Transforming Your Business ManagementWith Cloud Computing

May 17, 2012

Agenda

• What is Cloud Computing

• Key Drivers for Cloud Solutions

• Benefits vs. Risks of Going to the Cloud

• Cloud Computing Trends

• How to Assess a Cloud Solution

IT Options

ApplicationSW

Compute

Storage

Networking

Co-location

ApplicationSW

Compute

Storage

Networking

Space, PowerCooling

On-Premise“DIY”

Cloud& SaaS

"By 2012, more than 66% of independent

software vendors (ISVs) will offer some of their applications

optionally or

exclusively as SaaS.”

On-Premise

• Software developed internally or purchased via a perpetual license

• An up-front capital expense

• Software that runs entirely within the hardware systems of its owner or licensee

• The consumer is responsible for the management of the software installed

• Customers may be on many different releases of the software

Co-Location

• Provisioning of computing services in a third-party co-location center

• Software developed internally or purchased via a perpetual license

• An up-front capital expense

• The consumer is responsible for the management of the software installed

• Customers may be on many different releases of the software

Cloud Computing

Cloud computing is Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand, like the electricity grid. Requires no end-user knowledge of the physical location or configuration of the system that delivers the service.

―Source: Wikipedia

Cloud Deployment Models

• Community Cloud – Shares infrastructure between several organizations from a specific community with common concerns (e.g., security, compliance, jurisdiction), whether managed internally or by a third-party and hosted internally or externally.

• Public Cloud – The cloud infrastructure is provisioned by the cloud provider for open use by the general public. It may be owned, managed, and operated by a business, academic, or government organization, or some combination of them.

• Private Cloud – Infrastructure provisioned solely for a single organization, whether managed internally or by a third-party and hosted internally or externally.

• Hybrid Cloud – A composition of two or more clouds (private, community, or public) that remain unique entities but are bound together, offering the benefits of multiple deployment models. It can also be defined as multiple cloud systems that are connected in a way that allows programs and data to be moved easily from one deployment system to another.

Cloud Service Models

• Software as a Service (SaaS) – Employs the provider’s applications running on a cloud infrastructure. The applications are accessible from various client devices through either a thin client interface, such as a web browser (e.g., web-based email), or a program interface. The provider manages or controls the underlying cloud infrastructure with the possible exception of limited user-specific application configuration settings.

• Platform as a Service (PaaS) – Consumer-created or acquired applications supported by the provider are deployed onto the cloud infrastructure which the provider manages or controls. The consumer has control over the deployed applications and possible configuration settings for the application-hosting environment.

• Infrastructure as a Service (IaaS) – The consumer provisions processing, storage, networks, and other fundamental computing resources where the consumer is able to deploy and run arbitrary software, which can include operating systems and applications. The provider manages or controls the underlying cloud infrastructure while the consumer has control over operating systems, storage, and deployed applications; and possible limited control of select networking components (e.g., host firewalls).

Compound Annual Growth Rate

The Advent of the Business Cloud

#1Technology

affecting financeand IT

54Planning or interested in Cloud

%

GROWTH

6X

Source GartnerUser Adoption Survey, Sep 2010

SaaS Financials Adoption for 2011

Typical IT Budget Allocation

91% Maintenance

9% Innovation

12

Current

66% on old

versions

Source: ERP in SME, Aug 2010

On-Premise Holds the Business Back

Greater need for business

visibility

Local sales tax changes

Increasingly distributed business

More selling channels

Shrinking IT resources

Launching new subs and

geos

New businessmodels

Changing financial

reporting

Version Locked Business Management Software is a Liability in a Sea of Change

What Businesses Are Looking for in TheirNext ERP

Reduce overall IT maintenance costs

23%

Better support a distributed orga-

nization 17%

Need to Stream-line cross func-tional business

processes32%

Require more sophisticated functionality

12%

Need a system with better scalabil-

ity7%

Improve business visibility9%

N=809

Productivity Benefits Cited as Key Drivers for Cloud ERP

Speed of deployment3%

Lower cost of ownership

14%

Access data from anywhere at any-

time38%

Instant access to new functionality

10%

Lower upfront expenditure

4%

Streamlined business pro-

cesses31%

N=805

Why Run Your Business in the Cloud?

