Cloud Computing: A Paradigm Shift - CORE

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Singapore Management UniversityInstitutional Knowledge at Singapore Management UniversityResearch Collection School Of AccountancySchool of Accountancy8-2012Cloud Computing: A Paradigm ShiftPoh Sun SEOWSingapore Management University, psseow@smu.edu.sgFollow this and additional works at: https://ink.library.smu.edu.sg/soa researchPart of the Accounting Commons, and the Technology and Innovation CommonsCitationSeow, Poh Sun. 2012. "Cloud Computing: A Paradigm Shift". In Accounting and Productivity: Answering the Big Questions, edited byThemin Suwardy and Gary Pan, 113-122. Singapore: SMU and CPA Australia.This Book Chapter is brought to you for free and open access by the School of Accountancy at Institutional Knowledge at Singapore ManagementUniversity. It has been accepted for inclusion in Research Collection School Of Accountancy by an authorized administrator of InstitutionalKnowledge at Singapore Management University. For more information, please email libIR@smu.edu.sg.

Accounting &ProductivityAnswering the big questionsThemin Suwardy and Gary PanEditorsI

Table of ContentsFirst published August 2012Copyright 2012 CPA AustraliaAll rights reserved. No part of this publication may be reproduced, stored in aretrieval system, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording or otherwise, without the prior permission of the publisher,except for inclusion of brief quotations in a review.The views expressed in this publication are those of the authors and do notnecessarily represent the views of, and should not be attributed to, CPA Australia Ltdor the Singapore Management University School of Accountancy.Accounting & Productivity: Answering the big questionsiiEditors:Themin Suwardy and Gary PanPublished by:CPA Australia Ltd1 Raffles Place#31-01 One Raffles PlaceSingapore faceviPrologueviiiChapter 1Productivity Matters: Views from the TopChapter 2Productivity, Return-on-capital andStock Price Performance23Chapter 3Productivity Measurements forAccounting Functions34Chapter 4Productivity in Accounting Practices43Chapter 5Change Management: The People Dimension53Chapter 6Making Finance Work62Chapter 7Banking on Productivity73Chapter 8Value for (Public) Money88Chapter 9Business Intelligence and Analytics101Chapter 10Cloud Computing: A Paradigm Shift113Chapter 11Helping Hands1231iii

Chapter 10 Cloud Computing: A Paradigm ShiftReferences and Further ReadingErnst & Young (2012), The Evolving Role of Today’s CFO.Few, S. (2010), BI has Hit the Wall.PricewaterhouseCoopers (2007), Managing Information and Performance: CFOs FaceNew Demands for High-quality Data that Drives Decisions.Chapter 10Cloud Computing:A Paradigm ShiftSeow Poh Sun, Singapore Management UniversityIntroductionResearch has shown that investment in IT is a key driver of productivityimprovement in the accountancy sector. IT enables accounting firms toincrease their productivity by automating tasks and enhancing collaborationwithin the firm and with their clients. Cloud computing has generated muchinterest from the business and IT communities these days as an emergingtechnology to increase productivity.Many analysts have predicted cloud computing to be the next big thing in IT.Gartner, a world-leading IT research and advisory company, identifies cloudcomputing as one of the top 10 strategic technologies for 2012 (Gartner,2011). Gartner also estimates that the global cloud computing market willreach US 150 billion in 2014. Another premier global provider of marketintelligence for the IT markets, International Data Corporation (IDC), predictsthat 80 per cent of new commercial enterprise applications in 2012 will bedeployed on cloud platforms (IDC, 2011). IDC forecasts that worldwidespending on public IT cloud services alone will reach US 55.5 billion in 2014,with a strong annual growth rate of 27 per cent over the period from 2009 to2014. These numbers reflect the growing importance of cloud computing fororganisations.Cloud computing is also gaining traction in the Asia Pacific region. IDCprojects that the annual growth rate for cloud computing services in the AsiaPacific (excluding Japan) market is 40 per cent, reaching US 4.9 billion in2014. A major driver of this strong growth in Asia Pacific is the investmentof new data centres to support cloud computing. Several cloud computing112113

