Increasingly, CFOs must be aware of how focused investment in IT – including cloud technology – can drive strategic advantage for their organisations in the digital era.
After all, any CFO knows how to help the company manage its bottom-line results. But leading CFOs collaborate with chief information officers and chief marketing officers to grow top-line revenue.
Many CFOs view IT as an expense to be controlled. But investments in IT can increase company profitability through revenue growth, not cost reduction, and have a higher return on average than advertising or R&D. And in today’s increasingly digital world, IT excellence is a critical imperative for enterprises to survive and thrive.
Consider US bookstore chain Borders or US video-rental company Blockbuster, whose declines were due in part to problems with effectively formulating digital responses to competitors such as Amazon and Netflix.
But the most important reason to embrace cloud computing is its business benefits. The cloud – sitting at the nexus of mobility, Big Data and analytics, social media, and the internet – can help grow revenues by better differentiating products and services, reduce costs by optimising processes and enhancing asset utilisation, improve customer experience and relationships, reduce time to market and time to volume and reduce risk even in today’s turbulent times.
For example, the on-demand, pay-per-use model means that companies can acquire resources during demand spikes, such as Black Friday for retailers or early April for tax accountants in the US, but need not pay to maintain those resources during demand troughs.
Here are four ways cloud computing can help power strategic business success:
Operational excellence. Traditionally, operational excellence involved better process designs and manufacturing layouts and use of machinery to replace labour. Today, advanced algorithms can optimise supply chains, reduce intervals and enhance labour productivity and asset utilisation. Consider, for example, a mobile package delivery fleet or field support organisation that ingests real-time traffic information, weather and vehicle status to optimise routes.
Product leadership. Product leadership traditionally has entailed better materials, tighter tolerances and more fashionable designs. Today, products are intelligent, adaptable and tied to the cloud. Consider connected vehicles, wearable fitness trackers or intelligent thermostats.
Customer intimacy. Customer intimacy used to mean that the owner of the mom-and-pop store knew your name, your kids’ names and whether they could have lollipops. Now, massive data is collected to help generate enhanced recommendations for everything from movies and books to targeted, patient-specific therapies.
Accelerated innovation. Innovation – in processes, products and relationships – is no longer solely the province of internal R&D labs working on long-term projects. It is being extended to include networks of partners as well as open contests, challenges and idea markets, mediated by the internet and the cloud.
In other words, better processes, better products and services, better customer relationships and faster improvement to any or all of those are benefits to harnessing the power of the cloud.
Parts of the IT application portfolio are fairly mundane, such as the systems for ordering paper clips and reserving conference rooms. But, in this digital era, IT – when aligned with the business – can enable companies to increase profitability and achieve strategic competitive advantage. That’s a language CFOs understand.
Joe Weinman is a technology industry executive and the author of Cloudonomics: The Business Value of Cloud Computing.
Related CGMA Magazine content:
“Expectations and Reality Vastly Different for IT Departments”: IT departments with a solid infrastructure are seen as more strategic and give companies a better chance at getting applications to market ahead of competitors, a survey shows.
“Boards Can Oversee the Cloud With Five Key Questions”: To provide effective oversight, board members need to have a clear understanding of cloud computing’s potential benefits across the organisation.