Migrating From On-Premise to Cloud-Based Solutions

Gartner forecasts cloud computing to be a $278 billion business by 2021, as companies increasingly adopt cloud services to realize their desired digital business outcomes. In a separate survey of 439 global financial executives, the research company found that finance is moving to the cloud much faster than expected.

By 2020, 36 percent of enterprises are expected to be using the cloud to support more than half of their transactional systems of record.

With cloud technology promising to provide the speed and agility that the business requires, including generating significant cost savings and new sources of revenue, it’s not surprising the cloud market is experiencing a boom.

While companies have experienced both organic and inorganic growth, many have struggled to keep pace with rapidly changing technology landscape. Their businesses are saddled with legacy technology infrastructures that are slowing progress towards the achievement of strategic objectives as they are slow to react to change.

Given the need to react more quickly, at the same time become more proactive and drive business performance, senior finance executives are turning to cloud-based financial solutions to provide real-time management information reporting and decision support.

Adopting cloud not a simple and quick decision

Looking at the expected growth metrics for the cloud market and then hearing of all the novel opportunities offered by cloud computing, CFOs and CIOs are enticed to believe that it is only a matter of time before the organization’s computing technology and data is skyward.

However, over the course of my career I have come to understand that the only thing right about a forecast is that it’s wrong. Either the forecast is close to reality or very far from reality.

Cost savings is cited most often by senior finance executives as the reason for adopting cloud technology. Considering that cloud is essentially a form of outsourcing arrangement in which client organizations use the internet to connect to a variety of applications, storage services, hardware resources, platforms and other IT capabilities offered by cloud service providers, upfront capital investment and maintenance costs are minimal.

This is because the cloud service provider owns the necessary hardware and other resources needed to deliver these services and is also responsible for employing the staff required to support them. Unlike on-premise solutions where the business has to incur large capital outlays for hardware and IT support staff, cloud is an operating expense (except implementation costs which can be capitalized), that is payable as and when incurred.

With cloud, a business is able to add new licences to its subscription when it needs them and scale its licensing costs with its growth, rather than buying in bulk upfront. This is in direct contrast to traditional on-premise software where companies in anticipation of business growth have over invested in IT systems hoping to add more users to the user list soon after the growth is achieved.

However, when deciding whether to invest in cloud or not, CFOs should look beyond cost benefits. In addition to cost savings, they should also consider tactical and more strategic and structural issues. Unfortunately, the challenge for many finance professionals is that when evaluating investments the focus is solely on cost. We fail to examine and evaluate the non-financial risks and strategic impact of the investment on the business.

Strategic and structural considerations

As I have written in the past, most organizations get caught up in the hype of new technologies and end up making technology investments that are unaligned to the strategy of the business. There is no strong business case for investing in the new technology. Don’t allow yourself to fall into the same trap.

Investing in cloud is not an IT or finance only decision. Decisions of what to migrate to the cloud, when to migrate it, and how to transition from an on-premise environment to a cloud-based environment all require a collaborated effort if the organization is to achieve its stated objectives.

Further, transitioning to the cloud computing environment is not a matter of flicking the switch up and down. You need to have deeper understanding of the cloud resources (public cloud, private cloud, community cloud and hybrid cloud) available on the market, their delivery models (SaaS, PaaS and IaaS) and how these all fit together into your business and technology model.

Understanding the cloud model will help you determine whether cloud is appropriate in the context of your business purpose and risks. For example, in the case of public cloud, the applications and cloud-based services are positioned as utilities available to anyone who signs on.

If over the years your company has built and strengthened IT capabilities that differentiate you from competitors, migrating to the cloud can mean walking away from your success recipe and expose yourself to vulnerabilities.

Therefore, if you are planning to migrate your on-premise computing environment to the cloud, take a long-term view of your IT environment and determine what type of applications are candidates for the cloud and which will not be transitioned until the distant future.

Ideally, you should start with applications that have low risk associated with them or those that have a business need that cannot be met using traditional computing capabilities. Once you have build greater comfort and trust in the cloud, you can then scale to include other applications.

The pain of disintegration

It is no secret that many businesses today are re-evaluating their technology infrastructure and leveraging new technologies to respond faster and be more flexible. But is cloud computing right for your business? Is speed to deploy more important to you than having systems that talk to each other?

In a world where each cloud service provider is claiming that their solution is better than the next one on the same shelf, CFOs and CIOs are grappling with the decision of which cloud service provider to go with. As a result, the company ends up doing business with more than one vendor to compensate for the shortfalls of the other system.

The problem arises when the cloud-based application from one vendor is unable to work with an application from another provider resulting in more than one version of the truth. In other cases, the company’s on-premise IT infrastructure does not allow sharing data with multiple cloud-based applications, which in turn results in finance spending time consolidating and reconciling data from disparate systems in excel.

Given that the cloud model depends on providing essentially a standardized package across the board, it is important to weigh the pros and cons of foregoing customization versus rapid implementation. Because the cloud market is projected to grow in the coming years, many IT solution providers are channeling money towards cloud-based solutions. This has resulted in some vendors withdrawing IT support on legacy ERP systems and phasing them out.

In some cases, the vendors have installed upgrades to the same solutions. The problem with these solutions is that they were originally not built with modern business requirements in mind hence they can only get you a few more years of support.

It is therefore important for CFOs and CIOs to be cognizant whether the solution was originally designed as a cloud-based solution, or it is a modified version of a solution initially designed to function in a traditional on-premise client-ownership model.

With data being found everywhere today and advanced analytics playing a critical role in supporting key decision making, delivering one version of truth has never been so important. In order to make sense of all the data at its disposal a company should focus its efforts on centralizing data management and IT policies. Having a single data repository ensures everyone is drinking from the same well for information and insights.

