workday cloud silver bullet finance cfo final

8/2/2019 Workday Cloud Silver Bullet Finance CFO Final

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CLOUD COMPUTING:A silver bullet or inance?CFO Webcast sponsored by Workday

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CLOUD COMPUTING: A silver bullet or inance? | workday

Contents:About this Report: 2

Executive Summary: 2

Part One:Inormation Needs o the Modern CFO 3

Part Two:

Parting the Cloud 4

Part Three:

Countering Misperceptions 5

Part Four:

Implementing Cloud-Based Solutions 6

About this Report:Cloud Computing: A Silver Bullet for Finance is drawn rom

research, interviews and comments made by panelists at a

November 2011 Web cast sponsored by CFO Publishing and

Workday. CFO Publishing is an award-winning media busi

ness that reaches over 400,000 corporate executives in theUnited States, and includes CFO magazine, CFO.com, and

CFO Research Services. Workday is a leader in enterprise

class, sotware-as-a-service (SaaS) solutions or Human

Capital Management, Payroll and Financial Management.

Panelists or the Webcast were:

Craig Butler

Chie Inormation Ocer

AAA Northern Caliornia, Nevada and Utah

Michael Mitchell

Principal, Emerging Solutions

Deloitte Consulting LLP

Mark Nittler

Vice President, Financial Applications Strategy

Workday

Moderated by: Russ Banham

Contributing Editor

CFO magazine

Executive SummaryThe benets o cloud computinga high return on

investment, greater sta eciencies, optimization o IT

resources, and enhanced visibility and access to inorma-

tionhave piqued the interest o CFOs and nance leaders

who are actively evaluating the risks versus the rewards

o the cloud delivery model. Although a steady migration

to the cloud is happening in many areas o the enterprise

nance proessionals still have questions regarding the

security, perormance, privacy, risks, and the actual cos

and value o cloud computing. This white paper discusses

the benets and challenges o Finance in the Cloud, why

the cloud may be an appropriate platorm or Finance, andhow a move to the cloud has the potential to transorm

business operations.

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Part One:Inormation Needs o the Modern CFOThe role o the Chie Financial Ocer has evolved over the past

decade to be a strategic partner to the CEO and other cross-

unctional leaders in steering the organization orward to drive

improved business results. While CFOs still manage corporateexpenditures, endeavor to improve protability and assure

compliance with ar-reaching and constantly shiting nancial

and accounting rules and regulations, they must also be able to

manage corporate risk and help steer the strategic direction o the

business.

Many CFOs are hindered in this quest by inecient nancial

processes and ineective on-premises ERP (enterprise resource

planning) systems that cause a state o disconnection between

them and the rest o the business. Legacy nancial applications

are oten outmoded and ill-equipped to deliver timely inorma-

tion, and the cost and time involved in upgrading on-premise ERP

systems tax patience and steal ocus. These challenges can cause

undue anxiety or a CFO, who in the post-Sarbanes-Oxley environ-

ment must sign o on the accuracy o the companys nancials.

While traditional ERP technology systems were created to process

transactions, they were not designed or planning and decision

support. Enabling these systems to support the new ways o

governance, decision support and planning is elusive, requiring

the implementation o add-ons and upgrades that are time-

consuming, costly and rustrating (See Figure 1). As Mark Nittler,

vice president o nancial applications strategy at Workday,

describes the legacy systems, Theyve become a hindrance or

nance as it tries to transition rom a steward o value preserva-

tion to a business partner in the value-creation end o the busi-

ness, he explained. The traditional systems are doing what they

were designed to dotransaction processingand they do this

well. But, when it comes to control, analytics and reporting, they

just werent designed or that. More modern cloud-based ERP

systems, on the other hand, have these vital eatures designed in

rom the beginning.

Figure 1: Traditional ERP System Shortcomings

The drawbacks o the traditional systems can be boiled

down to the ollowing:

1. Since their architectures were not built or modern gover-nance and analytics, these issues tend to be addressed

with unctionality that is layered onto the core system,

i.e., not part o the core system;

2. The development and delivery cycle is very slow, resulting

in new releases that are typically 18 to 36 months apart;

3. The upgrade process is rustratingly dicult and expen-

sive, compelling many companies to delay it, which

results in the organization being three to our years

behind the current vendor release.

