Cloud computing for the CFO: Do the numbers add up?

The advent of cloud computing as a concept was accompanied by the same aura that precedes every next milestone in technology. Except that, this had impressive numbers to support the claim.
Case in point, by 2020, the Indian market for cloud computing is expected to grow to $16 billion. A second research study conducted by Zinnov Management Consulting reveals that private cloud in India will help Indian companies save up to 50 per cent of their infrastructure costs and will also create more than 13 million jobs by 2015.
Interesting enough for the chief financial officer (CFO) of any company to be interested! But then, is it all about the cost savings and efficiency of infrastructure?
Before we understand the benefits accrued to the companies, it is important to understand the changing profile of the new generation CFO.
In the historical perspective, the CFO's role was that of the custodian of capital of the company. But with time, and several demonstrated examples to show, an effective CFO can emerge from anywhere among the ranks; one who could best align the business interests to the overall goal of profitability.
This divergence of his profile compels him to look beyond the traditional methods of doing business; at the tools used and the process employed.
For a CFO brought up on the thought process that any asset goes through a gestation period before showing returns, the premise of cloud computing to realise returns from day one was hard to fathom. But, if the world was going gaga about it, there must be more than meets the eye. Let us take a look at the macro-efficiencies involved.
The first is the elasticity of the cloud. Again, unlike traditional infrastructure, you can scale up or down, as and when business demands. Deployment is mostly in real time, Data recovery is faster and administration across the board is simpler.
The second is smarter and staggered deployment of capital. Unlike traditional infrastructure, investment in cloud computing is demand-based or as the industry refers to it as 'pay-as-you-go'. Simply put, there is no locking of capital at the beginning of the investment cycle. The benefits need not be overemphasised.
The third is its flexibility. It accommodative nature allows for convergence of technologies and tools across multiple platforms.
A less emphasised, but equally important benefit is the ease of organising, retrieving and securing data. In an age of Big Data, scalar proportions and sequencing of Data becomes all the more critical. And cloud computing provides that big step up.
So what exactly are the bottlenecks in adoption?
As a recent Gartner report points out, CFO and business leaders are wary of whether adoption will act as a catalyst or an impediment to the business goals. Many, while are sold on the capability, are wary of the external influences that it might be subjected to. Uppermost on the CFO's mind is security, privacy of data and reliability. Not surprising, given that an estimated $1.5 billion is lost annually due to security attacks. The concerns are compounded in cases where proprietary data like research, analytics, financial records and governance compliance are concerned.
On the other side is the challenge from within the organisation. Management steeped in old world business, Analytics clouded in conservatism and automation that still relies heavily on human intervention. An estimated 18 per cent CFO's of non-IT companies surveyed, see themselves implementing a transition to a cloud platform in at least a few areas of their business in the next two years.
The trickle might have to do with clarity surrounding the environment itself.
In a case of testing-the-waters, it was mostly non-core services like mail, web hosting, conferencing tools that are being moved to the cloud. The success of the initial results will be seen as the catalyst to migrate core activities. Until such time, a sense of wariness will pervade any suggestion for adoption of a cloud architecture.
To some extent, the advocates of cloud computing themselves are to blame for this wariness.
While several companies have put forth their version of the cloud, their business pitch has left prospective customers confused about the right fit. Compounding the problem is the service provider's reluctance to move to a confederated set up so that the benefits can be amplified in one voice. Also, what's left unanswered is that as a private offering, will the cloud be commoditised to such an extent so as to suffer the vagaries of the market?
Also, if the benefits far outweigh the negative, why isn't everybody jumping on the bandwagon? The reluctance comes from changes in the traditional operating environment. Today, companies are more accommodative of employees bringing their own devices to office, operating in secure (office) and unsecured (client) environment, synching across multiple platforms regularly and sharing information across unsecured networks.
What worries them is storage of this resultant data and its access. It is therefore not surprising that proponents of cloud computing often encounter questions more on its security than capability.
SME, SMB and boutique business has been quicker on the uptake. Primarily because, to them, security becomes a critical factor only when they achieve critical mass. Until such time, it flexibility and cost.
CFO's of large enterprises on the other hand, will adopt a peer-goes-first attitude. While they are sold on the concept, their task on hand is to sell the concept internally. And when sold, time will show them that it was a decision well made.
The writer is a chartered accountant. Views expressed by him are his own and do not reflect the newspaper's policy.