How CFOs should audit the cloud balance sheet

How CFOs should audit the cloud balance sheet Cloud computing offers CFOs new opportunities to help the enterprise grow, but presents new challenges around governance, risk, and compliance.

Cloud computing is mature enough to be generating billions of dollars of revenue for Automatic Data Processing (ADP), Amazon.com, salesforce.com, and other well-known companies, yet young enough to be misunderstood by many in the C-suite, including chief financial officers (CFOs).

The grace period is just about over.

Figure 1: The extensible enterprise is the combination of versatile processes and ecosystem integration that create a network of business platforms.
Click for full-size

Initially viewed simply as a way to create more agile, efficient IT organizations, cloud computing is fast becoming the means for a new type of growth based on an opportunity that PwC calls the extensible enterprise. (See the article, “The cloud you don’t know: An engine for new business growth,” on page 04.) Not just agile but also versatile, the extensible enterprise sits at the core of a deeply interconnected ecosystem in which customers, vendors, and business partners drive mutual growth via a network of business platforms, as shown in Figure 1.

In this way, cloud computing could become the most transformative technological innovation since the Internet. Business leaders who fail to leverage this potential may risk forfeiting a competitive advantage to those who do.

This article examines the CFO’s role in creating the extensible enterprise and delves into the risks and bottom-line challenges he or she must manage. These challenges include the need for a faster and more expansive model-to-market mentality to match the speed and agility of the extensible enterprise. An array of governance, risk, and compliance (GRC) challenges also are associated with cloud-related operations and the security of corporate data. (See the sidebar “Cloud-computing-related challenges for the CFO.”)

A fundamental idea that CFOs—indeed, all C-suite members—must thoroughly grasp is how an extensible enterprise (by definition) requires exposing formerly internal capabilities to others in the company’s ecosystem and taking advantage of the services offered by others. Because this idea impinges heavily on many decisions CFOs will need to make, the next section examines it in more detail before looking at how CFOs can play offense and defense in an extensible enterprise.

Cloud-computing-related challenges for the CFO

The extensible enterprise will create new responsibilities for the CFO, including:
  • The basics: understanding how finance and business units can use internal and external clouds to speed deployment of new IT projects and applications, and reduce IT costs.
  • Supporting the CEO’s growth agenda with appropriate financial modeling and analysis of the network of business platform-oriented, cloud-based initiatives.
  • Mastering the new metrics necessary to compare the true cost and returns of cloud computing and exposing new services in the cloud to the cost and returns of traditional IT projects.
  • Understanding how the shift to the extensible enterprise enabled by cloud computing will affect income and cash flow statements, and the balance sheet.
  • Managing the governance, risk, and compliance issues that arise when moving sensitive operations and corporate data to the public cloud.