While Mitchell agreed with Nittler that traditional ERP systems

remain useul or transaction processing, they all behind when

it comes to data analysis. The transactional data has to be

re-aggregated by BI (Business Intelligence) systems to accom-

plish the analytical decision-making, he said. Youre bolting

on layer upon layer o new ancillary systems, a process that is

expensive, eats up time and creates an inability or nance to

react quickly and authoritatively to the transactional data rom

an analysis standpoint.

Nittler brought up another rustration with traditional

on-premises ERP systems. A recent release o sotware will

be eighteen to twenty-our months old by the time it is imple-

mented, and by then there are only a raction o potential

users on the release, he said. You can be years behind the

current upgrade, which is rustrating when you are in a volatile

accounting environment that can create expensive governance

and control risks. Even i the desired unctionality is delivered in

the latest release, most customers are not in a position to take

advantage o it.

As an example, Nittler cited upcoming Financial Accounting

Standards Board regulations mandating new accounting treat-

ment or leases on the balance sheet. The new rules, expectedto be in place by the year 2015, require vendors to update their

current lease accounting treatment in their ERP systems.

Those updates will likely come at a rate o two or three a year,

and there will be a rush just beore the rules kick in to imple-

ment them, Nittler said. The likelihood o receiving usable

lease accounting capability rom traditional suppliers by the

deadline is slim, and even i Finance is able to implement the

update in time it will cost a lot o money.

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As a result, many organizations will be compelled to

address the lease accounting treatment outside their

on-premises ERP systems. Said Nittler, Companies will

be dis-integrating their enterprise technology once again,

pulling one more thing out o the system o record and

putting it on spreadsheets. There needs to be a better way.

Part Two:Parting the Cloud

The better way is cloud-based nance applications. Cloud

computing is the descriptor given to technologies that provide

computation, sotware, data access, and storage services, in

which the end-user does not require knowledge o the phys-

ical location and conguration o the system that delivers the

services. A parallel concept is the electricity grid, whereby

end users consume power without needing to understand

the component devices or inrastructure required to provide

service. In the sotware-as-a-service (SaaS) cloud model, the

vendor supplies the hardware inrastructure and the sotware,

and then interacts with the user through a ront-end portal.

Since the provider hosts both the application and the data, the

end user is ree to use the service anywhere.

SaaS has touched nearly every industry, changing the way

countless organizations do business. The benets are straight-

orwardcost reduction, greater fexibility, quick deploy-

ment, lower implementation risk, better unctionality than

existing solutions, and a high return on investment. According

to a 2011 survey by the Institute o Management Accountants

(See Figure 2) on how nance views cloud-based solutions,

the desire to streamline cross-unctional business processes is

the primary reason companies moved nance applications to

the cloud.

Figure 2: What is your primary driver to move your

current accounting/ERP system?

The benets o cloud computing helps explain why research

organization Gartner predicts that by 2012, 80 percent o

Fortune 1000 enterprises will use cloud-computing services

For now, though, Finance lags other corporate entities like HR

IT and sales in cloud adoption rates. According to a survey by

Deloitte and CIOnet in May 2011, only 10.4 percent o respon-dents had implemented cloud solutions or nance (See Figure

3). Although the survey only looked at adoption rates within

the European CIO community, the ndings are likely similar to

U.S. statistics.

Figure 3: Which business units within your company

are currently using cloud computing solutions

IT 20.7

Sales 17.1

HR 13.1

Finance 10.4

Marketing 8.5

Service 8.1

Production 6.8

Logistics 5.4

Other 5.4

Controlling 4.5

5% 10% 15% 20% 25%

Indeed, Finance may be the nal rontier or SaaS appli

cations. Given the benets, it is expected to catch up

soon. Finance systems in the cloud provide unique and

powerul opportunities or Finance to enhance current ERP

system experience or compliance, governance and process

controls, as well as data updates and audit trails, said

Mitchell rom Deloitte. From an audit perspective, this

means a better auditing ramework. Details are captured

and comments explain the `why behind each step in the

business process.


