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March 7, 2013

Cloud Revealed as More than Cost Saver

By Marie Lingblom

As the theoretical promise of cloud computing gives way to lessons learned, more enterprises find the headaches and challenges are leading to long-term business goals other than cost savings.

As PwC puts it, the hype certainly did make the cloud sound too good to be true — as if you could snap your fingers and supporting infrastructure would appear. PwC notes that, as a disruptive force, the cloud raises issues companies need to carefully consider: strategy, finance, risk and governance, data security and privacy, technology, and its impact on other business functions.

A new KPMG International survey, “The Cloud Takes Shape,” polled more than 650 businesses and IT leaders across 16 major global markets. More than half are working in the cloud; about one-third report the costs of moving to the cloud were higher than expected. A similar number noted significant implementation challenges.

“One of the most important lessons uncovered by this research is that business process redesign needs to be done in tandem with cloud adoption, if organizations hope to achieve the full potential of their cloud investments,” said Rick Wright, leader of KPMG’s Global Cloud Enablement Program.

Executives, he adds, have found simultaneous process redesign is central to addressing the complexities that arise in the implementation and operational phases of cloud adoption. KPMG’s analysis finds business executives moving past costs savings as a final goal for operating in the cloud.

Other long-term benefits can include more efficient overall processes, flexible operating models, and faster speed-to-market. KPMG’s survey notes two of the top three cloud objectives identified by more than 20 percent of executives are to enhance new market entry and drive business process transformation.

The survey drives home what other market watchers are saying: A more strategic approach needs to be developed to realize the proper benefits, especially as organizations move their core and sensitive data and processes to the cloud. “When thoughtfully implemented, many providers could actually offer robust and resilient security measures and controls that could enhance overall security in the cloud,” according to Greg Bell, a U.S. principal and services leader at KPMG. For instance, he adds, functions that, until recently, were considered too sensitive or complex for the cloud are now being put on the table.

As part of its report, KPMG’s highlights specific aspects of cloud implementation that can significantly impair/enable an organization’s ability to reap rewards. In addition to security, mentioned above, these include the following:
Regulation: Companies say that, while regulation is not hindering cloud implementation, they are working to address future legal and regulatory requirements.

Tax: Organizations are approaching the tax structure of cloud deployment strategically and are finding a cloud environment can make a significant difference to their tax position and bottom line.

On the tax front, says Steve Fortier, Cloud Enablement lead for Tax at KPMG, bringing the tax department into discussions early can help companies avoid missing out on cost-saving opportunities or inadvertently creating significant tax risks.

It’s clearly necessary to focus on core business goals while moving portions of any organization into a cloud environment, says Wright. Organizations should look to leverage opportunities for business transformation and change management that can occur as a result of a move into the cloud.

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