However, in companies where IT governance is weak the tendency is for teams to autonomously adopt cloud-based solutions that meet their individual needs. This is counter-productive to data management centralization efforts as data normally ends up spread across multiple cloud-based systems that are dis-aggregated.

Just imagine a scenario where FP&A, tax, treasury, procurement, supply chain, and other finance functions each identify and select their own cloud solution. Consolidating and analyzing relevant data from these various systems to get a big picture view of business performance in itself is a huge task to complete as that data is divided across many domains.

While each cloud-based move may look beneficial in isolation, adopted together they may increase operating expenses to a level that undermines the anticipated savings.

Control versus no control

Although cloud-based solutions offer more affordable options and more flexible payment plans than traditional software providers, the issue of data control is still a concern. Cyber criminals are getting smarter by the day,and the fact is, whether organizational data resides on the internet or offline on the company’s network, it’s never completely immune to attack.

When it comes to data security, it is imperative for CFOs and CIOs to know that the moment data is no longer in-house, the business may end up having less control over who has access to key systems and data. The fact that you have outsourced your IT systems and data control to a third party does not make your company immune to a lawsuit in the event of a breach. You therefore need to sign agreements that protect you against various types of misfortunes.

Although the cloud service provider employs a team of IT support staff to monitor and perform regular threat assessments and deploy the latest patch immediately, the organization should not relax and assume the house is in order. You need to get strong assurances from your cloud vendor that your business data is safe.

You also need to know where your data is stored, the applicable data laws, how often it is backed up and whether you are able to perform audits on the data. Other factors to consider include end of agreements for convenience. Many software vendors try to lock in client organizations for a significant period of time. This in turn makes it difficult for client organizations to change vendors without incurring costs or changing systems some way.

Thus, when negotiating an agreement with a cloud-based service provider, try by all means to ensure that you are not locked-in for lengthy periods just in case you need to change technology providers in the near future.

Don’t rush to the cloud without a clearly defined vision and road map. Engage in plenty of deliberation to ensure the new surpasses the old, sample technologies with less risk and related influences on the business and then scale the adoption.

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The Art of Risk Management

This is the title of the article by BCG published a few years ago. The article discusses the principles that should govern the approach to risk management by companies of all shapes and sizes.

The authors make several points with which I agree. Here are some excerpts:

Risk management is essential in today’s volatile economy. In a continuously changing economic environment, companies cannot assume a stable risk landscape.
Stop thinking of risk management as primarily a regulatory issue. Embed risk management in the mindset of the broader organization.
Risk management is a value-creating activity that is an essential part of the strategic conversation inside the company. The goal of that discussion should not be to eliminate or minimize risk but to use it to create a competitive advantage.
Risk management starts at the top. The organization needs to demonstrate that it has made risk management a high priority and an integral part of the decision-making process by appointing a dedicated risk leader who reports back frequently to the CEO and the board to discuss the latest trends and any changes in the company’s risk scenarios.
Risk cannot be managed from an ivory tower. Risk Management should not exist in isolation from the rest of the organization, with an insufficiently granular understanding of the actual business-specific risks the company faces. To avoid this outcome, integrate risk management into the company’s entire routine management processes, including planning, capital allocation, controlling, and reporting.
- Understand the scope of the risks the company faces.
- Plan for how the company will manage those risks.
- Act to mitigate the risks or take advantage of strategic opportunities.
Avoid relying on black boxes. Although sometimes appropriate, over-reliance on complex metrics or models can muddy the risk management process, turning it from a transparent management activity into a frustrating black box. The appropriate level of complexity is company-specific and depends on the industry, business model, availability of data, level of experience, and mandatory legal requirements.
Align risk management with a company’s overall business strategy. Companies need to identify all relevant risks – not just those that can be easily quantified. Some of the relevant risks for a company may be those that are qualitative and especially difficult to quantify.
Risk management is more than a policy; it is a culture. The objective of a company’s risk-management system should be not only to enforce new policies but also to create a risk-aware culture that addresses risks proactively, not reactively, and manages them to create new sources of competitive advantage.
Effective risk management depends on the free flow of information throughout the organization. Unless employees at all levels of the organization are actively involved in the risk management process, it will be difficult to maintain the unrestricted flow of information. This can result in the most important data getting buried in one part of the organization unavailable to other parts of the business.
Risk management deals with uncertain futures. As a result, the goal should not be to develop precise metrics or future outcomes but to strive for a general understanding of the probabilities and potential impact of various trends or scenarios on business performance and enable decision-makers to confront the uncertain nature of risk and act accordingly.
Risk management is never about finding “the answer.” Rather, it is about continually refining the organization’s assumptions about the future and its understanding of the implications of those assumptions for the company’s business. Assumptions about risk often change quickly, so the relevant parameters, probabilities, impacts, and correlations should be revisited frequently.
It is possible to prepare for unknown risks by building an organization that so excels at crisis management that it is resilient even in situations in which it is blindsided by unprecedented challenges. For example, through developing the ability to detect, capture, and exploit information patterns as well as to think outside existing frameworks and risk landscapes.
Avoid the downside, but don’t forget the upside. Companies should use risk management also to identify new opportunities and to exploit them systematically. For example, scenario planning should be used to define not only worst-case scenarios but also best-case scenarios. Think in advance about how a company can make the best use of the latest market developments and trends and ultimately make the right decisions.

I enjoyed reading the article and highly recommend it.

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
- Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
- Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
- Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
- Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
- Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
- Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

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Migrating From On-Premise to Cloud-Based Solutions

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