5 Things Every Chief Financial Officer (CFO) Needs to Know Before Moving to the Cloud
Moving to the Cloud, CFOs love cloud systems. They offer lower upfront costs, faster deployments, and the ability to directly expense costs without messing around with ugly depreciation schedules — it’s all quite appealing.
And that is nothing compared to the potential upside that cloud system can deliver. Reduced costs, increased revenues, elevated time savings, improved quality, increased customer satisfaction, or whatever your ROI measures, cloud technology promises to improve your organization.
Sound too good to be true? It is. Kinda.
What CFOs need to recognize is that cloud technology introduces new risks and often times additional expense, erasing all potential ROI.
Cloud systems are easier to deploy, but harder to adopt
From the point of view of technical and infrastructure expenses, cloud systems are easier to deploy. Less time is needed acquiring servers, building out data centers, purchasing ancillary software, and hiring staff to support the system. Oh, and they can go live faster too – cutting implementation times from months and years to just days or weeks.
The challenge is, the technology can often go live faster than the people and organization can adapt. Traditional change management programs take time and focus on preparing people for the change. There simply isn’t time for this with cloud systems. With cloud technology, the systems can change faster than people. What happens is that your new, fast, affordable cloud system sits unused.
Weight your business case to reflect effective user adoption
Most every business case I have ever seen assumes 100% user adoption. It’s not explicitly laid out as such, rather it’s an implied assumption. The expectation is that everyone will use the system. And they will do so starting from the first day the system is live. After all, a system that isn’t used does not deliver any value, killing your ROI.
In reality, I have never seen an organization that has 100% effective, consistent system use. Often times it is closer to 25% – 45% effective use. Occasionally more, if they’ve done it right.
Oh, and effective user adoption doesn’t start on day one. Rather, people are normally slow to include the system into their daily work routines. Each day that people delay adopting your system costs you money. And this, as you know, hurts your ROI.
At Tri Tuns, we recommend that CFOs adjust the business case / ROI projections to reflect different user adoption scenarios. Does your business case stand up if you only get 40% adoption? 50%? 75%? What is the impact if there is a 6 -12 month delay before your people use the system? (BTW, research has shown that without direct intervention it typically takes 24-36 months for people to use systems as part of their daily working practices).
Every dollar spent on training is wasted…unless people use the system
This one is a no-brainer. Every dollar that you spend training users on systems that sit idle is a waste of your time and money. It costs you money to develop and deliver the training. It costs you money to pay your people to be in a training class. And there’s the opportunity cost associated with the time people are in training and not doing their jobs.
How does your business case hold up if people never apply what they learn in training?
This is too costly a risk for anyone not to plan for.
Your cloud vendor now shares your risk
You have user adoption risk. And it can cost you big.
The good news is that with cloud systems, a portion of this user adoption risk is transferred to the cloud vendor. Why? Because you will not renew subscriptions for systems that are not delivering value to your organization.
Increasingly cloud vendors are providing tools and services to help clients drive and sustain effective user adoption.
The bad news, most of them are very bad at it. User adoption is a people and an organizational issue, not a technical issue – and software vendors are tech experts, not people experts. So, while your cloud vendor may share your user adoption risk, they often lack the capacity to solve this problem on their own.
Tell your vendor your renewal criteria right up front!
Cloud vendors rely on renewals and long-term customer relationships in order to profit. If you want to see a vendor go into panic mode, let them know that you will not renew your software subscription. They will try all sorts of things – like give you free services or training – to retain your business.
One way to get your cloud vendor to help you attain your needed ROI through user adoption is to tell them exactly what business outcome you need to see in order to renew their software. And let them know when you will be making your renewal decision.
By letting your vendor know how and when you will determine if the money you spend on their software is worth it, they are in a position to help make sure that you achieve your measurable business result. And if you get the value you expect from the system, renew fast and without wasting any time looking at alternatives or engaging in painful negotiations.