© NetSuite 2010

Stay abreast of latest accounting and regulatory changes

More easily scale a distributed, global organization

Reallocate IT budget from maintenance to innovation

Get automated upgrades and eliminate “wasted” maintenance

Benefits from economies of scale for security and data mgt.

Use a modern, more easier to integrate solution

Typically get more tightly integrated analytics

Todays organizations are increasingly distributed

Ideal for inherently distributed activities:– Financial Planning– Selling and Order Taking– Distributed finance team

Facilitates off-shoring / shared services

Easily supports temporary and home workers

Real time view into centralized data

#1 Benefit of Cloud ComputingReported by Finance

Executives

Cloud Enables the Distributed Organization

Trait Business Benefit

Quote to cash integration Reduce cycle time and overhead

Procure to pay integration Eliminate spreadsheets

Web based T&E management Improve employee productivity

Comprehensive audit trail Reduce audit times and improve compliance

Self service dashboards & reporting

Reduce time spent “hunting”Collaboration and “actionable

One view of the customer Improve team collaboration, reduce redundancy

Keys to Cloud ERP Success:ERP that Improves Organizational Efficiency

Trait Business Benefit

Support multi-sub and COAs Manage consolidation times as business grows

Country specific tax and accounting regulations

Eliminate need to add ERP to support local needs

Automated sales tax management Calculate sales taxes across channels and geos

Drill down from corporateto subsidiaries

Ensure straight line visibility from HQ to geos

Multi-language management Ensure you can localize solution to geo needs

Keys to Cloud ERP Success: ERP that Supports Growth

Trait Business Benefit

Comprehensive web services integration

Integrate with suppliers, channels, and services

Graphical workflow management Empower line of business to automate business process

Managed customization layer Ensure that customizations will not “version lock” application

Mobile and anywhere access Support the distributed organization

Industry functionalityand ecosystem

“Future proof” application

Keys to Cloud ERP Success:ERP that Supports Business Flexibility

Software as a Service

Ideal for the Downturn/Upturn

Low CostLow Cost

Subscription-based Pricing

Eliminates IT Costs

Rapid DeploymentRapid Deployment

Deploys in WeeksOption to Self-Implement

TransparencyTransparency

Pricing, Uptime, Training, Support and Trials All

Online

Ease Of UseEase Of Use

24x7 Web-based AccessBrowser-based Interface

InnovationInnovation

More Frequent Product Releases, Automatic

Upgrades

Renewal-Based ModelHigh Customer Satisfaction

AccountabilityAccountability

Challenges and Opportunities

• Compliance/Governance

• Availability and Reliability

• Performance

• Security/Data Privacy

• Cloud Lock In

• Software Licensing

Today’s Regulatory EnvironmentAnd it just keeps coming!!!

SOX (Sarbanes Oxley) – IT General Controls

HIPAA (Health Insurance Portability and Accountability Act) – Data Security

Graham-Leach-Bliley Act – Financial Privacy Rule

S&P (Standard & Poor’s) – Risk Assessment

PCI (Payment Card Industry) – Data Security Standards

IFRS (International Financial Reporting Standards) – Updated reporting standards

Etc, Etc, Etc!!!!!

