SHOULD THE CLOUD BE IN YOUR FUTURE?

Applications offered in the cloud—or better described as software-as-a-service (SaaS) applications—are expanding rapidly. Are these applications appropriate for small to medium-sized entities (SMEs)? Or are they intended for large corporations? Perhaps surprisingly, SMEs generally have more to gain from SaaS offerings. According to PricewaterhouseCoopers’s 2014 HR Technology Survey, “While the cloud holds promise for organizations of any size, our survey shows that small and mid-market organizations currently comprise the bulk of those moving core transactional processes, such as HR and payroll, to the cloud. For example, more than 70 percent of our survey respondents with core HR and payroll in the cloud have less than 5,000 employees.”

WHY SAAS?

SaaS providers offer fully functioning applications on a subscription basis and provide the hardware and all IT services to run the software. Subscribers access the software via a Web browser. The typical SaaS application functional upgrade cycle is three to four months—a much faster upgrade cycle than in-house software and without distracting IT “upgrade projects” because all upgrades happen “behind the scenes.” While all applications benefit from user feedback, a faster upgrade cycle puts improved functions, reports, analytics, and dashboards into the hands of their subscribers sooner.  

Another major advantage of SaaS for SMEs is that they avoid the distraction of building the physical and IT resource infrastructure required for in-house systems. According to Lance Walter, chief marketing officer of Host Analytics, “SMEs, especially fast growth and technology companies, are some of the best suited companies for the cloud. These companies devote their talent and resources to developing their own products rather than building infrastructure. Some of our largest clients, like Tesla Motors, became customers when they were very small.”  

The SaaS provider amortizes the infrastructure costs over tens, hundreds, or thousands of customers. Therefore, it can offer an application with speed and features that a typical SME can’t afford to run in-house. Access to these features is more important to SMEs than the cost benefits, especially when compared to in-house systems they can afford. According to KPMG’s 2014 Cloud Survey Report, “Executives are increasingly realizing that cloud can be a catalyst for process improvement as well as a driver of business transformation…Cost efficiency is clearly less of a driver today than it was two years ago, as more organizations seek to explore greater cloud potential for business transformation.” Also, “executives feel implementing the cloud has helped them improve business performance (73 percent), improve levels of service automation (72 percent), reduce costs (70 percent), rapidly deploy new solutions (67 percent), and achieve other important business objectives.”  

Accessing SaaS applications using only a Web browser supports the use of a variety of devices, such as PCs, tablets, and smartphones. Ease of access fosters greater collaboration, which improves insights, depth, review, and, thereby, accuracy of the information. As more stakeholders access the information more often, you’ll be able to quickly identify if plans are going off track or if the information doesn’t accurately reflect the realities of the business.

SECURITY

Data security/privacy is critical to SaaS providers’ business, so they devote a much higher percentage of their resources to security than a typical SME. SaaS applications typically run on internal or hosted platforms, and providers make available Service Organization Control reports, which the American Insititute of Certified Public Accountants (AICPA) describes as internal control reports on the services provided that contain “valuable information that users need to assess and address the risks associated with an outsourced service.” A recent research paper published by the Chartered Institute of Management Accountants (CIMA), titled “The Effects of Cloud Technology on Management Accounting and Decision Making,” reports that, “In spite of public perception, cloud providers can typically provide more secure services than that which most SMEs can afford.”  

IMPLEMENTATION

The move to the cloud will typically require changing some processes to adopt the methodology used by the SaaS provider. This is an easier process for SMEs that have outgrown manual or immature processes, and, in most cases, it should result in improved internal controls and oversight over the process. With a good SaaS application, you leverage a framework established and supplied to satisfy the needs of many businesses in many industries. Remember, though, that customization likely isn’t an option.  

For multi-needs functions like recruiting, compensation, and/or payroll, you must prioritize which requirements are most important for your business, rank the SaaS offerings you are evaluating, and then consider how the provider will deliver on the less important needs in the future. Ask the vendor where it is placing its development bets in the future and the timeline of development, and then assess if you feel this is achievable. Request a list of references, and ask them if the provider delivers on its development timeline. According to PwC’s 2014 HR Technology Survey, “113 respondents cited a ‘readiness to give up customizations and embrace a SaaS mindset’ as an implementation challenge.” Choosing an application that has a functionality gap in a significant need with the hope (or promise) that the vendor will close the gap quickly is a recipe for implementation disaster.

OUR ROLE

The cloud has come of age and can now offer substantial upgrades in functionality to SMEs. Management accountants should be leading the way. We have the skills to identify appropriate SaaS solutions; help the implementation run smoothly; ensure the information provided is complete, accurate, and presented at the proper level of summation; and ensure our organizations take full advantage of the benefits.  

DID YOU KNOW?

SaaS applications in the cloud include:  

1.  Human Resources: Compensation, Recruiting, and Payroll
2.  Governance, Risk, & Compliance (GRC): Internal Controls, Control Management, Internal Audit, and Risk & Compliance Management
3. Enterprise Performance Management (EPM): Planning, Forecasting, and Budgeting
4. Customer Relationship Management (CRM)
5. Accounting
6. Financial Reporting and Disclosure Management
7. Data Analytics, Data Warehouse, and Big Data Analysis