Chapter 10 Cloud Computing: A Paradigm Shiftpioneers are making their presence felt in Singapore. In 2010, IBM openeda US 38 million Asia Pacific Cloud Computing Data Centre in Singapore.Salesforce.com also opened its first international data centre in Singapore in2009 to serve increased adoption of cloud computing in Asia Pacific. AmazonWeb Services also launched its first Asia Pacific platform in Singapore in 2010so that it can better support customers based in Asia.The Infocomm Development Authority of Singapore (IDA) has identified cloudcomputing as a key technology for shaping the competiveness of Singapore.Based on IDA’s cloud adoption study in 2012, Singapore is ranked third, afterAustralia and Japan in terms of cloud adoption in the Asia Pacific region (IDA,2012). To encourage the investment of local organisations in productivityand innovation, IDA announced in 2011 that it will include cloud computingunder the government’s Productivity and Innovation Credit (PIC) Scheme.Organisations can now qualify for a 400 per cent tax deduction for the first 400,000 expenditure incurred on cloud computing. Alternatively, cashconstrained organisations may opt for 60 per cent non-taxable cash payoutfor up to 100,000 expenditure incurred on cloud computing (see Chapter11: Helping Hands). These incentives give impetus to the adoption of cloudcomputing in Singapore.The next section presents an overview of cloud computing. It examinesthe definition, key attributes, service models and deployment models ofcloud computing. Subsequent sections will cover the business values andconsiderations of cloud computing.What is Cloud Computing?Cloud computing facilitates “anywhere, anytime” access to real-time data.Therefore, accounting firms and clients can work together better to increaseproductivity and reduce costs. Previously, accounting firms and clientstypically exchange data files through email in order to share information. Withthe accounting software and data in the cloud, accounting firms and clientscan now look at the same data together. Any adjustment to the data can beseen immediately by both parties, eliminating the need to pass informationto and fro, resulting in effective communication and collaboration. Mr Eric114Tan, founder of SPT Advisory, which advises accounting firms, estimated thatcloud computing could help his firm save up to 20 per cent of expenses bycutting down on travel time, printing fees and other related costs (StraitsTimes, 2012).The National Institute of Standards and Technology, an agency within theU.S. Department of Commerce, describes cloud computing as a model forenabling network access to a shared pool of configurable computing resources(for example, networks, servers, storage, applications, and services). In short,cloud computing is the delivery of computing resources as a service primarilyover the internet. Cloud computing signals a move away from traditional onpremises IT systems to an on-demand delivery/consumption model.The cloud computing model is characterised by the following five keyattributes.1. Cloud service providers adopt a multi-tenant model by pooling theircomputing resources to serve multiple customers. Computing resourcesare dynamically assigned and reassigned based on customers’ needs.2. Cloud computing allows customers self-service capabilities for serviceprovisioning. Customers do not require human interaction with cloudservice providers.3. Cloud computing caters for rapid elastic scaling. Customers can quicklyscale computing resources in any quantity at any time to meet their needs.4. Cloud service providers incorporate usage-based pricing for their cloudservices. Customers are charged on a pay-per-use basis.5. Cloud computing caters for ubiquitous network access. Customers accessthe cloud services via the internet, using diverse clients such as desktops,laptops, tablets and smartphones.Cloud computing is associated with three service models: software as aservice (SaaS), platform as a service (PaaS) and infrastructure as a service(IaaS). Exhibit 10.1 illustrates the three service models of cloud computing.115