SAS 70 / SSAE 16 Reports

• Report issued by a CPA firm that attests to the internal controls implemented at the service provider and their operating effectiveness

• The cost is incurred by the service provider

• Provides reasonable assurance that the required IT General Controls required for compliance are met

Applications: Pros

• Cost Savings– Lowers the upfront cost

to buy the application• Lowers upfront implementation costs and time to deploy

• Less complex processes

• Monthly licenses fees

• Savings on software maintenance costs

– SaaS pricing models provide great flexibility• Easy to start small and grow with your needs

Applications: Cons

• Cost Increases– Doesn’t lower overall cost of ownership

• Additional cost to integrate onsite applications

• Additional training for mandatory upgrades – one code base

– SaaS pricing models based on users/transactions• For larger entities, pricing model may not provide

required bandwidth

– Reporting across SaaS and on premise data sources can require additional reporting tools and data sets

Infrastructure: Pros

• Cost Savings– Reduces upfront cost to

purchase hardware

– The management, support, and upgrading of the software and the infrastructure that supports it is the responsibility of the solution provider

– Employs highly sophisticated security technology and spreads the cost over all customers

Infrastructure: Cons

• Cost Increases– Loss of productivity due to:

• Internet going down without notice

• Solution provider outages

– Difficulty in integrating to applications and data sources that are on premise due to:

• Mandatory upgrades

• Lack of integration tools

Additional Advantages

• Secure data access through Web Access – anytime, anywhere without the IT hassle

• Great for Collaboration-internal & external

• One code base means fewer bugs

• Ability to standardize processes

• Built-in backup for your applications and infrastructure

• Can be part of your disaster recovery plan

Additional Disadvantages

• Many SaaS applications offer fewer built-in features than comparable non-SaaS applications

• Building and maintaining interfaces to other applications can be costly

• Mandatory upgrades

• Loss of unique processes or data requirements

• 100% dependent on the Internet

• Speed and response time dependent on Internet

Important to Note

• Most of the solutions are geared towards small/medium entities but moving upstream

• Share common processes with multiple entities

• 100% reliant on the internet; have a backup pipe/plan

• PC must be sufficiently equipped

• Good implementation is required for good results– DON’T skimp on professional services and support

IDG Enterprise 2012

2012 Cloud Computing

Key Trends and Future Effects

Purpose and Methodology

Survey Sample

Field Work Dec. 20, 2011 –Jan. 12, 2012

Total Respondents

1,682

Margin of Error +/- 2.19%

Audience Base CIO, Computerworld, CSO, Network World, InfoWorld and ITworld sites

Survey GoalTo measure cloud computing trends among technology decision-makers including usage and plans across various cloud service and deployment models, investments, business drivers and impact on business strategy and plans.

Survey Method

Collection Online Questionnaire

Number of Questions

53 (incl. demographics)

Private Cloud Most Readily Adopted Rapid Growth Expected to Continue

Q. Approximately, how much of your organization’s data presently resides in the public, private and hybrid clouds, and will in 18 months?

Long-Term Outlook Shows One Quarter Will Have Majority of IT Ops in the Cloud

Q. Which of the following best describes your long-term expectations for cloud computing at your organization over the next 5 years?

Long-Term Savings Anticipated but Calculating a Challenge

Q. Please rate your level of agreement with the following statements.

Hurdles for Cloud Computing: Security, Access and Governance

Q. What are the top three challenges or barriers to implementing a cloud computing strategy at your organization?

How to Assess SaaS Providers

1. True Multi-Tenancy

2. Regularly Delivered, Vendor-Managed Updates

3. Seamless Integration on Demand

4. Business Driven Configurability

5. World-Class Data Center and Security

6. High-Performance Sustainable IT Infrastructure

7. Predictable Total Cost of Ownership (“TCO”)

8. Faster Deployment

9. Complete Control of Data

10. Liberation from Non-Strategic IT Issues

How to Assess SaaS Providers

• Require a SAS70/Type II or SSAE16 SOC1/Type 2 report

• Try before you buy – it’s in the cloud!

Questions?

Carolyn Duffy, CPADirector, Business Advisory ServicesOffice: 303-298-9600Cell: 303-915-1886cduffy@heincpa.comwww.heincpa.com