Don't get lost in the cloud

21 September 2021

NZ companies switching their business to the cloud are often missing the point.

Some New Zealand companies adopting the cloud are not using it to its richest potential, according to a business advisory expert.

Head of Advisory for accounting and business advisory firm BDO, Adam Davy, says while most New Zealand companies are "on the cloud" these days, the point of the move is how to use the cloud to accelerate their business to another level.

"You'd have to say these days most people are on the cloud but so what? The real question is whether they are using it to supercharge their business," he says. "This is particularly true of small businesses as the cloud gives them the tools, usually data collection and speed, to take on the multi-nationals."

Small to medium enterprises (SMES) typically spend about 20 per cent of their working time on finances – time which can be used for other vital business decisions, like future-proofing.

Figures from Australia suggest 43 per cent of Australian businesses have yet to adopt the cloud – the digital platform which makes data and software accessible online, any time, anywhere, from any device.

New Zealand statistics for cloud uptake are not available but Davy says anecdotal evidence puts New Zealand ahead of Australia, supported by a 22.1 per cent growth in New Zealand subscribers on Xero alone in the year to March 31.

Davy says another common statistic is those companies which use Xero plus one other cloud tool grow 30 per cent faster.

Some are making the shift of at least parts of their business to the cloud because they have heard the commerce drums beating that the cloud is the future of business – with the rate of change, lower barriers to entry (particularly cost) and huge leaps in innovation and technology the key drivers.

"While the cloud is a terrific enabler of how you run your business, the amazing things you can do with data which means you can make much faster, assured business decisions, its main value is in the next step," says Davy.

"Once you have saved yourself all this time and got your processes really flowing well, that is the key. Some businesses are just ticking the box, saying', well, we've done the cloud; let's focus on marketing or some other aspect now'."

Davy puts the cloud's current evolution at about the same stage as when mobile phones developed their cameras, making even standalone digital cameras almost obsolete – and demonstrably boosting the penetration and usage of the phones to previously unseen levels.

"That's the thing; no one expected the mobile phone to be used so widely for cameras, giving birth to businesses like Instagram and many more. That's the vital element of the cloud – it's an enabler and a brilliant one but it really depends on the thinking that the business using it applies to push their business forward and up."

Perhaps the best example of a company using the cloud to totally transform their business is Netflix. In 2008, Netflix's back end computer architecture was causing business-threatening disturbances to its new (2007) online delivery service. Database corruption and outages led the company to think about moving its business to the cloud.
It proved a landmark decision. Between December 2007 and December 2015, the number of hours of content streamed on Netflix increased 1000-fold. It had eight times as many people signed up to Netflix at the end of its cloud migration process as it did at the start. Cloud infrastructure was able to stretch to meet this expanding demand while their old, traditional server racks in a data centre were not – and it proved to be a major cost saving.

So the failing company that mailed DVDs to movie buffs opened the door to a multi-billion dollar industry of online video streaming, taking Netflix from that old-school DVD pusher to a business rivalling a Hollywood studio.

Davy says the key there was the thinking that got Netflix from a DVD mailing outfit to an online video streaming company. Many businesses are using the cloud to speed up/automate bookkeeping matters or data collection and analysis, enhanced (work anywhere) mobility, collaboration, scalability – but it was a matter of how they used the time saved that really mattered.

"That is where many companies think they have done enough. But the cloud is only a ticket to the game – you still have to decide how you are going to play the game and how you are going to beat the opposition."

Davy says BDO sits down with clients to work out their strategic imperatives before advising how to access financial data to take advantage of other business opportunities. They use technology like BDODrive, a flexible platform to help optimise business performance; Futrli – a powerful reporting tool with real-time business insights; Spotlight – enabling insight-driven forecasting; and Xero's renowned accounting software.

As featured in the New Zealand Herald.