Cloud for the tax function: Lessons learned
Companies’ appetite for cloud technology continues to increase. Many organizations treat cloud technology investments as a crucial driver of this transformation — and many tax departments are now ideally positioned to consider and apply several hard-earned cloud-adoption lessons that their counterparts in sales and marketing, finance and accounting and human resources have experienced in the past 18 to 24 months.
Despite the widespread use of cloud technology adoption, misconceptions are commonplace. Cloud solutions, for example, do not negate the need for information technology’s (IT’s) expertise or support. In fact, the experience and know-how within IT functions represent crucial enablers of sound solution selection processes and effective vendor relationship management activities. This makes it incumbent on non-IT managers looking into domain-specific cloud solutions to collaborate effectively with their IT colleagues. Implementation, governance and vendor-management missteps also occur too often. Inattention to recovery time objectives (RTO) and other key metrics in service level agreements (SLAs) are a prime example of a routine oversight. These shortcomings routinely limit the returns companies derive from their cloud investments.
Tax functions may not qualify as an early adopter of cloud technology, but by applying practical insights and lessons learned from cloud adoption experiences to date, tax leaders can sidestep common mistakes while boosting their odds of optimizing their investments in cloud technology. For tax functions, this technology most commonly takes the form of software-as-a-service (SaaS) applications that support tax performance management.
This paper, which is intended to serve as a practical cloud-adoption handbook, provides an update on the cloud technology’s adoption and benefits before highlighting approaches, steps and considerations that tax executives and professionals should work through when pursuing cloud investments.
Adoption trends and challenges
The number of companies adopting cloud-based software has increased significantly in the past few years, and that trend shows no sign of waning.
In 2017, 30 percent of global companies replaced traditional on-premise financial management software licenses with cloud-based software solutions, according to Gartner. By 2020, the research firm projects that figure will increase to 36 percent. By 2025, Gartner forecasts that 50 percent of all global companies will have replaced traditional financial management software with cloud-based applications.
CIO’s annual projection of cloud trends also makes it clear that “the rate of cloud adoption will continue to rise in 2018.” The publication projects that more companies will move from maintaining and running internal cloud infrastructure to the public cloud to save money and reduce IT workloads. This shift is being driven, in part, by vendors who offer to manage the applications for clients and other valuable services such as security, monitoring, high availability, and disaster recovery.
“Some may think that cloud computing already hit its maximum on the ‘hype meter’ over the last few years,” notes Information Week’s Andrew Froehlich. “But honestly, 2018 is shaping up to be the biggest year ever.” Among several factors contributing to increasing cloud adoption in companies of all sizes, Froehlich highlights “a massive IT policy shift of cloud computing as a long-term strategy.”
There are a number of sound reasons for the widespread adoption of cloud technology, including the following:
- Cloud is a lynchpin of digital transformation efforts. As more organizations purse digital transformation initiatives to harness the value of their data, cloud technology solutions are playing a central role thanks to their cost efficiency, ease of implementation and powerful data-management technologies.
- SaaS and cloud technology are becoming an integral part of IT strategies. Cloud technology has grown more alluring to organizations thanks in part to the increasingly robust security most vendors now offer, along with other valuable services and functionality such as monitoring and high availability. As a result, more IT functions are adopting a “cloud-first” approach in which cloud-based solutions are considered first and foremost when the need to replace an existing system or to invest in new software arises.
- Cloud technology offers time-to-value and cost-savings benefits. Most SaaS applications can be implemented much quicker than it takes for on-premise software systems to go live – in a matter of weeks or even days, compared to as long as a year or more, in some cases. Cloud software boasts a lower total cost of ownership than on-premise software, thanks in part to the fact that it removes most, but not all, of the maintenance burden from internal IT functions.
- Better access to advanced functionality and innovation. Thanks to the convenience of Internet delivery, cloud applications can be updated with new functionality much more frequently (e.g., every six to 12 weeks, in many cases) and with far less disruption compared to traditional forms of software (which may be refreshed only once every 18 months). This capability gives companies improved access to functionality and related innovations developed by leading vendors.
By off-loading the majority of the software maintenance and upgrades to vendors, companies also free internal IT resources to focus on higher value activities.
A second article in this series will cover governance, security and integration of cloud technology.