Improve businessvisibility 9%

Need a system

with betterscalability7%

Require moresophisticatedunctionality:12%

Streamline crossunctional businessprocesses: 32%

Better supporta distributedorganization: 17%

Reduce overalIT maintenancecosts: 23%


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Finance is urther assisted by a cloud-based model to e-

ciently and eectively stay abreast o regulatory changes.

Newer cloud systems were developed in the post-Sarbanes-

Oxley, post-IFRS world, meaning that the technology and the

engineering were created with these regulatory challenges in

mind, Mitchell explained.

The unctional capability o cloud nance solutions also

warrants attention. Mitchell noted that newer cloud systems

have an intrinsic workfow component that controls trans-

actions, preventing users rom going o-script on a busi-

ness process. Some object-oriented cloud-based nance

systems urther allow BI reporting capabilities, Mitchell

added. Theyre coming online quickly with a broad enoughspectrum o unctionality to make them viable alternatives to

on-premises systems. (See Figure 4)

As key fnancial processes migrate to the cloud,

other benefts include:

A much aster closing o the books, reeing up nance to

invest more time in analyzing the results than processing

them.

A single repository or up-to-date inormation,

Easing o distribution o data to end-users, thereby

enhancing collaboration and reporting capabilities.

Computing capacity scaled to shiting IT needs, thus

eliminating large, upront inrastructure costs.

Despite these many competitive plusses, why has Finance

been slow to migrate to the cloud? The next section mulls somepossible reasons.


Figure 4: Cloud-Computingwith Workday

Economic

Advantage

Enterprise-Grade

Security

Always Current Global

Consistency

Partnering

Relationship Decrease cost

Predictable cost

No depreciation Faster

implementations

Liberate IT

resources; easier

maintenance &

updates

Lower training

costs

Higher adoption

Workday proactively certifieson the leading and strictestsecurity standards:

SAS-70 Type II

SSAE 16 Type II

ISO 27001

Safe Harbor Self-Certification

Workday also providesenterprise-grade protectionsfor:

Physical Security

Database Security

Network Security Data Backups

Data Segregation

Disaster Recovery

Delegated Authentication

Leverage the most

advanced

technologiesavailable

Better compliance

controls; Lower

financial and

regulatory risk

System is always

current

Automatic upgrade to

current version

Latest capabilitiesavailable immediately

Regularly deliveredinnovation

Better

compliance

controls Single, global

source of truth

Unified platform

for faster

business-driven

insight

Workday

earns business

& renewals Integrations

ecosystem

Shift operational

responsibility to

vendor


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Part Three:Countering MisperceptionsAt present, the global cloud computing market is worth an

estimated $40.7 billion, according to Forester Research.

Many analysts predict exponential growth in cloud-based

nancial applications in the next ew years. A recent studysponsored by AT&T and conducted by independent research

rm Verdantix indicates that companies plan to accel-

erate their adoption o cloud computing rom 10 percent

o their IT spend to 69 percent by 2020, a good proportion

o it invested in nance applications. A pulse survey taken

during the Webcast sponsored by CFO Publishing and

Workday seems to back up these expectations:

Figure 5: Votes received: 117

Which o the ollowing describes your

organizations cloud adoption?

We already adopted the cloud in one or more areas o the

business

41%

We will probably adopt the cloud in the next two years

30.8%

We have no plans to adopt the cloud in the next two years

28.2%

Despite this somewhat optimistic prognosis, Finance has

been slow to join the parade. Part o this has to do with

relative immaturity o cloud solutions. A June 2011 survey o

413 end users and vendors by North Bridge Venture Partners

indicates that 26 percent o respondents were awaiting

market maturity beore adopting a ormal cloud strategy.

A slightly higher percentage in the Webcasts second pulse

survey also is waiting in the wings:

Figure 6: Votes received: 94

In fve years, what will be the uture o fnance in

the cloud?

Finance in the cloud will be standard are in most organizations

36.2%

Finance in the cloud will move slowly toward becoming

the standard47.9%

The cloud will be standard in other areas o the business, but not

in inance.7.4%

Finance in the cloud will be supplemented by some other technology

8.5%

Another reason why Finance has not moved quickly to

implement cloud-based nance applications is a misper

ception o its value and risk. The latter includes concerns

over data security, compliance and legal issues, the risk o

losing governance or control, and perormance/reliability

worries. These are air concerns, but or the most part theyhave been resolved, Nittler said. This is `mission critical

to us and we have very tight controls. (See Figures 5 and 6

Data in Workdays cloud-based nance solution is

encrypted at Department o Deense-type levels, Nittle

said. There is no backdoor to the systemno database

administrator can go in and change data or pull data out

Everything has to go through strict control processes

involving data at rest, data in motion or data access. From

a transactional processing standpoint, everything is date

time-stamped.

