new “extensible” enterprise unbound by old notions of bricks and mortar.
by rick telberg
cloud computing is changing the costs and distribution of technology services and stands to make fundamental changes to the way business is done.
whether you call it software-as-a-service, on-demand, online, web-based or any number of other terms, the new model “is becoming the it fabric of the future,” according to tom degarmo, philadelphia-based principal and technology leader at pricewaterhousecoopers after 14 years at bearingpoint.
to be sure, cloud computing is not new, and neither are its transformative effects. you are reading this article from the cloud. it was sent to you via the cloud. you went to the cloud to retrieve it. you might share it using an e-mail application (app) that lives in the cloud. in fact, cloud computing could have as much impact on business as the internet.
but in what can only be described by that over-used term as a paradigm shift, degarmo says in the report that cloud computing is already having a transformative effect on business strategy. in the new paradigm, cloud computing creates the “extensible enterprise.”
in describing the new extensible enterprise, degarmo favors a metaphor from the restaurant business. in the traditional restaurant business, patrons come to the restaurant to eat good food and enjoy friendly service.
but the extensible restaurant business model recognizes that their most popular salad dressing could be sold through a retail window or wholesale to supermarkets. or the entire kitchen and food-preparation process could be duplicated in a warehouse and dedicated to catering. but go further: since selecting the best fresh ingredients is a core capability of great restaurants, why not pick for the rest of us and open a fresh produce market? by applying core competencies to new products and services, the extensible enterprise creates new revenue streams and profit centers.
now consider what the notion of the extensible enterprise could mean to finance executives. cloud computing is mature enough to be generating billions of dollars of revenue for companies like adp, amazon.com and salesforce.com, yet young enough to be misunderstood by many cfos, pwc says.
at first, finance executives will be grappling with new challenges and responsibilities. pwc starts with five:
1. understanding how to use internal and external clouds to speed deployment of new it projects and reduce costs.
2. supporting the ceo’s growth agenda with financial modeling and analysis of cloud-based initiatives.
3. mastering the metrics to compare the true cost and returns of cloud computing.
4. understanding how the shift to the extensible enterprise will affect income and cash-flow statements and balance sheets.
5. managing the governance, risk and compliance issues when moving sensitive operations and corporate data to the cloud.
on the other hand, pwc expects finance executives to quickly embrace cloud computing’s big three topline advantages:
1. eliminating many big upfront it investments.
2. boosting cash-flow with faster and more precise transactions and reports and,
3. maybe best of all, shifting the accounting treatment for it from capex to opex, giving cloud computing huge tax advantages.
although promising, the challenges and opportunities of cloud computing remain murky. the only thing certain is that the paradigm shift cannot be ignored any longer. you’re running out of time.
comment: what will cloud computing mean to you and your business? do you think cpas are ready to do business in the cloud? tell us in comments.
7 responses to “the cloud changes everything… again”
adriana garcia
thank you for the opportunity to respond to your questions.
no, we are not ready.
as the person responsible to keep our firm equipped to work every day 24/7, it is a disservice to me and others in my position to constantly market to our employers with scare tactics and generalizations that do not take into account the reality and complexity of all of the issues that must be addressed from firm to firm and culture to culture.
i waste so much time explaining or clarifying to partners what someone has told them or that they have read in an article or heard over the internet when i could be using that time to get us ready to go to the cloud which i feel is the answer for my particular firm.
again thank you.
adriana garcia
office/it information manager
vink teague & associates, lllp
mike d. mccraw
great article. however, i still think that no matter what sales job it does, the finance gurus will be slow to adopt.
mathew heggem
the focus on cloud computing will shift the way we instruct our program participants at the bookkeeping center (www.tbkc.org). we are charged with the task of training entry-level employees in financial administration and bookkeeping. now, we should probably add a technology component to help them understand ‘the cloud’ – perhaps even just a workshop. we hope that such a workshop could give our participants a competitive advantage and move them up the economic ladder from low-income & unemployed to meaningful and profitable employment.
