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Rick Telberg
Rick Telberg

Cloud Computing Changes Everything, Again

You're running out of time to get up to speed. Cloud computing is changing the costs and distribution of technology services and stands to make fundamental changes to the way business is done. Do you think CPAs are ready to do business in the cloud? E-mail your comments to Rick Telberg here.

October 7, 2010
by Rick Telberg

TechBytes

Whether you call it software-as-a-service, on-demand, online, web-based or any number of other terms, the new model "is becoming the IT fabric of the future," according to Tom DeGarmo, Philadelphia-based principal and technology leader at PricewaterhouseCoopers (PwC) after 14 years at BearingPoint.

To be sure, cloud computing is not new, and neither are its transformative effects. You are reading this article from the cloud. It was sent to you via the cloud. You went to the cloud to retrieve it. You might share it using an e-mail application (app) that lives in the cloud. In fact, cloud computing could have as much impact on business as the Internet.

But in what can only be described by that over-used term as a paradigm shift, DeGarmo says in the report (PDF, 64 pages) that cloud computing is already having a transformative effect on business strategy. In the new paradigm, cloud computing creates the "extensible enterprise."

In describing the new extensible enterprise, DeGarmo favors a metaphor from the restaurant business. In the traditional restaurant business, patrons come to the restaurant to eat good food and enjoy friendly service.

But the extensible restaurant business model recognizes that their most popular salad dressing could be sold through a retail window or wholesale to supermarkets. Or the entire kitchen and food-preparation process could be duplicated in a warehouse and dedicated to catering. But go further: Since selecting the best fresh ingredients is a core capability of great restaurants, why not pick for the rest of us and open a fresh produce market? By applying core competencies to new products and services, the extensible enterprise creates new revenue streams and profit centers.

Now consider what the notion of the extensible enterprise could mean to finance executives. Cloud computing is mature enough to be generating billions of dollars of revenue for companies like ADP, Amazon.com and salesforce.com, yet young enough to be misunderstood by many CFOs, PwC says.

At first, finance executives will be grappling with new challenges and responsibilities. PwC starts with five:

  1. Understanding how to use internal and external clouds to speed deployment of new IT projects and reduce costs.
  2. Supporting the CEO’s growth agenda with financial modeling and analysis of cloud-based initiatives.
  3. Mastering the metrics to compare the true cost and returns of cloud computing.
  4. Understanding how the shift to the extensible enterprise will affect income and cash-flow statements and balance sheets.
  5. Managing the governance, risk and compliance issues when moving sensitive operations and corporate data to the cloud.

On the other hand, PwC expects finance executives to quickly embrace cloud computing's big three topline advantages:

  1. Eliminating many big upfront IT investments.
  2. Boosting cash-flow with faster and more precise transactions and reports and,
  3. Maybe best of all, shifting the accounting treatment for IT from capex to opex, giving cloud computing huge tax advantages.

Although promising, the challenges and opportunities of cloud computing remain murky. The only thing certain is that the paradigm shift cannot be ignored any longer. You're running out of time.

COMMENT: What will cloud computing mean to you and your business? Do you think CPAs are ready to do business in the cloud? E-mail Rick Telberg.

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Rick Telberg is president and chief executive of Bay Street Group LLC, advisors in marketing, management and strategy.

Copyright © 2010 CPA Trendlines/BSG LLC. All Rights Reserved. Used by Permission. First published by the AICPA.

Disclaimer: Any views expressed in this article do not necessarily reflect the views of the AICPA or CPA2Biz. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.

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