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Q&A with Tech Analyst Brian Sommer: Cloud Pioneers Then and Now

We got a little time recently to chat with Brian Sommer, ZDnet columnist and founder of technology research firm Vital Analysis. He shared some perspective on why the CFOs of today are embracing cloud financial systems and how they got there from a few years ago. He approaches the subject with an experienced eye and a humorous perspective that has been honed from witnessing years of software evaluations and implementations. 1) What are the key differences in tone/attitude towards cloud financials that you found the most interesting (2010 vs 2013)? The tone is markedly different.  Today’s software buyers are not the cloud pioneers of yore anymore. They’ve been quietly trying out a variety of cloud applications. And, they’ve had a lot of success with them. Four years ago, the cloud users I spoke to were a different breed. They had blazed all-new trails in their firm’s IT and business processes. They had to do some heavy lifting to get what was then a non-traditional technology approved, funded and implemented. These executives also had to debunk a lot of FUD (fear, uncertainty and doubt) that cloud naysayers had been spreading around. These cloud buyers of the past made it possible for numerous others to get the current deals done and done more frequently and easily.  2) Can you quantify some of the biggest savings/benefits as a result of moving to cloud financials? Cloud financials, like other cloud applications, can deliver some interesting savings. All cloud applications should be able help a company avoid a number of hardware and systems software acquisitions (or refreshes). Multi-tenant cloud applications, like, are even more interesting than their single-tenant competitors, as the vendor maintains, upgrades and patches the software for the customer as part of their subscription. This one benefit is often massive. TCO (total cost of ownership) comparisons between on-premises and cloud solutions shows that companies often expend more to maintain software over 8 years than they will for their initial license fee, maintenance payments or implementation costs. Eliminating that cost is a huge deal for software users. Multi-tenancy also means customers are always on the most current release of the software. 3) Can you highlight some benefits from the user perspective as well? I did hear of some other benefits from cloud financial software users. They reported that newer cloud systems permitted these firms to establish new offices anywhere in the world with no lost time, no hardware purchases and no extra anything. All these firms need is an Internet connection and a computing device to have a new instance. The mobility that cloud solutions provide also promotes more work/life flexibility for critical hires. One CFO even spoke of how their cloud solutions permit them to keep their best talent by giving them flexibility in where and how they work. Staff retention is a major concern for mid-sized firms and cloud solutions could help with this pain point. 4) Why do you think the rest of the market is slow to adopt cloud financials? I’m not so sure that the market is slow to adopt these products – it’s just the opposite. We need to remember that there must be a business reason for a company to pick new software. A significant number of firms have to wait until there is some major business expansion/contraction, merger, technology obsolescence or other factor precipitating a need for new software. These replacement cycles often take 10 years. What we’re seeing right now is still the early adoption phase of the cloud financial software uptake. Many more deals will follow for many years to come. 5) How would you classify cloud technology buyers? As to the technology adoption lifecycle (TALC), it is believed to comprise five kinds of technology buyers: innovators (who are the first to try anything new), early adopters (who also love the bleeding edge), the early majority (who are often a large chunk of buyers and love to have new things that come from market leaders), the late majority (who buy technology to achieve competitive parity cheaply),and, the laggards (the folks who buy old tech on the cheap). One of the key determinants of a technology’s market success is to know when a technology crosses over to the early majority buyer group. From what I can see, cloud financials have made this transition for small-to-medium sized buyers. The larger firms are clearly experimenting with cloud financial solutions but they should embrace them in larger numbers soon as products mature more. 6) What do you think it will take to change the rest of the market’s perception about cloud financial software? Well, nothing speaks like the success others achieve with new technologies. When I asked CFOs and Controllers about what counsel they’d give to peers in other firms, their responses were enthusiastic re: cloud accounting software. Moreover, they won’t be going back to on-premises solutions. No, these accounting professionals will be promoting cloud financial software to their peers. The positive word-of-mouth the industry is creating will be a boon to cloud software adoption. But the story gets even better as the CFOs I spoke with are already using multiple cloud solutions in their firms. They’ve grown quite comfortable using cloud software for CRM, HR, financial planning, Marketing, sales compensation and other functions. They’re moving their systems to the cloud and financial accounting software is the next step in the cloud evolution process. 7) Were you surprised by the number of cloud application products companies are using today? Very much so. Many of these executives identified 5 or more products. While I expected to hear several mentions of cloud CRM products and some cloud HR or office automation solutions mentioned, I was surprised at how many other solutions like cloud storage popped up. Bottom line: There’s a lot more cloud adoption going on out there than I ever suspected. And, that could be a good thing for the further adoption of cloud financial accounting software.
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