Financial applications are on a journey to the cloud

CFOs in Europe embrace cloud-based financial applications as a result of security and delivery model improvements

Interest in cloud-based financial applications is on the rise in Europe, as chief financial officers (CFOs) recognise the benefits the applications can bring in terms of reduced costs and improved efficiency.

“Cloud is not the dirty word it once was for European CFOs,” says Andy Wilton, CIO of UK-based managed service provider Claranet.

He adds that this change is partly due to huge advances in cloud security and the delivery model quickly growing in maturity.

While there are still some fundamental concerns about the use of the cloud, including data security, Wilton said many CFOs cite a greater need for higher levels of performance and availability.

Security is important, but so are performance and availability 

In a recent Claranet survey of 900 IT decision-makers in Europe, 40% of European IT directors stated security was the most important factor in the delivery of finance applications.

However, 29% of respondents selected availability and 31% chose performance, “which is where cloud comes in,” says Wilton.

The survey also found data sovereignty remains a key issue for the hosting of financial applications. 

“Until the EU Data Protection Regulation comes in – and perhaps well after – in-country datacentres are likely to remain the preferred method of hosting financial data in the cloud,” says Wilton.

Overall, the research found 46% of those surveyed use third parties to manage and host their financial applications.

David Parry, director of the management consulting division of KPMG, points out the number of companies using what he describes as “true” software as a service (SaaS) for financial applications is still very low, commenting it is “literally in the tens in the UK”.

Parry notes that take-up has focused on hosting legacy applications in the private cloud to save on infrastructure costs, and on hosting niche products, such as financial reconciliation tools.

CFOs are still dipping their toes in the water

Daniel Kimpton, co-founder and business manager at, a cloud-based application for automating supplier statement reconciliation and accounts payable auditing, largely agrees with Parry’s assessment. 

“Although we are not seeing a wholesale migration of core ERP [enterprise resource planning] financial applications to the cloud, we are witnessing CFOs dipping their toes in the water by trying out bolt-on financial applications for specific processes, such as supplier statement reconciliation,” says Kimpton.

Parry believes true SaaS that offers “wall-to-wall financial functions” in the cloud is the more exciting area, and promises real opportunities for a company’s financial operations in the future.

The potential perceived benefits are profound, and range from a reduction in total cost of ownership by up to 40%, a reduction in the speed and risk of implementation as a company is forced to adopt standard products, and increased agility.

Overcoming the problem of shadow IT

Ian Finlay, chief operating officer at cloud computing specialist Abiquo, adds that investing in hybrid cloud – a mix of private and public cloud – as a business strategy, rather than having to deal with the problem of shadow IT, where business teams use public cloud resources autonomously and bypass the IT department, ensures the business can properly evaluate and measure return on investment.

Challenges remain nonetheless, such as ensuring data is secure and complies with different regulatory regimes, overcoming the complexity of integrating legacy systems with cloud-based applications, and accepting the standardisation inherent in SaaS products means a company is forced to change its business – not the product – to accommodate them.

Despite the challenges, surveys continue to show interest in cloud-based financial applications is high, as revealed by research from finance controls and automation software specialist BlackLine.

Greater automation means better productivity

BlackLine’s survey of 250 UK financial decision-makers found 80% of those questioned agreed the greater the level of automation, the greater the level of productivity. 

Meanwhile, 89% of financial decision-makers said they want their teams to use cloud-based applications, compared with 28% of respondents saying their teams are already doing so. 

“The finance department isn’t historically seen as an innovative part of business, but this is beginning to change as CFOs wake up to applications that can streamline back-office processes and give them more time to work strategically and ensure data security,” the BlackLine report found.

Clive Grethe, vice-president of sales in Northern Europe at Canopy (the Atos Cloud), notes business leaders increasingly regard the journey to the cloud as an important issue.

“We carried out research and found 75% of CFOs think their business is missing out on revenue opportunities by not having the right cloud applications and infrastructure in place to support digital business transformation. As a result, 70% of CIOs and CFOs fear their business will become uncompetitive, with the majority [76%] estimating this will happen as soon as the end of 2015,” says Grethe.

What some companies are doing now

France-based construction materials group Saint Gobain is one company looking to the cloud to streamline its financial operations, and has deployed an SaaS system from BlackLine. 

“Because of our unique situation, where we have 16 different ERP systems and 28 different instances, it proved to be a great opportunity to consolidate our balance sheet reconciliations,” the company said.

Third Financial has migrated its wealth management software, Tercero, to Claranet’s managed application hosting service, placing it in a secure, fully virtualised environment. Claranet takes responsibility for every aspect of the live application environment, including the security of the data held in Tercero applications.

“Compliance is the big issue wealth managers worry about, especially when they entrust their data to a third party. We need to assure our clients their sensitive data would be safe with Claranet for two important reasons: so they can reassure their own customers, and to satisfy compliance regulations from the Financial Services Authority,” says Stewart Foster, CEO of Third Financial.

Moving from Microsoft Excel silos to the cloud

Matt Buckley, group planning and reporting lead for finance at Specsavers, said the company had been “living in a world of Excel silos” before it decided to make the leap to the cloud by deploying a system from Adaptive Planning, which provides SaaS-based corporate performance management software for financial planning, forecasting and budgeting.

“Budgeting and planning had become a version control nightmare among numerous stakeholders and contributors, and inaccuracies increasingly threatened to throw business goals off course. We were in desperate need of a single version of the truth on which we could base current and future budgeting decisions,” says Buckley.

Now, Buckley says the company has visibility into its key performance metrics all through a single pane of glass. 

“It has allowed us to drive discussions based on a single view of the entire business, giving us the historic picture that allows us to look forward based on real trends,” he adds.

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We use cloud storage extensively here, but there are still serious misgivings about security, especially for sensitive information, especially for financials.

OTOH, we are fast becoming cynics about security. Neither complacent nor convinced, just cynical as we watch security breaches follow each other like evil ducklings. It seems very little is safe no matter where it's put nor how carefully it's stored.

Given that, hell, the cloud seems no more insecure than anything else and ti's a lot more convenient. So we use it, spending our efforts building better locks in a race against the lock-pickers. 

See, I told you. Cynical....
I agree that "Challenges remain nonetheless, such as ensuring data is secure and complies with different regulatory regimes. “
I found interesting projects that addressed this challenge and one project included incoming source data from various European banking entities, and existing data within those systems, which would be consolidated in one European country.

The project achieved targeted compliance with EU Cross Border Data Security laws, Datenschutzgesetz 2000 - DSG 2000 in Austria, and Bundesdatenschutzgesetz in Germany by using a data tokenization approach, protecting the data before sending and storing it in the cloud.

This new approach to data privacy is described in a report from the Aberdeen Group that revealed that "tokenization users had 50% fewer security-related incidents (e.g., unauthorized access, data loss or data exposure than tokenization non-users". Nearly half of the respondents (47%) are currently using tokenization for something other than cardholder data.

This new technology development makes it easy to store data outside the domestic borders and at the same time be compliance to regulations and also ensure that the data remains secure and private.

Ulf Mattsson, CTO Protegrity
I agree that "challenges remain nonetheless, such as ensuring data is secure and complies with different regulatory regimes."
I found interesting projects in EU that used data tokenization to address this problem.

Ulf Mattsson, CTO Protegrity