cfo survey report on the economics of the cloud
TRANSCRIPT
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Tableofcontents
ExecutiveSummary 3
MethodologyandtheSurveyUniverse 4
SurveyFindings 5
Appendix:Respondentcompanieslist 10
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Executive Summary
"The first rule of any
technology used in a
business is thatautomation applied to
an efficient operation
will magnify the
efficiency. The
second is that
automation applied to
an inefficient
operation will magnify
the inefficiency"
- Bill Gates
"Any sufficiently
advanced technology
is indistinguishable
from magic."- Arthur C.Clarke
"Once a new
technology rolls over
you, if you're not part
of the steamroller,
you're part of the
road."- Steward Brand
"We're changing theworld withtechnology.
- Bill Gates
The advantages of cloud-computing are commonly known: You dont need
upfront infrastructure investment; scaling up is relatively easy; and the service
provider is likely to be more efficient than your company.
The ability to pay as you go from a service provider rather than spending
upfront feels natural to a CFO theres nothing new about buying services.
Whats new is that cloud-computing offers a delivery and financing alternative
to one of the bastions of corporate capital expenditures: IT.
If a CFO can see better cash flow, lower risk and visibility, he or she will likely
become a cloud-computing convert in no time. It is, however, not always a
bed of cash flow for everyone. Service level agreements, increasing monthly
costs and data ownership are all potential trouble spots that will need to be
resolved.
While it may not make sense for a company to apply a cloud-computing
model to every enterprise service, smart CFOs should seriously examine the
trend for some of their services. The big question now isn t whether to adopt
cloud computing, but rather, where and when to adopt it.
The CFO Institute, in association with Microsoft, conducted a survey amongstCFOs and senior finance professionals to gather their perceptions andunderstanding of cloud-computing, and its potential economic and efficiency
benefits.
Our CFO Survey revealed the following:
The majority of CFOs consider investment in technology as a meansto cut costs.
Reduced up-front costs, increased flexibility, and competitiveadvantage are the key benefits of implementing a cloud computingsolution.
Over 30% of CFOs surveyed are already using or are considering touse a cloud computing solution, indicating a keen interest in cloudtechnology.
A concern regarding security and compliance was the number oneimpediment to large Indian corporations in adopting a cloud
computing solution, followed by loss of control and compatibility.
One third of CFOs consider themselves responsible for taking thelead in implementing a functional and cost effective cloud computingsolutions. The majority feel that it is the CIOs responsibility
A high percentage of CFOs were not aware that cloud computing is agreen technology.
In conclusion. Given the CFOs belief that cloud computing can offersubstantial savings, process flexibility and competitive advantage, they wouldbe keen to explore its implementation provided issues related to security andcompliance and loss of control are managed effectively. CFOs also need to
be convinced that cloud computing is a proven and tested technology, whichthey expect will happen in due course of time.
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Methodology and the Survey Universe
The survey was conducted by the The CFO Institute, in partnership with Microsoft. The results arebased on approximately 30 individual CFO responses.
(Please refer to the Appendix for the complete respondent companies list)
Respondent companies by sector Respondent companies by size
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SURVEY FINDINGS
The majority of CFOs
consider investment in
technology as a means tocut costs
It is not surprising that a
majority of CFOs consider
investment in technology as
a means of cutting costs.
Those that thought
otherwise considered
investment in technology as
a means to improve
processes. The fact that
costs are reduced is simply
a side effect, says SK
Joshi, Director Finance,
Bharat Petroleum
Corporation.
Reduced upfront costs and
competitive advantage wereconsidered to be to prime
benefits of cloud
computing
helping the company
react quickly to markets
conditions is a benefit that
CFOs are not aware of
The majority of respondents considered reduced up-front costs, increased
flexibility, and competitive advantage as key benefits of implementing a cloud
computing solution. Surprisingly, however, most did not consider its ability to
enable a company to react quickly to changes in market conditions as a key
advantage.
INSIGHT: Michael Schrage, Research Fellow, MIT Sloan Schools Center for
Digital Business explains that the cloud can accelerate and compress both the
development and the test times for innovation and change you can do this
with suppliers and customers. It is a big deal!, he says.
About 10% of respondents
had already implementedcloud computing. 20% are
planning to implement...
Over ten percent of the respondents had already implemented a cloud
computing solution, while another twenty percent are planning to implement in
the near future. A large portion of the respondents had no plans to install cloud
computing solutions, a thought echoed by Robin Banerjee, CFO, Suzlon who
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... those that are not
planning to implementshould seriously consider
the needs of those that
require flexibility from the IT
infrastructure
explains that having already invested heavily in infrastructure, they would
consider it as an option when the time comes to update hardware
infrastructure. His concerns about cloud computing not being a proven
technology would hopefully get addressed by then, he says.