Chapter 10 Cloud Computing: A Paradigm ShiftBesides software, another service model for cloud computing includes anIT platform. SaaS caters for end-users while PaaS caters for applicationdevelopers. PaaS is a cloud platform for the creation of applications. Underthe PaaS model, application development tools are hosted in the cloud.Developers have access to a computing platform such as operating system,programming language, execution environment and database for buildingand running applications, without focusing on the underlying infrastructure.Examples of PaaS are Microsoft Windows Azure Platform and Force.comPlatform. Both PaaS platforms enable developers to focus on buildingapplications in the cloud.Exhibit 10.1: Service Models of Cloud Computing1SaaS is the most familiar service model for cloud computing. Checking emailon Gmail, collaborating on Google Docs, sharing files on Dropbox, updatingschedule on Google Calendar, social networking on Facebook, accessingcustomer’s data on Salesforce.com are examples of SaaS. SaaS is the deliveryof applications over the internet. Under the SaaS model, cloud applicationsare delivered and consumed via the internet. Unlike the traditional on-premisessoftware model, SaaS model does not require organisations to buy and installsoftware on multiple local machines. End-users use web browsers to accessapplications in the cloud for a subscription fee. For example, organisationspay 39.90 per month for six user licences to access QuickBooks Online onSingTel myBusiness, SingTel’s online store for SaaS. In October 2011, IDAlaunched the SaaS Enablement Programme (SEP) to provide funding supportfor software vendors to SaaS-enable their software.The third service model of cloud computing relates to IT infrastructure. Underthe IaaS model, cloud service providers provide fundamental computingresources such as server, storage and network as an on-demand servicein the cloud. IaaS is the cloud platform for the deployment of applications.It differs from traditional hosting services where hosting companies typicallycharge a fixed amount for a pre-configured computing resource irrespective ofusage. IaaS service providers offer customers on-demand capability to scaletheir computing requirements to match their needs. Instead of paying an upfront fee, IaaS customers only pay for their actual consumption of computingresources. Amazon Elastic Compute Cloud (EC2), IBM SmartCloud Enterpriseand StarHub Argonar are examples of IaaS, providing scalable computingcapacity in the cloud.Organisations can deploy cloud computing in three deployment models:public cloud, private cloud and hybrid cloud. Public clouds are opened to thegeneral public and exist on the premises of the cloud service provider. On theother end of the continuum, private clouds restrict access to people withinthe organisation and may exist on or off premises. Hybrid clouds contain bothelements of public and private clouds and imply integration between internaland external environments.1Johnston, S. (3 March 2009) “Cloud Computing”, Creative Commons Attribution.Retrieved from http://en.wikipedia.org/wiki/File:Cloud computing.svg116117

Chapter 10 Cloud Computing: A Paradigm ShiftThe Business Values of Cloud ComputingCost savings was the initial selling point of cloud computing. Cloud computingchanges the way organisations think about IT costs. Advocates of cloudcomputing suggest that cloud computing will result in cost savings throughthe sharing of computing resources such as networks, servers, storage,applications and services. Organisations that adopt cloud computing avoidsignificant capital expenditures on purchasing computer hardware andsoftware compared with organisations that adopt the traditional on-premisesIT system model. Instead of the upfront capital expenditure, organisationsincur either monthly subscription fees or pay only for what they consume.Knorex Pte Ltd, a software development company, significantly cut down itsIT operating costs by eliminating its in-house servers with the adoption ofcloud computing.In addition to the initial purchase costs of the computer hardware andsoftware, organisations should also consider the total cost of ownershipsuch as the subsequent costs to configure, implement, maintain, backupand upgrade the applications. Cloud applications are managed by the SaaSproviders on their premises. Organisations do not have to manually installapplications on their local desktops and laptops. Users simply access thecloud applications via the web browser. Users also end up using the sameversion of the application at any one point in time as software updates arehandled by the SaaS provider. Since there is only a single version of theapplication in the cloud, managed by the SaaS provider, organisations donot have to worry about configuration, maintenance and upgrading issues.Thus, cloud computing lowers the total cost of ownership by eliminating thesignificant upfront and ongoing costs. This enables organisations to channelmore funds into growing their business. For example, SingTel estimated thatthe total cost of ownership over three years of its ONEOffice, a suite of officesolutions in the cloud, is 3,725. In contrast, the total cost of ownership overthree years for a comparable traditional email and office software package isestimated at 59,595. ONEOffice represents a cost savings of 94 per cent.SingTel’s total cost of ownership calculator can be accessed at .118Besides applications, organisations also have to manage their IT infrastructuresuch as computer servers. Before cloud computing, organisations overinvest in servers to cope with potential spike in customers’ activities. Withcloud computing, organisations do not physically own the servers. Instead,organisations purchase computing resources from the IaaS providers, similarto how they purchase electricity from the utility company. As cloud computingoffers elastic scaling, organisations can rapidly scale computing resourcesto manage peaks and troughs in usage. This allows organisations to keepcosts proportionate to their IT requirements. Instead of waiting for monthlyinvoices, organisations can track their actual usage in real-time to managetheir spending. For example, Readyspace, a cloud service provider, bills itscustomers on daily billing block instead of binding its customers with longterm subscriptions or contracts. Readyspace’s customers can terminate theservices at any time. Mr Dumas Chin, SingTel’s vice-president of businesssales, commented that cloud computing finally enables small and mediumsized enterprises (SMEs) to access computing resources at a fraction of thecost (Business Times, 2012). Without cloud computing, many expensivecomputing resources are out of reach for SMEs.Another impetus for the adoption of cloud computing is the push to improveproductivity. HSR Property Group, a leading real-estate company in Singapore,adopted Google Apps to improve information flow and collaboration amongits 2,000 agents. Google Apps enable HSR to share floor plans, maps, pricing,availability and other real-estate data in real-time, both internally among itsagents and externally with clients. Besides Google Apps, another popularcloud application is Microsoft Office 365. SD Group, a technology solutionand services provider, adopted Office 365 to boost productivity and improvecommunications. According to Mr Daniel Soh, the Managing Director, SDGroup saved US 1,000 to 2,499 per month with Office 365. Mr Soh addedthat productivity increased by 80 per cent, as Office 365 enabled employeesto access all employees’ calendars and minimise time required to set upmeetings. Previously, SD Group’s employees have to send multiple emails tocoordinate schedules.119

