KPMG Accounting Head: The Cloud Is Still Your Best Bet

The following article recently appeared in KPMG Norway’s Accounting and Financial Management magazine. Marius Berg is Partner and Head of Accounting at KPMG Norway. Prior to joining KPMG, Berg spent 20 years at the head of leading firms in the finance industry. KPMG is an Xledger recommending partner.

Wants the company’s financials in the cloud

When the servers at Amazon recently went down for a few hours, it created problems for a number for internet related services. But this is not an argument against cloud based services, according to Marius Berg.

On the contrary, it just proves that those who still have their accounting system on a server in the basement need to move it to the cloud, claims the KPMG partner, who is responsible for his company’s accounting services.1

Even though it’s well known in the tech world, few people are aware that the online shopping giant has since 2006 been the world’s largest supplier of infrastructure for cloud based internet services, with a market share of more than 40 percent.

Wanted Control

At first glance it may seem odd that something we think of as a bookstore makes millions from providing cloud services. Berg thinks the explanation is simple.

In 2006 Amazon’s systems handled online turnover of $10.7 billion, and it was the world’s biggest platform for e-trade. One second of down-time on the servers could, on average, cost the company $340 million in lost revenue. During Christmas season shopping, the cost would be much higher.

To minimize the down time, Amazon developed significant competency in keeping services going. The company’s technicians and management realized in 2003 that this competency had great commercial value. In the spring of 2006 they launched it as a service, first as data storage capacity and then as full cloud service. Now, 11 years later, Amazon Web Services (AWS) is the industry standard that all suppliers of cloud services are measured against.

KMPG Accounting is responsible for providing bookkeeping services to many Norwegian companies, which it does through cloud-based systems like Xledger. These systems are not built on Amazon’s platform and are therefore unaffected by Amazon’s problems, but they nonetheless abide by the same standards and expectations that Amazon has created in the market.

What Are the Alternatives?

It naturally causes turmoil when the largest player in the industry experiences down time, but Berg thinks that this incident is a good opportunity for companies to consider what needs they actually have, and what alternatives exist.

If your company can’t sustain four hours of downtime in your business management system once every few years, and if you cannot otherwise afford to pay IT staff that are more competent than the world’s leading IT firms, you will naturally have to consider whether there is a sufficient number of benefits to staying on an outdated business management platform, says Berg.

The KPMG partner thinks that in addition, one has to take into account that according to a recognized analytics firm, the TCO for a modern cloud based business management solution is 77% lower than for legacy systems. In addition, cloud based systems provide companies with simpler and better insight into financials.

Six issues

According to Berg, there are six issues that managers should consider in order to determine whether it’s time to make changes to their ERP systems.

  1. Is the ERP system dependent on one or two key persons? Can others keep the system running relatively easily if the responsible person is sick or leaves?
  2. Has the ERP system ever been an obstacle to something the company wanted to achieve? Does the system fit with the company’s strategy?
  3. Does the current system provide sufficient access to management information and real-time financial information when you need them, or does someone have to go and pull data to make comprehensive calculations?
  4. Is your ERP solution customized to your company’s needs? What value does this customization provide, and could it have been replaced with standardized routines?
  5. Could you have benefitted from using a cloud based solution as your ERP, or do you depend on mixing new and old technology?
  6. Have you calculated the costs of your current system and financials versus the savings you could gain from using a cloud ERP solution that automates your business processes?

If the answer is yes to any of these questions, it may be an indication that your ERP system is a liability, that it poses an obstacle to your organization’s development, or even that it imperils the survival of your company. If so, it is probably time to change to a solution that can catalyze future restructuring, which means choosing a cloud based solution. Those who use rare events like what Amazon recently experienced as an argument against such systems are fooling themselves.

Note: The above article has been translated from Norwegian. Xledger is solely responsible for any errors made in the transfer.

1. In Norway