At IL&FS, their internal security policy does not allow the use of wifi networks,thus making it difficult to even consider cloud computing as an option, says SN
Mukherjee, Chief Operating Officer.
INSIGHT: Michael Schrage emphasises that the question that needs to be
addressed explicitly is "Are the business unit heads satisfied with the flexibility
offered by their existing IT infrastructure, as they are the ones that need to be
responsive and adaptive to the market changes. Just because you've spent a
lot of money on something doesn't mean you're getting value. There's a saying
in America that goes "where you stand" depends on "where you sit". The CFO
may be happy with how things are going, but the business unit heads may
think otherwise. Cloud computing can offer low cost flexibility with quick turnaround times., he says
Concerns regarding security
and compliance are the
number one impediment to
implementing cloud
computing...
Currently, a concern regarding security and compliance was the number one
impediment to large Indian corporations in adopting a cloud computing
solution, followed by loss of control and compatibility.
SN Mukherjee explains when we send an email, we don't know where it
goes it goes into a cloud. We are moving from data abstraction to
infrastructure abstraction, which can be unsettling.
11.5
23.1
50.0
15.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Alreadyusingit Plantouseorare
consideringusing
it
Noplans Don'tknow
WhatisyourstandpointonadopPonofcloud
compuPng?
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The majority of CFOs surveyed were fairly neutral when it came to their
impression of reduced time to impact compared to regular investment in IT
hardware/infrastructure.
Although the time to implement a cloud computing solution may be fast,
additional time will be required to prove that it works, says Robin Banerjee.
INSIGHT: Time to Impact - if a business unit has a new and interesting
idea, it can be easily tested on the cloud. It can give a customer the ability to
customize an order, which would otherwise take forever on traditional ERP
systemsYou use the cloud to prototype the template with a few customers...
learn from that, and that becomes your gateway. You then use middleware to
1.3
0.0
5.1
11.5
5.1
3.8
1.3
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
1
2
3
4
5
6
7
CanCloudCompuPngsubstanPallyreducethePmerequiredto
implementanITsoluPon,ascomparedtoatypicalupfrontCAEX
basedITprojectdecision?
1=Stronglydisagreeand7=Stronglyagree
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integrate the innovation with your existing ERP system, Michael says.
The majority of CFOs have
placed a high priority on
reducing their capex to opexratio...
The majority of companies have placed a high priority on reducing their capital
expenditure to operating expenditure ratio, which is all the more reason to
consider cloud computing as an effective means to reduce capital expenditure
and increase IT infrastructure flexibility.
INSIGHT: Cloud computing and traditional computing (ERP etc) are not
necessarily rivals. If you collaborate with the CIO and business unit heads, you
can have the best of both worlds. You can have the cloud give agility,
nimbleness and responsiveness to business process and business units, andhave the existing infrastructure provide centralized support, Michael says.
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The majority of CFOs feel
that it is the CIO that should
take the lead in
implementing a cloudcomputing solution...
One third of CFOs consider
themselves responsible for
taking the lead in
implementing a functional
and cost effective cloud
computing solution. The
majority feel, however, that
it is the CIO who should be
held responsible for taking
the lead, and changing ITs
internal charging model to a
pay-as-you-go type
framework. Over ten
percent felt that the CEO
should take the lead.
Many CFOs are not yetaware that cloud computing
is a green technology...
A high percentage of CFOs
were not aware that cloud
computing is a green
technology.
Cloud computing can save
energy and money. When
an organisation requires
additional computing
power, a cloud computing
set up can draw on its
additional computing power
and resources, just when
its needed. Energy and
other associated costs for
running servers the rest of the time can be avoided. Cloud resources provide a
reserve that can be allocated without the need to pay for the resource sitting
idle in one fixed location. Therefore, cloud computing enables an
organisations IT infrastructure to be far greener than it is currently.
Toknowmoreaboutcloudcomputingpleasevisit:http://www.microsoft.com/india/cloud/
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Appendix
List of respondent companies
1. ABB Limited2. Abu Dhabi Commercial Bank (ADCB)3. Alok Industries Limited4. Bharat Petroleum Corporation Ltd.5. Bosch Chassis Systems India Ltd.6. Ceat Ltd7. DCM Shriram Consolidated8. Ericsson India9. Essar Projects (I) Ltd10. General Insurance Co. Ltd11. Govt. of India12. HCL Infosystems Ltd13. Infosys Technologies Limited14. Infrastructure Leasing And Financial Services Ltd15. Ispat Industries Limited16. JSW Steel Ltd17. Maharashtra State Electricity Distribution Co. Ltd.18. Mother Dairy19. Punj Lloyd20. Reliance Comm21. Suzlon Energy Ltd22. Tata Chemicals Ltd.23. Tata Consultancy Services24. The New India Assurance Co Ltd25. Toyota26. Voltas27. Wipro