Demand for Cloud-based Finance Technology

by Ogo Nwanyanwu, Research Director, SAPinsider

The current business landscape requires multinational organizations to move at the speed of real-time transactions. Recent societal volatility is a significant catalyst for the current global economic uncertainty facing organizations today. This uncertainty is driving complexity across the business landscape.

In response to this complexity, organizations are prioritizing business transformations of core finance functions and moving to cloud-based SAP ERP deployments. Data from our benchmark state of the market report on SAP S/4HANA Finance and Central Finance points to “pressure to reduce the cost and complexity of financial processes” as the top driver impacting the SAP S/4HANA finance strategy of SAP customers. A move to the cloud represents the new standard for simplifying complicated and expensive technology infrastructures that support core finance and accounting functions.

For many organizations, the foundational elements of their digital transformation strategy begin with a greenfield conversion of all or brownfield conversion of some core business functions housed in SAP ERP and non-SAP systems to the cloud.

Organizations can choose an SAP S/4HANA conversion implementation to deploy on-premise or in the cloud. C-suites depend on SAP ERP systems to manage costs, sustain growth, and mitigate risks at high-performance levels. Resiliency and flexibility are also required in today’s operational model to support these tasks amid new daily threats.

Moving Past TCO Discussion in SAP S/4HANA Cloud Conversions

SAP S/4HANA Cloud deployment can support improved system reliability and availability at scale, as cloud providers such as Amazon Web Services, Google Cloud Platform, or Microsoft Azure invest heavily in business continuity and disaster recovery solutions. For organizations that manage multiple subsidiaries integrated with SAP S/4HANA, SAP hosts its own Software as a Service (SaaS) solution. The cloud provider is also responsible for new features, data storage, and security. These offerings help large organizations achieve a smaller IT footprint by removing the costs of maintaining hardware, software, networks, and technical talent.

In the past, total cost of ownership (TCO) reduction often defined the core value proposition for transitioning all or parts of an organization’s financial core system to the cloud. In this current business landscape, transitioning to the cloud has become less about reducing TCO over the long term and more about achieving a return on investment (ROI) in the short and medium-term. By shifting to SAP S/4HANA Cloud deployment, organizations can allocate resources to innovation rather than legacy system maintenance.

Strategic Evolution Requires Digital Transformation

Demand for innovation stems from evolving business models and the need to market new products to engage customers where they live (e-commerce) and how they live (mobile). Accelerating trends in digitalization and globalization call for new methods of working with vendor partners (e-invoicing) to meet the demands of modern marketplaces. Government policies, regulatory frameworks, and revenue authority enforcement are increasingly more direct, comprehensive, and invasive regarding corporate engagement (e-filing; environmental, social, and governance reporting).

The global economy continues to change rapidly, forcing decision-makers at multinational corporations to plan and execute more strategically than ever before. These business pressures are triggering a demand from C-suites for real-time visibility across organizations to enhance the current insight-generation and decision-making methodologies.

Yet, many companies are challenged by complicated core systems and require digital transformation to remain competitive. Increasing transaction volumes across disparate systems with varied data models are exposing inefficiencies within outdated technology foundations. Large multinationals can leverage the universal journal in SAP S/4HANA to centralize business activity recording, streamline finance processes, and deliver information quickly across the organization. Finance transformations via the cloud provide organizations with the capacity to uncover more impactful insights and quickly distribute critical information.

Financial Transformation Facilitates Move to the Cloud

According to SAPinsider research, increasing real-time visibility into finance and operations is one of the top strategies organizations leverage with SAP S/4HANA Finance to transform core finance and accounting functions.

Here is a list of several core finance functions organizations are prioritizing in a move to cloud-based solutions for improved centralization, standardization, and transparency:

• Financial planning
• Profit tracking
• General ledger
• Accounts payable/accounts receivable
• Fixed asset management
• Risk management
• Multi-currency management
• Tax management
• Reporting and analysis

In addition to improved finance functions, cloud-based finance solutions are increasing the efficiency of finance and accounting professionals forced to work remotely in virtual teams. The pandemic redefined the workforce model, as finance and accounting professionals can work from anywhere at any time with any device. Quick access to data and the efficient transfer of information across the organization can reduce errors and improve the accuracy of end-to-end core finance processes. The elimination of low-value repetitive tasks, coupled with better workflow orchestration, can enable organizations to allocate resources to higher-value, more strategic work. Cloud-based finance management solutions provide real-time content updates to support operational controls and help optimize workflows previously designed for an in-office workforce structure.

Cloud Transition Offers a Roadmap to Next-generation Finance Function

The most crucial element of deploying cloud-based finance management solutions is to better collect, manage, and manipulate data across the organization. The volume and variety of data that ERP systems are required to process continue to accelerate. Organizations are prioritizing best-in-breed solutions across specific finance processes, including reconciliation and indirect tax determination. C-suite leaders at multinational organizations are faced with the emergence of new threats and new business needs. Some challenges are addressed with current resources, while others call for novel solutions to address the threat or need. Cloud-based finance solutions provide a clear roadmap to automate routine tasks, standardize data models, and centralize financial information. This creates the foundation for building intelligent finance functions throughout the organization to address new and emerging threats and meet needs in real-time.

SAP S/4HANA Finance can enhance an organization’s end-to-end financial processes with intelligent automation solutions leveraging robotic process automation and machine learning to deliver valuable insight. Artificial intelligence-enabled capabilities offered via cloud-based finance management solutions provide a roadmap to the next-generation finance function. The rapidly changing global economy is constantly producing new challenges. These challenges continue to reinforce the accruing value proposition of organizations in favor of a cloud-based technology ecosystem, as defined by near-term ROI via resource efficiency, workforce productivity, operational resilience, and business agility, rather than long-term TCO reduction.

What Does This Mean for SAPinsider?

Change management is critical. Finance and accounting professionals are human, and most humans need convincing to adopt change. Even if your organization is ready to move to the cloud and embrace the next-generation finance function, the workforce may be well behind the curve, so it is essential to evaluate the critical role of change management across the organization.

Financial processes need to be re-imagined. Organizations should constantly re-think every process and task to achieve optimization in concert with evaluating a move to the cloud. Processes developed for constrained physical offices and work hours should be stress-tested and future-proofed. Cloud-based SAP ERP systems such as SAP S/4HANA Cloud benefit from faster development and implementation cycles, supporting an organization focused on continuous innovation.

Prioritize ROI at the right speed. In a perfect world, business leaders would prefer a total cloud conversion of their core system all at one time. However, organizations are unique and complex, with several lines of business voicing varied requirements and time schedules that all demand consideration. Brownfield conversions with SAP S/4HANA Central Finance offer decision-makers the opportunity to pursue a more flexible approach to financial transformations in waves or stages. A more deliberate approach can limit interruptions and downtime for some organizations while leading to better strategic and quantitative outcomes.