What are the business impacts of cloud computing?

The short answer is that all areas of your organization will be impacted by cloud computing, or they should be, if you have a comprehensive strategy in place. Cloud computing is more than an advance in technology. It represents transformation for your entire organization — people, processes, and systems.

Subject matter specialist

Cara Beston

Partner, Assurance

Cara Beston

Finance — Identifying cloud services and analyzing accounting models will help your organization determine how to proceed most efficiently and effectively with activities such as research and development and revenue recognition.

Internal audit — In order to accommodate the move to cloud computing, cloud service providers will need to modify, upgrade, or replace systems to process, measure, and control use. This will also be critical for billing. Providers should have the right SLAs in place, and a process to monitor those SLAs. Buyers of cloud services must give themselves the same control and monitoring environment in the cloud that they did on internal networks and servers. This is much more challenging, as your organization no longer controls hardware. Methods of application management may change significantly.

Tax — If you’re buying or selling cloud computing services, it is critical to determine what you’re buying or selling. You may be leasing equipment, making service payments, or paying a license for using software — these distinctions are important and can have an impact on your company’s tax filings. Current tax law does not necessarily reflect the realities of cloud computing. Cloud computing transactions aren’t quite leases and aren’t quite services, but tax law requires them to be classified in one of these two categories. Eventually, tax regulations will be updated and clarified. Now, there isn’t enough consensus.

Risk and compliance — Cloud computing represents a risk, as it moves data and information into the hands of a third-party provider for storage, processing, or support. Buyers of cloud services will need to set the criteria for the evaluation of cloud computing providers; whereas providers will need to consider which cloud services to provide. Then, your organization will need to be able to explain the next steps that are required in order to mitigate the risks of moving into a cloud computing environment.

Marketing and sales — New services and products lead to new sales models and customer interfaces. To realize the full potential of cloud computing, your organization needs to understand the value of these products and services, and then price them correctly.

Vendor lock-in — The viability and capabilities of small and startup cloud vendors could be a concern for long term continuity of service. Enterprises that are using proprietary vendor technology may incur heavy costs if they to move to another cloud platform.