5 Overlooked Advantages of Moving to the Cloud

Even though cloud has gone mainstream, replacing an on-premises ERP or HCM application with a cloud system can be a tough sell for some CFOs. Very often, IT cost savings along with the advantages of modern technology are not compelling enough.

Some leading-edge companies have looked beyond the horizon to identify some compelling advantages that often go unnoticed by the mainstream. Here are five benefits that we’ve found are commonly overlooked and should be part of your back-office operating plan:

Moving to the cloud offers a prime opportunity to rationalize your finance operations—which, in the long run, can have a much bigger impact on your business than cutting IT costs. Recently, one of our clients—a top Oracle ERP Cloud customer—justified moving its finance applications to the cloud on the strength of the business changes it could introduce. These included legal entity rationalization, chart of account redesign, streamlined account reconciliation, and improved enterprise performance management.  

The business-process changes enabled the company to generate substantial labor savings and turn a marginal business case into a no-brainer. Another client adopted Oracle ERP Cloud not so much for the IT savings but because the technology would enable them to rationalize and consolidate its disparate shared services model.

Many CFOs are unaware of the substantial tax breaks available to American companies that invest in the cloud. They’re based on a 1981 U.S. law called the Research and Experimentation tax credit. (In 2015, the credit was made permanent.) According to KPMG research on the tax implications of cloud computing, just 18 percent of tax departments among the 800 companies surveyed were maximizing the benefits of operating in the cloud. (Remember that moving to the cloud means you’re shifting a large portion of your costs from CapEx to OpEx, so that needs to be factored into your tax strategy.)

Although the formula is complex and each company’s situation is different, companies can estimate that they will receive a tax credit for about 13 percent of the cost of the project. This could include expenses such as software purchases, employee wages, project implementation, and other research efforts tied to moving your operations to the cloud. At KPMG, we’ve worked with several clients to file for these tax credits as part of their move to the cloud. The savings can be significant. For example, we recently helped a diversified media company gain a $2 million tax credit related to its investment in an Oracle Cloud solution for finance and HR. Learn more about research tax credits here.

Managing business risk and compliance has always been a top priority for CFOs. And it can be an expensive responsibility. The challenge is that many companies have gradually implemented a significant number of manual controls outside the core finance applications. Finance ends up absorbing the cost of administering these controls using spreadsheets, reports, email, and other manual approval tools.

Implementing a cloud-based ERP provides companies with the opportunity to take a step back and reevaluate all of the existing controls, roles and segregation of duties. There are often opportunities to automate and implement the controls embedded within the cloud application. For example, when one of our clients implemented Oracle Risk Management Cloud, it eliminated more than 60 manual reviews and, according to estimates, will save nearly $300,000 per year.

Another hidden source of labor savings in the cloud comes from automated user provisioning and access certification.