The adoption of cloud solutions by treasury departments is just part of a larger corporate migration to software-as-a-service (SaaS) technology. According to a 2016 survey by consulting firm Protiviti, 64% of organizations say that they are investing in the cloud.
“We are seeing more adoption of enterprise solutions in the cloud,” said Ed Page, a managing director at business consultancy Protiviti and leader of its national financial services IT consulting practice. “We’re starting to see much greater traction for ERP solutions, and even a number of banking solutions are starting to gain traction in the cloud.” The fact that financial institutions are willing to use cloud solutions is particularly notable, he said, since that industry has been one of last bastions of installed software.
Another survey, released last month by 451 Research, shows businesses expect their spending on cloud services and hosting to grow at a pace of 25.8%, more than double the 12% growth they expect in their overall information technology spending.
Liam Eagle, the research director for hosting and cloud at 451 Research, said the shift from handling different types of computing work internally to having the work done externally “is universal across every workload we track.
“We don’t see anything where the percentage handled internally is increasing over the next two years,” Eagle said, adding that what differs from one type of work to another is “mostly the extent to which it’s shifting and where it’s going.”
We’re starting to see much greater traction
for ERP solutions, and even a number of banking
solutions are starting to gain traction in the cloud.
—Ed Page, Protiviti
Customer relationship management (CRM) systems are one of the few types of solutions for which companies say the majority of their current spending is for external services, at 55%, versus just 45% for internal staff and IT resources, according to data from 451 Research.
Eagle said the CRM situation reflects the fact that Salesforce.com, which offers a cloud computing solution, “was early to market with something that became seen as the de facto way to execute CRM.
“And there was no huge legacy of on-premises CRM software,” he said. “Adopting Salesforce, for many businesses, was the equivalent of adopting CRM.”
ERP is one of the areas that remains mostly on-premises. In the 451 Research data, 77% of corporate ERP spending is currently designated for internal staff and IT resources, Eagle said. But that is set to change. Survey data from 451 Research shows that companies expect the portion of their ERP-system spending that goes to internal staff and IT resources to decrease to 42.9% over the next two years.
“A huge beneficiary is going to be SaaS and hosted services, going from 9.7% of spending to 26% of spending,” he said, but added that there will also be increases in spending on such external areas as infrastructure as a service, managed services, and security services.
Another category that is making a big shift is database and data warehousing, Eagle said. That area currently has the largest percentage of on-premises spending, but there will be a significant move to external providers, mostly infrastructure as a service, he said. Another big one is application development processes, where spending is 86% on-premises currently but is expected to fall to just 56% over two years.
Asked about the extent of corporate activity that will move to the cloud, Eagle noted that some organizations have highly sensitive information, such as research and development data, that they may hold in computers that aren’t even connected to the Internet.
“From a data sensitivity level, there are some things that simply will not move to the cloud,” he said.
Other companies believe they can handle the work more cheaply in-house, Eagle said, and inertia also keeps companies doing things the way they have been doing them.
On the other hand, he noted that concerns about the security of data in hosted environments, which traditionally have been a major factor limiting companies’ use of cloud computing, have subsided.
I’ve had plenty of people saying,
‘I might not have made this shift
to the cloud environment
had the vendor not said, we’re moving.’
—Liam Eagle, 451 Research
“It is becoming more possible to accomplish the security requirements that you may have as an organization in the cloud, and that is the result of people developing tools for securing the cloud, or cloud platform providers developing specific compliance functions,” Eagle said. “The other factor that I think is important is that the idea that the cloud is inherently insecure is diminishing, especially in cases where it’s not true. People are beginning to realize that they can achieve any security requirements they want on the cloud.”
Eagle noted that some companies move to the cloud because they’re following a vendor that is switching to delivering its solution in the cloud, rather than as an installed solution.
“The decision at the vendor level is also driving adoption,” he said. “I’ve had plenty of people saying, ‘I might not have made this shift to the cloud environment had the vendor not said, we’re moving.’”
Protiviti’s Page predicted that over the long run, “a substantial proportion” of enterprise solutions will be cloud-based. “It will happen in different areas at different rates, but generally the trend is that direction,” he said.
He cited the advantages that cloud solutions offer when it comes to scale. “It’s not just scale in terms of processing power, it’s scale in terms of future investment and the ability to pay as you go, as opposed to investing in large data centers and large software purchases.”
When it comes to processing power, “the cloud has some distinct advantages because you’re only paying for that capacity at those times you need it,” Page said. “If you’re a retailer, you may want to take advantage of what they call the elastic capacity to deal with big spikes in your demand, a Black Friday or a Black Monday.”
That aspect of cloud technology could become even more important to finance teams amid an increasing emphasis on crunching numbers, he added. “Analytics are a big consumer of computing power. As people consume more [artificial intelligence] types of solutions and analytic types of solutions, that elastic type of demand is going to be more and more important.”
At the same time companies are adopting cloud solutions, Page cited a trend toward the “decomposition” of many enterprise software products.
“If you rewind the clock even five years, but certainly 10 years or more, the large enterprise solutions were dominated by big single solutions that were large and complex and provided a lot of functionality,” he said. “What we’re seeing now is even the big players are decomposing their solutions into smaller pieces. You’re also seeing a lot of new entrants who are addressing pieces and parts of those solutions, and often those are in the cloud. I think that trend is an interesting corollary to the cloud.”
Page argued that the term “transformation” is overused. More importantly, he said, “transformation is no longer a destination.
“My perspective is that transformation is just the new norm,” he said. “Technology is changing so rapidly, evolving so rapidly, that transformation is a competency. It’s not the strong that survive, it’s the ones that can adapt to change."