russell abernathy, cpa
i think cpa’s will be very slow to go to the cloud.
they are overly paranoid about client data and hackers and overly conservative when it comes to advances in technology. the cloud is the future and one day not so far away we will all be on the cloud.
cpa’s still have not for the most part adopted social media and its benefits.
zora monster
i have to say, having been a co-founder of a company whose business is based on cloud computing, that i don’t get what’s so new and different about it.
gmi based it’s entire business model around doing everything on the web, from collecting a panel to conducting surveys to doing statistical analysis of data and even creating presentations with said data. we started in 1999.
microsoft has, for years, been talking about office on the web. intuit has, for years, offered a low-end version of their quickbooks product on the web. what’s new and different about taking desktop operations and databases and putting them on the web is the name, nothing more.
what’s driving it is the ready availability of broadband. from an audit perspective, probably the biggest single issue is auditing the hosting site, but for a lot of companies that won’t be such a problem since they are likely hosting at major sites with very secure systems. the second biggest problem is auditing the security of the end users, but if a system is set up to check for anti-virus software – installed and running – that solves that issue.
the thing with cloud computing is to understand that the only change is that everything is done over the web, and we were already there with shopping and a number of other applications. otherwise, it’s just like your desktop. the company intranet is simply run off-site. if a secure facility is being used and reasonable security precautions are in place, it’s no more vulnerable than a traditional company intranet, meaning it’s as secure as it’s users.
oh, and someone is making a lot of money.
mike abbott, mba, cpa
rick,
it is ironic they use the “paradigm” of “cloud” computing. from a distance, clouds are fancy, pretty and graceful. once you get into them, they are stormy, destructive and generally rain on your parade.
i have been in it related services for 45 years. i have seen paradigms come and go. usually a lot of flash about new stuff; only to wind up right back where they started, after sinking gobs of money. lately, i have been working with small businesses. these are the types that traditionally tried various different accounting systems, all had new, improved “paradigms”.
eventually, most ended up with quickbooks pro. they would usually pay someone like me to set it up, or convert it over from whatever system they previously had, but went out of business. more recently, they have been looking at the cloud. i had several migrate to clouds, most noticeable microsoft’s accounting system.
microsoft pushed it hard. everything you would ever need, all at one stop. they also moved to the server based office products. then microsoft discontinued support of their current products, and migration became the “paradigm” of the day. their payrolls were farmed out to other houses, usually at greater fees. they got confused, encountered lapses of support, and eventually got so frustrated that they came back, hat in hand, begging me to move them back to the old quickbooks.
that’s when the real kicker set in. the form of their data was no longer compatible with their tried and true quickbooks pro. major transformation was necessary, those that could even get dumps of their data. many had to settle for printouts from the cloud system so they could manually re-enter months of data. in the end, they usually get back to what worked best for them, their own hardware platform running their own (licenced of course) softwares, doing their own backups and providing their own security. i made money off their misfortunes, as will many others in this new “paradigm”.
massive corporations, i am sure, will migrate over much more gracefully. they will be able to push their costs into new places on the financial report. other costs like raincoats will sprout up to protect them from those lightning bolts from those blue skies, bringing the rain and problems that clouds usually bring with them.
new products will be available for purchase to hedge those bets. cloud is just another catchy name for the same old tired concepts that citrix ushered in decades ago. only then, the clouds were local showers. today, they will spawn into hurricanes. but, we will have pushed oodles and oodles of money around. new castles will be formed in the clouds. i will be waiting, with my billing software on my laptop, ready to help them bale water.
mike
danny johnson
wow. loved the title…a play off of apple’s iphone four launch campaign.
but i agree with you. in the past, one may have had to sacrifice a little functionality or integratability in moving to the cloud but those days may have ended. the company i work for, netdocuments, has been in doing saas document management since 2001 and i can vouch for the fact that cloud computing has matured significantly not only in power but in number of providers and markets reach.