Finance applications start to make shift to the cloud

Posted by Mike Vizard on Dec 29, 2014 9:00:00 AM

Finance departments are notoriously conservative, but new research from Saugatuck Technology suggests that CFOs are getting ready to make the move to the cloud. A survey of 317 finance and IT executives in North America finds that over one third of respondents are actively evaluating options to replace (21%), or have plans to replace their financial management systems in the next 24 months.

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The survey also finds that executives from mid-size companies with 1,000 to 3,000 employees have the greatest propensity to consider replacing their systems in the next six to 12 months (15%) or in 12-24 months (17%).

While it’s obvious that smaller companies are more likely to make the shift to the cloud faster than larger ones, Saugatuck Technology analysts suggest that the three primary reasons that organizations are considering shifting financial applications to the cloud are 1) to add Big Data analytics; 2) current systems are highly fragmented; 3) existing system is too expensive to run or upgrade.

The study also shows that these organizations are not in any particular hurry. It will be 2018 before the number of organizations having a preference for an on premise deployment drops from 58 percent now to 27 percent. Much of that thinking might be driven by the fact that 63 percent say their existing systems are both easy-to-use and timely.

Of course, there are two forces pulling organizations in opposite directions when it comes to financial applications. Compliance and security concerns push organizations towards on premise deployments. At the same time, having more agile systems that can be treated as an operating versus capital expense has a lot of appeal, especially for smaller organizations.

Naturally, not every IT service provider is going to greet this shift with the same level of enthusiasm. Many of them make a substantial amount of money supporting legacy financial systems and the platforms they run on. But like it or not, it’s clear that huge numbers of customers will be making the shift to the cloud in the years ahead. As such, it’s almost a certainty that one IT service provider or another is gong to be helping those customers make that transition so it’s probably in the best interest of the incumbent IT service provider to make sure they are the ones that wind up driving that project.

The good news is that all those financial systems running in the cloud will need to be integrated with other applications inside and out of the cloud. While the rise of application programming interfaces (APIs) has made that much easier to accomplish, the number of applications that need to be integrated with financial systems has increased exponentially.

As cloud computing continues to gain momentum there is no class of application that won’t be available as a service. That doesn’t mean that every application is going to wind up running in the cloud. But it does mean that the factors driving an organization in one direction or another will vary widely, which means like it or not, IT services firms now need to be prepared for any eventuality.

Photo Credit: Charis Tsevis on Flikr. Used under CC 2.0 license

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Topics: Cloud Trends

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