Have you spoken with your CIO about your company's cloud
Chances are your CIO is developing one, and its effects will be
felt companywide. Cloud computing can reduce IT and business costs,
and it is fast becoming a powerful means for growth. As CFO, you
should understand how a cloud strategy can influence your
organization's cost structure and financial
strategy—or risk forfeiting a competitive advantage.
There is a chance you won't be included in early discussions
with your CIO because some IT executives underestimate the
game-changing nature of cloud. In fact, some eschew cloud computing
in part because its efficiencies can reduce demand for IT staff.
But momentum is building for cloud, and if you are not a user
today, you likely will be within a few years.
A rudimentary understanding of cloud computing dissuades many
CFOs from initiating the cloud conversation. Don't let that
stop you. It would be wise to educate yourself on the service
models, cost structures, and governance issues. Then use these
questions to engage your CIO.
Five questions to ask your CIO
How do the organization's short- and long-term cloud
computing strategies reduce IT and business costs while helping
drive new opportunities?
How does the cost structure of our IT compare with that of
public clouds? Have you analyzed the two approaches?
How is our security group approaching the use of both private
and public cloud models?
If we have started implementing cloud, what are the detailed
plans for migration and implementation? Is internal audit
What is the strategy to prevent proliferation of shadow IT
among business units? How are we monitoring acquisition of
New frontiers for risk and governance
When parsing the answers to these questions, CFOs must consider
the risks and rewards of strategies identified by the CIO and other
A cloud-focused CFO will take a lead in creating a
flexible—and adaptable— framework to manage
emerging governance and compliance issues. CFOs also must evaluate
risks and vet the viability of providers.
The CFO must be prepared to assess a cloud provider's
ability to safeguard data residing in its systems and vouch for the
security of any data that is regulated for privacy and compliance.
If IT reports into the finance function, CFOs may need to vet the
financial strength of the provider and help ensure that it meets
performance and stability requirements. And once a cloud
implementation is in place, a CFO must monitor costs to manage
accurate billing and reevaluate the economics. If it becomes
necessary to seek another provider, the CFO should oversee an exit
How the cloud impacts finance
Users of cloud services typically see lower capital
expenditures. This shift varies by industry and whether the cloud
is public or private. CFOs may need to adjust capital spending to
factor in new variable costs such as total contract value or stream
As a user of cloud services, the CFO must be able to model new
impacts on revenue, profits, and operating margins, as well as the
risks of exposing services in the cloud.
Cloud computing will impact finance's processes for
investing in, monitoring, and depreciating IT assets. Providing or
using cloud services also will impact sales and use tax
Evaluating cloud standards
As cloud computing evolves, regulators and standards
organizations are developing criteria to evaluate risks associated
with public cloud computing. CFOs must be mindful of these risks
and be prepared to include contract provisions allowing third-party
audits, independent SLA monitoring, audit rights over variable
pricing, and SAS 70-type independent audits. While SAS 70 audits do
not address risks associated with cloud computing, alternative
reports are becoming more commercially acceptable to assess
cloud-related risks and controls.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Law Society of British Columbia’s Cloud Computing Working Group issued its Final Report on Cloud Computing on January 27, 2012, amending an earlier consultation report approved by the "Benchers" on July 15, 2011.
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