Craig Butler, CIO o AAA Northern Caliornia, Nevada and

Utah, a ederation o 69 automobile clubs, stated anothe

reason or the slow adoption o the cloud by Finance

Many people perceive the cloud as just another iteration

o an Application Service Provider, Butler said. ASPs were

a model where you had a particular application, but didnt

want to invest in the inrastructure to host it. So, you went

out to a provider and what they did in their data center was

build a single instance o that application and then hosted

it over the Internet. As the cloud gained momentum, the

perception developed that it was just a new version o ASP

Its not; its so much deeper than that.

The next section will explore how Finance can best leverage

the value o the cloud.



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Part Four:Implementing Cloud-Based FinanceSolutions

Inerior data breeds inerior decisions, yet many organizations

oten doubt the accuracy o the data used to create peror-mance metrics and indicators. Moving nance applications to

the cloud can alleviate these concerns.

They did or AAAs Butler. We were in a unique situation at

AAA, where we were going through a signicant change in

the business that oered the opportunity, rom a technology

perspective, to hit reset and look at things in a dierent way,

he said. I had recognized that over the past couple years, AAA

was stacking up more and more on-premises applications,

and all the areas this aects, rom inrastructure to networks

to databases. I was spending more and more time taking care

o the applications and keeping them up and running, and less

time actually partnering with the business.

To alter the paradigm, Butler contracted with Workday to

implement its cloud solution or Human Capital Manage-

ment and Finance. For me, the greatest benet has been the

ability to spend more time now with the business, Butler said.

Overall, were happy with where were going. As I made this

journey, one o the things I didnt realize was the change in

the kind o employee skill set I needed on my IT team. As we

became more immersed in the cloud and started to make more

investments there, I realized that I was starting to hire more

people that were slightly less technically oriented and more

business-ocused. And that is a good thing.

Regarding the aorementioned concerns over data security,

consistency and access, Butler said he addressed these issues

by educating himsel on the vendor marketplace, and then put

orth contract terms and conditions to assure these issues were

resolved. The key is to understand how a vendors business

model works, he explained. In our case, the amount o secu-

rity Workday has in place ar exceeds anything that I would

have been able to secure on my own. It may seem a bit uncom-

ortable at rst not to see any servers on-site, but you get used

to this ast.

O course, it is the servers that pile up costs or companies. Iyou add up the technologythe databases, servers, rooms

and storageand combine this with the people doing all o

this work, it can be exorbitantly expensive, Nittler said. SaaS

takes that all o the table and puts it onto the vendor. Certainly

its not all reethere are licensing ees involvedbut its

much more economically ecient.

To become a world class Finance organization leveraging the

cloud, CFOs must ride herd on the establishment o a single set

o data denitions and business process denitions. You can

then assure you have quality data, which permits the delivery

o quality analytics, said Nittler. This isnt easy with a tradi-

tional on-premises model because in large-scale implementa-tions, every location in your organization oten has a separate

instance o that system.

With a global SaaS deployment, however, you can more easily

align your business because they are all using the same system.

You set up your chart o accounts, your process and your

data denitions, Nittler explained, and then everybodys

on the same page. Down the line, there will still be a role or

on-premises sotware in the Finance shop, but on a bespoke or

special purpose basis. SaaS is a mass-customization model;

its not a custom sotware market, Nittler explained. Some

will continue to build their own systems or use traditional ones,

but the trend is denitely toward Finance in the cloud.

Mitchell agreed: It will move slowly on the uptake, due to the

need to adopt standard business processes, but once we see

greater unctionality this is the way it will go.

In our case, the amount osecurity Workday has in place arexceeds anything that I would have

been able to secure on my own. It mayseem a bit uncomortable at rst notto see any servers on-site, but you getused to this ast.

- Craig Butler, CIO, AAA Northern Caliornia, Nevada and Utah


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