Technology Blogs by SAP
Learn how to extend and personalize SAP applications. Follow the SAP technology blog for insights into SAP BTP, ABAP, SAP Analytics Cloud, SAP HANA, and more.
Showing results for 
Search instead for 
Did you mean: 
0 Kudos

When it comes to the cloud, CFOs are typically looking for continuous efficiency improvements in order to maximise value across the board. Two types of events, in particular, bring these efforts into sharper focus – firstly, driving for growth, when the expanding business, while rightly focusing on the top line, can lose sight of the immense cost pressures that can build up from fervent expansion activities; and secondly, economic challenges, be it from unexpected turbulence, crises or the competition.

Successful growth plans require a business technology platform that can scale, with agility, no matter how big you are or how small you start.

Two points are worth getting clear from the outset. Firstly, throwing cloud solutions at certain areas of the business, in the hope that they will prove to be a panacea for immediate uplifting of entrenched processes (processes that, no doubt, have served the company’s historical growth trajectory well) may prove to be a short-cut to corporate disappointment, with little ROI.  Deloitte point out that CFOs are often sceptical when it comes to “spending based on the promise of savings” and that they are right to be “wary of business cases that depend on technology cost reduction alone.”[1]  The percipience of this view is borne out by Accenture’s survey on expectations vs reality, showing that “nearly two-thirds of companies … have not achieved expected cloud benefits.”[2]

Secondly, viewing cloud solutions with the narrow lens of incremental process efficiency gains or cost reductions only, risks missing the bigger point of cloud as a real differentiator in terms of driving growth through agility, scalability and innovation. McKinsey identifies the latter opportunity (the “Innovate” dimension of value) as almost twice the size of the former (the “Rejuvenate” dimension)[3]. According to McKinsey, “business benefits can swamp IT cost efficiencies in cloud” citing the fact that IT spend “often represents only a fraction of total revenues, perhaps 0.5 percent.” Even comparatively large savings of, say, 25% in this spend would still only amount to “small potatoes” in contrast to the “broader potential business impacts from cloud”.[4]

The enlightened CFO knows that worthwhile cloud solutions should offer a pathway to a more comprehensive, holistic transformation with clearly quantifiable benefits justifying the spend. Therefore, identifying business benefits as the main value drivers, rather than simply looking for cost reductions, will allow companies to focus on cloud initiatives that will deliver a bigger edge in the market. These advantages include faster and better insight, business model agility vis-à-vis new geographies and products, innovation in services and customer experience, all of which, taken together better serve to propel profitable growth.

Most companies would love nothing more than to shed their historical system complexities, complexities they may have inherited through acquisitions or built up through home-grown developments. But, the fact is that corporations are all at different stages of their continuous improvement cycles, they cannot afford to stop operations while they rebuild their technology infrastructure, yet again, from square one. The trick is to redesign and improve your processes without high up-front investments regardless of where you are in your digital transformation journey.

In conclusion, what should CFOs look at when considering the cloud? Doing it right, in other words, making sure the additional cloud investment builds upon the ROI of current IT investment, should involve two things:

  • a focus on business value rather than a simplistic compare and contrast between on-premise vs cloud costs, and

  • clarity about the scope and roadmap. Begin by moving functions rather than the whole enterprise. The Finance function is a great place to start, proving the value with Finance puts the CFO in the driving seat to propel the rest of the business towards enterprise-wide transformation.

The pathway to cloud does not have to be a singular option requiring re-inventing all processes at once on entirely new platforms. Similarly, It should not serve as a band-aid holding together all the broken pieces of an antiquated system in the hope of squeezing out some efficiency gains. Simply lifting and shifting legacy complexities from on-premise to the cloud would be a wasted opportunity.  The more assured path is to invest in a transformative roadmap delivering a cloud business technology platform, primed with the advantages of innovation, agility and scalability – attributes which are essential in today’s world.

[1] The CFO Guide to Cloud. 2019, Deloitte.

[2] Perspectives on Cloud Outcomes: Expectation Vs. Reality. 2020, Accenture.

[3] Cloud’s trillion-dollar prize is up for grabs. 2021, McKinsey & Company.

[4] Debunking seven common myths about cloud. 2020, McKinsey & Company.