve before reducing IT resources.
Furthermore, cloud solutions rarely result in a complete elimination of IT resources. Rather, a specialized
knowledge of managing complex service level agreements is required to manage the complexity of cloud migration
and sustainability successfully. EY recommends that organizations consider appointing a cloud finance subject
matter professional who not only understands the total cost of cloud services ownership, but can also track service
consumption along with cost transparency.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 9
Cloud service model
What is the business and IT
maturity, complexity and
How much cloud use?
How much data control and
privacy is required?
Cleanse your data to a single version of truth
A single version of the truth is often cited as a top
benefit of cloud adoption. Despite the prior ERP
revolution over a decade ago, many companies still
struggle with a tangle of inconsistently defined data
residing within disparate systems.
Organizations looking to adopt cloud technology must
first lay the groundwork by cleansing their data and
standardizing processes across the enterprise as much
as possible prior to cloud migration. It’s a mistake to
rely on the cloud to standardize an organization's
processes automatically and immediately. Mapping to
a cloud solution can aid an organization to get to a
single chart of accounts, but that’s an undertaking
that can be time-consuming and resource intensive.
CFOs must recognize that – much like on-premise
solutions – what goes into the cloud is largely what
you’ll get out of the cloud.
Organizations must also consider the complexity of
the existing processes and functions. As many cloud
solutions are out of the box, organizations must
consider if the same level of complexity should be
maintained in the cloud. It’s important to recognize
that automation isn’t useful if the business process
being automated is already fragmented.
Getting to a single version of the truth is often a
difficult journey, with or without cloud migration. The
key to a successful transformation lies in adopting a
systematic approach with simplicity and
interoperability as the focus.
It’s also important to look to the cloud for enhanced
capabilities and not just a transfer of what currently
Organizations with complex functions and processes
often believe they can translate the business as is, and
the cloud will sort everything out. While this may be
true to a certain extent, as cloud offerings enforce a
certain level of standardization, the cloud does not
discern between simple and complex processes.
It’s important that a pre-migration simplification
endeavour is undertaken in order to obtain optimal
enhanced functionality from cloud solutions.
Embrace hybrid solutions
Although one of the major benefits of cloud solutions
is flexibility, it’s important to recognize that, due to
the inherent nature of existing cloud models, cloud
offerings are largely out of the box. Thus cloud
computing is not one size fits all.
As such, organizations must often conform their
business processes to the technology. This has its
benefits, as it forces organizations to standardize their
functions and processes. However, depending on the
maturity and inherent complexity of a business, outof-the-box
solutions may not provide much needed
CFOs must also be aware that customizing cloud
technology to conform to the business can be an
exceedingly costly and resource-heavy undertaking
that can often be just as costly as customizing an onpremise
As such, mapping an entire organization's business to
a cloud solution may not always make sense. Thus, a
hybrid approach allows businesses to take advantage
of the cloud in an agile fashion by enabling migration
of certain applications to the cloud, while
simultaneously winding down existing on-premise
Finance decision-makers must look at the enterprise
as a whole to determine which areas of the business it
makes the most functional and financial sense to
deploy as a cloud service, and which business
functions can and should be continued to be
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 10
With the hybrid
available with SAP
choose their own
blend of cloud
solutions and onpremise
ease of use and
their access to
SAP’s deep Finance
Thack Brown, GM,
Global Head LoB Finance,
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 11
As CFOs devote more time to strategic
issues that affect the business, the
focus should be on getting the right
operating model in place.
James Meader, Advisory Partner (Ernst & Young, LLP)
It’s about the operating model
Any decision to adopt cloud services should ultimately be driven by business needs and goals alongside enterprisewide
strategy. Global CFOs and finance decision-makers at leading organizations are transforming their internal
structures and processes to ensure they are well positioned to optimize strategic opportunities.
The starting point of any transformation, regardless of scale, entails deploying the right enterprise operating
While the cloud service and deployment models are key components of any cloud adoption approach, the operating
model encompasses an organization's wider strategy.
The enterprise operating model encapsulates the financial, operational and technology environments that provide
an organization structure, along with the most effective and efficient processes.
The operating model enables an organization to align its business with its strategic vision. Finance can continue to
provide traditional roles; however, the optimal operating model will empower finance to become a strategic partner
with the ability to help the organization realize value-added, tangible business benefits.
For CFOs, cloud-based solutions are not just about streamlining the finance function and reducing IT costs, they
are about enabling finance to become a strategic partner and a catalyst in driving the business forward; the
operating model is the starting point.
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 12
Cloud computing is rapidly evolving and finance
executives, more than ever, are finding they must
navigate an unprecedented period of disruption and
CFOs who truly understand cloud technology, as well
as the associated challenges and risks, are better
placed to manage the impact of cloud computing on
the finance function and potentially gain a competitive
advantage over less informed competitors.
Moreover, CFOs must engage an agile innovation
strategy focused on deploying the right operating
model in order to realize fully the benefits of cloud
In EY’s experience, organizations that fail to make a
robust cloud risk assessment often need to make
subsequent, costly changes to the cloud model,
thereby negating any savings gained from cloud
EY recommends that organizations develop a clear,
attainable cloud strategy, including an appropriate
operating model accompanied with a cloud risk
management approach to mitigate risks and avoid a
premature move to the cloud.
EY has a proven framework for cloud models, along
with risk assessments and broad-based diagnostics to
evaluate and optimize a cloud strategy that enables
minimal disruption while accelerating an organization's
The author of this report and key contacts for more information are listed below:
+44 20 7951 3241
+44 20 7951 0045
+49 89 14331 13590
+1 212 773 5949
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 13
EY Advisory: at EY, our purpose is to build a better
working world for our clients, our people and our
For Advisory, a better working world means solving
big, complex industry issues and capitalizing on
opportunities to help deliver outcomes that grow,
optimize and protect our clients’ businesses. The
unique and ongoing collaboration between EY
consultants and our clients results in better
Outcomes and results: we are driven by answers
and outcomes, and measure success by the results
we deliver. Our clients face a world of constant
change and unpredictability, which requires new
ways of thinking. A successful project leads to
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Collaboration: collaboration is at the heart of our
culture and who we are. With every client, we work
relentlessly to listen, challenge and refine the
thinking to arrive at a truly co-created outcome
and valued client experience.
Cloud computing knowledge: EY has proven
frameworks and technology assessments based on
leading practices and standards. We combine
thought leadership with real-life implementation
experience to help clients manage risk.
Agile Business Finance: EY has a holistic approach
to address the impact on the entire finance
organization, including finance process
innovation/flexibility, IT simplification and
Implementation of SAP Simple Finance.
Breadth of capabilities: our breadth of capabilities
in growth, risk, strategy and execution services
enables us to become a trusted collaborator, no
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Global footprint: our ecosystem is a globally
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that spans the breadth of the whole Advisory
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other service lines, as well as relevant external
third parties. It ensures we approach our projects
in unexpected ways to deliver better working
© 2015 EYGM Limited. All rights reserved. Finance in the cloud 14
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About EY Advisory
In a world of unprecedented change, EY Advisory believes a better
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From C-suite and functional leaders of Fortune 100 multinationals to
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The better the question. The better the answer. The better the world
© 2015 EYGM Limited.
All Rights Reserved.
EYG/FEA/OC no. AU3452
This material has been prepared for general information purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors
for specific advice.