Cloud for the tax function: Organizational strategy
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.
Effective collaborations with IT partners related to the selection and management of a software-as-a-service solution requires some high-level considerations. Tax leaders and other functional executives weighing SaaS application purchases should:
1. Get familiar with the organization’s current digital business and cloud technology strategy;
2. Request that the IT function – and, more specifically (where relevant), IT’s infrastructure & operations group – get involved in the selection process; and,
3. Evaluate how experienced IT and/or the I&O group are when it comes to SaaS investments and support.
Cloud strategies can vary significantly; for example, they might advocate a “cloud-first” approach to new technology investments. At the other end of the spectrum, an organization may not have a documented cloud strategy. Where cloud strategies exist, as they do within a growing number of companies, they tend to lay out how the cloud fits in with the current IT infrastructure, the role the cloud plays in any digital transformation efforts and key requirements or attributes of the cloud technology the company uses.
As emphasized throughout this series, IT’s involvement in the selection and ongoing management of SaaS and other forms of cloud technology is vital. IT’s expertise in several key areas are integral to both conducting a successful selection process, and managing the vendor relationship throughout its lifecycle. These areas of expertise include:
- Data security and vendor risk;
- Integration requirements and connectors;
- Vendor management;
- Service level agreements; and,
- Exit strategies.
From a risk management perspective, IT’s involvement is crucial in assessing a potential SaaS vendor’s data security and privacy capabilities. IT professionals know how to evaluate the quality of processes and technology used to store and transmit data.
From a broader relationship management perspective, the IT function also possesses the expertise needed to craft an effective SLA, which includes selecting the right metrics (e.g., uptime, recovery time objectives and recovery point objectives) to monitor, setting up troubleshooting protocols to quickly address issues as they arise, and laying out a fair process to terminate or renew the relationship once as the agreement ends.
While most IT functions possess this expertise, there are exceptions. Some IT groups have not yet begun to use third-party SaaS solutions. When this is the case, tax managers should be aware of it. The IT tools and processes required to manage external SaaS applications differ, sometimes markedly, from those approaches and tools used to manage on-premise software. In these situations, it is useful for tax and IT to treat the SaaS selection process as an opportunity to learn together about the technology model’s benefits, risks and practices.
Areas of awareness and evaluation categories
The differences between managing on-premise software and SaaS applications can be significant. Once the new solution has been implemented these differences will quickly materialize. As such, the tax department should be aware of some of the most notable differences, including the following:
- More frequent software updates need to be understood and assimilated. One of the benefits of SaaS solutions is that vendors typically improve and upgrade the software far more frequently. Although these updates are smaller in scope and much less intrusive than major upgrades of on-premise software installations, they pose different challenges. SaaS vendors will typically announce the date that an upgrade will appear and then provide customers with a period of time (30 days is routine) to share any concerns about the updates and any potential business process adjustments they might require.
- External vendors, rather than IT colleagues, operate the software and are responsible for security. If tax managers have trouble accessing data from an on-premise software system, they can call IT, request an import or expert operation and IT responds by writing a query to fulfill the request. While that approach has plenty of potential shortcomings, it remains an inner-organizational process. If tax managers want to make changes to how data is exported from a SaaS application, that request must go to the vendor — ideally with IT’s involvement to ensure that any relevant governance requirements are satisfied. SaaS vendors are also ultimately responsible for data security. That capability should be carefully evaluated, with IT’s expert assistance, during the evaluation process and consistently monitored throughout the vendor relationship.
- Workflow, processes and governance changes require vendor interactions. Business processes and organizational IT environments change frequently, especially amid the high volume of disruptions that most companies contend with today. When new software systems, IT infrastructures and business processes changes affect a SaaS solution, those changes should be communicated to the SaaS vendor. Most SLAs lay out how these changes are communicated and managed.
In addition to those SaaS-specific dynamics, tax managers should have some familiarity with the process IT functions use to adopt SaaS solutions and the high-level criteria used in the selection process.
Although adoption processes vary by company, most progress through several stages. Ideally, the process begins with the formulation of a strategy that lays out the rest of the purchasing and management process, including how potential solutions will be evaluated, how the SaaS solution will be implemented and integrated with the company’s IT environment and, finally, how the relationship will managed following the implementation.
Specific SaaS evaluation criteria also vary by company. Gartner’s categorization of technical criteria (which include subcategories related to management, integration, management, security, storage and network issues) and business criteria (which include subcategories related to pricing and billing, SLAs, and support and communication) are useful to keep in mind.
Today, cloud solutions seem ubiquitous. “Cloud is no longer about cheap servers or storage — it’s now the best way to turn great ideas into amazing software, faster,” wrote Forrester principal analyst Dave Bartoletti. “In 2018, cloud computing will accelerate enterprise transformation everywhere as it becomes a must-have business technology.”
That includes the tax function. And if tax leaders want their functions to maximize what SaaS applications can deliver in terms of powerful tax data management capabilities at an attractive price point, they’re going to need to work closely and considerately with their IT partners to make and manage these potentially transformational investments.
This series, which is intended to serve as a practical cloud-adoption handbook, provides an update on cloud technology’s adoption and benefits before highlighting approaches, steps and considerations that tax executives and professionals should work through when pursuing cloud investments. Catch up on the first and second articles here and here.