|CLOUD COSTS Companies find unexpected expenses in moving to cloud|
As companies become more comfortable with the benefits of a cloud environment, they are reporting higher-than-expected costs, as well as challenges with implementation, operations, and governance, according to a new survey from KPMG International.
The KPMG survey, "The cloud takes shape," polled more than 650 business and IT leaders across 16 major global markets and found more than half of the organizations already working in the cloud. However, the survey found about one-third of respondents said the costs of moving to the cloud were higher than expected, and a similar number noted significant implementation challenges.
Rick Wright, KPMG's Global Cloud Enablement Program leader, says it appears some companies are only focused on the technology aspects of cloud to the detriment of their core business goals.
"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," says Wright, a partner with KPMG LLP. "Simply put, executives have found that simultaneous process redesign is central to addressing the complexities that often arise in the implementation and operational phases of cloud adoption."
According to KPMG's analysis of the survey data, business executives are moving past cost savings as a final goal for operating in the cloud. Wright says other long-term benefits can include more efficient overall processes, flexible operating models, and faster speed to market. KPMG's survey notes that two of the top three cloud objectives identified by more than 20% of business executives were to enhance new market entry and drive business process transformation.
Although companies are finding cloud to prove more than an IT cost reduction tool in the long run, a more strategic approach needs to be developed at the outset to realize the proper benefits, especially as organizations move more of their core and sensitive data and processes to the cloud, according to the survey.
"When thoughtfully implemented, many providers could actually offer robust and resilient security measures and controls that could enhance overall security in the cloud," says Greg Bell, a U.S. principal and services leader at KPMG LLP. "Functions that-until just recently-were considered too sensitive or complex for Cloud are now being put on the table."
The report highlights specific aspects of cloud implementation that can significantly impair or enable an organization's ability to reap its rewards. These include:
· Security: Cloud adoption should improve, rather than weaken, security concerns. Nevertheless, more than one-quarter of the companies surveyed have found that security-related challenges can be extensive and are a prime example of where business executives and IT need to work together to create a cloud security strategy.
· Regulation: In many cases, companies said that while regulation is not hindering cloud implementation, they are working proactively to address future legal and regulatory requirements.
· Tax: Organizations are approaching the tax structure of cloud deployment strategically and are even finding a cloud environment can make a significant difference to the company's tax position and bottom line.
"We see time and again that the federal, state, and international tax implications of various cloud deployment approaches can significantly impact an initiative's ultimate ROI," 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."
"Considering a strategic approach is necessary to focus on core business goals while moving portions of the organization into a cloud environment, organizations should also look to leverage the opportunities for business transformation and change management that can occur as a result of a move into the cloud," says Wright.
[This article was posted on February 26, 2013, on the website of ABA Banking Journal, www.ababj.com.]
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