As a cloud service provider we are often asked, “why is the cloud important?” Besides free upgrades and accessing software in a browser (which even many non-cloud solutions can offer, by the way) why is your CIO telling you that the cloud is a must for your treasury team? The best answer is this: the cloud eliminates risk.
Historically, one of the biggest risks with investing in enterprise software was obsolescence. By the time (or before the time) the platform was fully implemented, it needed to be upgraded, necessitating significant internal and external costs. After a certain number of years, the software would become obsolete – in terms of its features and / or the underlying code and components used to build it. In short, installed (or even hosted) software needs to be replaced with a newer system every few years.
Additional reading: Building the Business Case for a Treasury Management Solution
The cloud offers a service
The cloud has changed that model completely, where CFOs and treasurers are instead choosing a service that is by nature changing underneath them. A true cloud solution will be updated constantly without any user intervention or costs. Updates can be minor – adding new features, for example. At the same time, cloud providers who are committed to the long term will also change the entire system, piece by piece, every release. They will take advantage of new technologies, new software components, and new integrations with other cloud providers. In fact, if a cloud provider isn’t doing this they are missing the biggest opportunity the cloud offers: eliminating software obsolescence.
Costs of being wrong
Unfortunately in the treasury technology market, there are many providers talking about cloud but not offering the technology to back up those claims. Asking the right questions – often driven by the CIO, CTO, and / or information security teams – will separate real cloud solutions from marketing hype. As with any important purchase, it is important to know what you are actually spending your money on so that perception matches reality. Unfortunately in treasury, the cost of being wrong is more than just having to replace your TMS in five years or having to use spreadsheets alongside your TMS. That cost could be measured by the impact of having ineffective solutions for fraud, cybercrime, and business continuity.
Additional reading: SaaS and Cloud: Beware of the Wolf in Sheep’s Clothing
Benefits of being right
Your organization’s CIO will tell you the first priority is information security. The cloud improves security by taking data and workflows outside the organization’s four walls and into a more secure location where no employees have direct access to these financial systems or the sensitive information within them. So long as the cloud provider meets your CIO / CTO / CSO department’s information security policies and procedures, treasury can rest comfortably knowing they are secure in the cloud.
The second benefit CIOs will say the cloud delivers is scalability. While a heavily (over)used term, scalability in this context means two things:
1. Growing into your software-as-a-service: The cloud’s SaaS delivery model means you pay only for what you need and add (or subtract) features and functions as you go forward. As your treasury needs grow, you subscribe to more software so your costs align to your benefits – and ROI is realized now rather than five years from now.
2. Scaling to support your business – switching from a cost discussion to an enablement discussion, the cloud enables immediate deployment to new geographic areas or new areas of the organization.
For example, the company expands to China and needs immediate visibility into bank accounts and capabilities to fund the operation through direct payment channels and indirect offshore/onshore sweeping in and out of the global cash pool. The features in the cloud treasury solution can be turned on like a light switch and are configured over a few weeks or months. No installation of software, no reliance on IT, immediate results.
Another example: a company spins off a division into a separate legal entity. The new company will be on their own in six months with no further transitional support from the former parent. Supplier payments is an immediate priority as disruption would hurt top line growth. Everyone reading this knows that implementing ERP-to-bank connectivity (especially if a new ERP is chosen for the new org!) takes six months of planning, never mind completing implementation. Enter the cloud – where a pre-built payment connectivity and bank format transformation solution can implement in a couple months, without installation of software or reliance on internal resources and external consultants.
The cloud has much to offer CFOs and treasurers. It is worth paying attention to because your CIO wants you on the cloud to improve information security and ensure treasury is enabling the business rather than slowing it down.