Core finance - taking a strategic approach to cloud

This is the third in a series of three blog posts which looks at how a digital finance transformation enables a future-ready finance department - one that can use data, technology and human talent to go beyond governance to provide commercial leadership to the business. In this series I outline how a digital finance transformation enables efficient operations, smart data exploitation, strategic cloud usage, seamless user experience and an expanded role for finance 

This post focuses on the benefits of a strategic cloud approach. The first blog post in the series titled, 'How a focus on the customer can help you fight for a digital finance transformation' can be read here and the follow up on laying the foundation for the future of finance can be read here. 

As organizations continue to plan and execute digital finance transformation strategies, CFOs are looking to reap the business benefits and the competitive advantages offered by cloud solutions.  

The benefits of moving to the cloud are widely acknowledged, and cloud native companies are leading the way in increased revenue and financial performance, improved business agility, and enhanced customer experiences.  

A look back 

If we look back to the late 2000s/early 2010s, upgrades to finance department architectures relied on a single, massive vendor who came in and built out a wall-to-wall technology architecture.  These projects were often spearheaded and overseen by IT teams with limited input from the business.  After several years when the solution was launched, it wasn’t always fit for purpose and finance teams had to build complex workarounds or customizations that made future upgrades challenging.  

Flash forward to the last five years or so and we’ve seen the shift to a heavier reliance on more niche, best in breed solutions that are vendor agnostic, scalable and more cost effective – and offered in multiple deployment models including Software as a Service (SaaS).  

Recently, analyst firm Gartner wrote about an emerging, “fourth era of enterprise business capabilities, or EBC, which demands shorter time to value, a focus on outcomes and a solid core of enterprise business capabilities.” (source) This fourth era of ERP, driven by the willingness to migrate core financial applications to the cloud, will balance the flexibility and expertise offered by the best of breed model with the need to bring together information from across the enterprise to support analytics and AI initiatives required by the business.  

Moving core finance solutions to the cloud 

The finance department, while it traditionally has lagged others in cloud adoptions, has been moving toward an increased adoption of cloud solutions that perform specific tasks – areas like reconciliations, disclosure management, and other discrete business processes.  

But with security and performance concerns around cloud overwhelmingly addressed, CFOs are evaluating more robust cloud platforms for core financial (corefin) applications like the General Ledger and other systems of record.  In fact, Gartner predicts that by 2023, 30% of organizations will leverage financial consolidation capabilities, including account hubs, within their cloud corefin, reducing deployments of third-party tools and 60% of all new midsize corefin projects and 30% of large and global ones will be public cloud implementations. (source) 

Finance Data as a Service (fDaaS) 

This new willingness to migrate core financial systems to the cloud introduces the potential for ‘Finance Data as a Service’ or fDaaS.  A Finance Data as a Service offering is supported by a cloud-based repository for finance certified data, supplemented with external and internal non-finance data.  The information is made available and consumable via a self-service model supported by APIs and standards-based reporting.  Unlike current data lakes or data warehouses which often lack the control required by finance, information is sourced only from finance accurate, audited, and approved data.   

FDaaS introduces several important capabilities.  It provides a platform for statutory and ad-hoc reporting, as well as a foundation for predictive modeling forecasting and analytics.  An API layer over top could allow this information to be used across the business or even by external third parties, like what we’ve seen in the open banking space. By standardizing this in the cloud you gain a solution that’s out-of-the box, standardized, and built for finance. 

As the use of cloud solutions in finance continues to expand, the consideration of how and where to use cloud solutions within the department should be a part of any digital finance transformation. In the end, it’s less about whether you’re leveraging a public or private cloud deployment model and more about having the flexibility to scale and adjust your cloud solutions as business needs and maturity evolve.