By Nilly Essaides
Cloud-based EPM solutions are set to become more mainstream, as companies replace legacy on-premises systems or leapfrog directly into cloud tools from spreadsheet environments. That’s according to the results of a Hackett Group late 2016 EPM in the Cloud study (see image below). Our study shows that counting current, ongoing, planned implementations, as well as exploration of cloud solutions, cloud adoption has the potential to rise significantly in the next 2-3 years.
Source: The Hackett Group, 2017
That’s great news for FP&A professionals. Cloud-based EPM solutions offer cost-effective, flexible and streamlined alternatives to legacy systems, while allowing more people to participate in the planning process. They can bridge technology islands and integrate multiple databases to create a single repository without requiring time consuming hard coding. Finally, they let FP&A staff offer the business more-advanced analysis quickly and user-friendly self-service tools to help management make smarter business decisions and reduce the data-to-insight cycle.
What’s driving the cloud adoption momentum?
The current push for the implementation of cloud-based EPM solutions reflects eight distinct developments:
1. The incoming 800-pound gorilla. Cloud solutions have been in an introductory phase for the past five to seven years; however, the use of offsite, hosted solutions began to gain real traction as Oracle jumped all in with its EPM in the cloud product in 2016. Oracle’s move gave the cloud market a final stamp of legitimacy, pushing adoption into high gear. Since then, the implementation pipeline at all EPM cloud vendors, such as Adaptive Insights, Anaplan and Host Analytics, has increased significantly.
2. Reducing cost of ownership and implementation. Instead of paying a big upfront lump sum for ownership plus anywhere between $500,000 to $1 million on average to upgrade, with significant downtime and sometimes no improvement in functionality, companies can own the most recent version for much less and keep up with the latest features.
3. Adapting to faster change and fiercer competition. The competitive environment is changing rapidly as digitalization and globalization are transforming business models. Finance needs to keep pace by generating real-time data-driven decision support so the business can rapidly adapt to changing market conditions. Waiting for new functionality or taking time off to upgrade is no longer acceptable.
4. Taking control of IT resources: The move to the cloud is also about finance taking control of its own technology path. By adopting a cloud solution that’s easier to manage, finance can avoid having to call on IT for updating models or running queries, saving time and increasing its ability to respond to external change by updating analytics models and accessing new sources of information.
5. Acquiring richer features: In cloud’s early days, companies had to choose between high-cost, full-featured, on-premises systems and low-cost, “lite” cloud versions. But that tradeoff is changing fast. Cloud vendors have enriched their products with end-to-end process support and are constantly adding new modules like predictive analytics, visualization and updated reporting capabilities
6. Offering an inclusive process: Today’s planning, forecasting and budgeting process reaches outside finance to include business unit and functional partners. The cloud allows a broader user base to participate at a much lower per-user cost and a more user-friendly interface. A more participatory process is faster and more agile. Because there are fewer iterations and no re-inputting of data, there are also fewer errors, and business units feel more accountable for the information they provide.
7. Providing a greater degree of comfort about security: Companies today are more comfortable that they can achieve a level of security with cloud solutions that equals that of on-premises alternatives. As more server rooms are shut down, the idea of storing data offsite is becoming mainstream. CFOs have seen their organizations put CRM and HR data in the cloud. They’re ready to move financial data there, as well.
8. Resolving system integration complexity: Many companies are transforming their EPM technology against the backdrop of a highly fractured system environment, one that includes multiple ERPs, multiple instances of the same ERP, pockets of spreadsheet usage, and disparate databases. Trying to link all these disparate systems with hard coding can be a nightmare. However, it can be done relatively cheaply and a lot faster using cloud applications that sit atop this system archipelago and pull data into a single repository.
Companies are increasingly turning to the cloud for their EPM solutions. They are cheaper to own, faster to implement and upgrade, and more collaborative in nature; they help FP&A support the business and management with better insight. The absolute numbers may not be high but current implementation, planned implementation and active exploration of cloud solutions point to a large surge in adoption in the next two to three years. As EPM moves to the cloud, its processes will become more agile and it will reduce cycle times and busy work and become a more valuable partner to the business.
Source: Generation CFO LI Group