Chapter 10 Cloud Computing: A Paradigm ShiftEurokars, Singapore’s largest privately-held car distributorship, implementedan IT system in a private cloud to provide its sales employees with real-timeaccess to customer and inventory information regardless of location. Priorto this, Eurokars’ sales employees can only access information in the office.Another SME, KSL Resources, a repainting and decorating contractor, alsoadopted cloud computing to increase productivity. Similarly, KSL’s staff couldonly manually report their work status in the office. Now, they could use thecloud application to update job status directly regardless of location. Realtime updating also allows KSL to manage workflow more efficiently. SMEsthat are implementing information and communication technology solutionsfor the first time can apply for the IDA’s Increase SME Productivity withInfocomm Adoption and Transformation (iSPRINT) scheme for up to 70 percent of qualifying expenditure, capped at 10,000 (See Chapter 11: HelpingHands for more information).Availability is another barrier for the adoption of cloud computing. Organisationsare dependent on the cloud service providers for their IT infrastructure andapplications. If the cloud is down, organisations will not be able to function. Forexample, Microsoft Windows Azure platform experienced a severe worldwideoutage on 29 February 2012 due to a leap year coding error, leaving theircustomers without cloud access (eWeek, 2012). In the event of extendeddowntime, cloud service providers must have good disaster recovery plans inplace. In addition, organisations are worried about slow internet connectionspeeds as cloud computing is essentially the delivery of computing resourcesover the internet. The reliability of cloud service providers is also a concern.If the cloud service provider goes out of business, organisations will faceserious disruption to business operations.Issues to Consider in Adopting Cloud Computing What is your service level agreement (SLA)? How do you handlecompensation in the event of downtime?Despite the potential business values of cloud computing, organisationsshould be aware of the possible pitfalls. Many organisations are cautiousabout adopting cloud computing because of a fundamental data securityconcern. Organisations are worried about hosting sensitive and confidentialdata in the public cloud. Organisations typically opt for private clouds torestrict access if they have data security concerns. Besides data security,organisations are concerned about data ownership. Cloud computing involveshanding control of data over to external cloud service providers. Therefore,the ownership of data in the cloud is questionable not only in this case but inthe advent the cloud service provider is no longer operational. Cloud serviceproviders must specify clearly what they can do with customer data. Lastly,organisations do not want to be locked in to a specific cloud service providerand require assurance that they can easily export their data to other cloudservice providers.120Organisations need to work closely with their cloud service providers. Beloware some questions to discuss with potential cloud service providers: What is your backup policy? How often do you perform backup? What is your disaster recovery plan? How often do you test it? What is your security policy? How will data be protected? What is your data ownership policy? Who owns the data? What is your privacy policy? Do you sell information to third parties formarketing?121

Chapter 11 Helping HandsConclusionCloud computing, the delivery of computing resources as a service primarilyover the internet, is here to stay. Organisations are excited about thepotential of cloud computing to reduce costs and improve productivity. TheSingapore government has included cloud computing under the PIC Schemeto encourage the adoption of cloud computing. Under the PIC scheme,organisations can either enjoy tax deduction or cash payout. SMEs that areimplementing information and communication technology solutions for thefirst time can also apply for the IDA’s iSPRINT scheme. However, as withany technology, organisations must always consider their business needsbefore their adoption of cloud computing. Data security, data ownership andavailability are some issues that organisations will need to consider carefully.References and Further ReadingeWeek (2012), Microsoft Windows Azure Downtime Blamed on Leap Year Bug.Gartner (2011), Gartner Identifies the Top 10 Strategic Technologies for 2012.IDC, International Data Corporation (2011), IDC Predictions 2012:Competing for 2020.IDA, Infocomm Development Authority (2012), Address by IDA CEO atCloudAsia 2012.Business Times (2012), Boost your Productivity with the Cloud, 3 April.Straits Times (2012), Accountancy Sector Urged to Raise its Game, 2 March.122Chapter 11Helping HandsGary Pan, Singapore Management UniversityIntroductionWith economic uncertainty prevailing in recent years, Singapore is beingconfronted with the challenges of managing growing aging population,acute land and labour constraints and rising business operating costs. If leftunchecked, these challenges may threaten Singapore’s economic well-beingand consequently its status as a global and financial hub. To address thesechallenges, many believe productivity-driven growth can deliver sustainableand inclusive economic development and improve Singapore’s standard ofliving over time. The National Productivity and Continuing Education Council(NPCEC), set up to spur Singapore to step up its efforts to boost skills andenterprise productivity, has identified the accountancy sector as one that hasthe scope for productivity growth and could potentially bring about spill-overproductivity effects to other industries (Straits Times, 2012).Funding support for accounting entities working to achieve productivity growthis an important strategy to raise the accountancy sector’s overall productivity.It is widely believed that funding is essential for investment in productivityenablers such as training and information communication technology (ICT).Skills upgrading through training is a key mechanism for companies to raiseproductivity. In the same vein, companies can sharpen their competitive edgeby leveraging on ICT to improve their productivity and, ultimately, generategreater business growth. In its funding strategy, Singapore has adopted asectoral approach supported by efforts in key horizontal productivity enablers,which have across-the-board impact in raising productivity (Ministry ofManpower, 2012). The three endorsed programmes are the SME-Productivity123

Chapter 11 Helping HandsContributing AuthorsAbout the Editorsand AuthorsElaine Chong, Co-Founder, Institute of Business AnalyticsAndrew Lee, Associate Professor (Practice), SMU School of AccountancyLim Chu Yeong, Senior Lecturer, SMU School of AccountancyIrving Low, Head of Risk Consulting, KPMG SingaporeGary Pan, Associate Professor (Education), SMU School of AccountancyEditorsR. Raghunathan, Partner, Business Consulting, PricewaterhouseCoopers LLPAssociate Professor Themin Suwardy (FCPA Aust.) is theAssociate Dean (Curriculum and Teaching) and Master ofProfessional Accounting programme director at SMU Schoolof Accountancy. He has been awarded numerous teachingawards, including the inaugural recipient of the internationalCEEMAN’s Champion Award for Teaching in 2010. Histextbook, Financial Accounting: IFRS (co-authored withHarrison, Horngren and Thomas, published by Pearson Education), is a globaledition used in many institutions around the world. Themin is currently DeputyPresident – Singapore, CPA Australia and Vice-President (Membership) of theInternational Association for Accounting Education and Research.Seow Poh Sun, Assistant Professor (Education), SMU School of AccountancyAssociate Professor Gary Pan (FCPA Aust.) is the AssociateDean (Student Matters) at School of Accountancy,Singapore Management University. Gary was awarded MostOutstanding Teacher, Master of Professional AccountingTeaching Award in 2010; School of Accountancy MostPromising Researcher Award in 2009 and Best Paper(Honourable Mention), Journal of Strategic InformationSystems in 2009. His research and teaching focus on areas of accountinginformation systems, strategic implementation of IT systems and corporategovernance. Gary is a member of CPA Australia, ICPAS and ICMA. He is alsoAssociate Editor for Journal of Information & Management.134Themin Suwardy, Associate Professor (Practice), SMU School of AccountancyRichard Tan, Partner, Risk Consulting, KPMG SingaporeKK Tang, Co-Founder, Institute of Business AnalyticsMelvin Yong, General Manager – Singapore, CPA AustraliaTracey Zhang, Assistant Professor (Education), SMU School of AccountancyIntervieweesChow Kam Wing, Executive Director and CFO, Micro-Mechanics HoldingsKon Yin Tong, Managing Partner, Foo Kon Tan Grant ThorntonSim S. Lim, Country Manager, DBS SingaporeTham Sai Choy, Managing Partner, KPMG SingaporeKenny Yap, Executive Chairman and Managing Director, Qian Hu CorporationPhilip Yuen, Chief Executive Officer, Deloitte Singapore135

Chapter 10 Cloud Computing: A Paradigm Shift 118 119 The Business Values of Cloud Computing Cost savings was the initial selling point of cloud computing. Cloud computing changes the way organisations think about IT costs. Advocates of cloud computing suggest that cloud computing will result in cost savings through

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