Cloud technologies have long since come of age and increasing numbers of services are migrating from the server room to the cloud. Tax and finance are no exception. The benefits are myriad: real-time collaboration between locations and organisations; lower total cost of ownership (TCO); speedier and easier updates; and more opportunity for using the very latest technologies. In this Q&A, Russell Gammon, pictured above, Chief Solutions Officer at Tax Systems, walks us through the changing dynamics of the industry.
Where are we in the tax industry on the journey to cloud migration?
When it comes to revenue from tax applications, as recently as 2020 it was 60/40 in favour of desktop versus cloud; we expect that to flip in the other direction within 18 months and, from there, continue the march towards cloud. As with many technologies, the tax sector is somewhat behind the curve and we tend to work with fragmented solutions from multiple vendors. We also take a binary approach to technology because we are so traditionally desktop-driven: either outsource it or handle it in-house. Moving to the cloud eradicates that binary thinking.
What are the obstacles to adoption?
Previously, people have been the biggest challenge. Experienced old hands can be set in their ways and are wary of change; digital natives on the other hand are very much on board with new technology and we’re seeing more and more instances of these people driving charge across their organisations. We need forward-thinking people driving the change and bringing down internal barriers. It’s worth noting that during the pandemic, the necessity of working from home has accelerated the adoption of new technology and has eroded some of the barriers to new ways of working, including the cloud. Another problem that has historically been an obstacle is confidence in the technology itself. We’ve needed cloud solutions that actually work – that are intuitive and mimic best practice processes. Today cloud technology has come on leaps and bounds and is more intelligently able to automate certain activities, paving the way for achieving the benefits cloud has always pertained to offer like efficiency and cost savings, faster and easier updates, scalability and more.
Can we meet Making Tax Digital (MTD) targets without a cloud platform?
Making Tax Digital for CT will be a challenging programme and requires lots more collaboration between Corporation Tax and VAT teams, which previously in many instances were much more siloed. Cloud is a collaboration force multiplier, giving multiple teams real-time access to the information and services they need. It removes the likelihood of duplication of effort that comes when working on siloed desktops and smooths the path to digitization.
What are the cost implications?
Cloud technologies typically have a significantly lower TCO. With a traditional server-desktop deployment, there is considerable upfront investment and ongoing maintenance costs. Moreover, it can take months to update software due to the manual nature of its deployment. The cloud removes these costs and complications at a single stroke – you simply pay a monthly or annual, predictable fee for what you use. Meanwhile, the application vendor and cloud host take care of all the maintenance, patches and updates. And with a more regular update cycle, you enjoy continuously improving solutions.
What about data compliance and regulatory concerns?
Companies have a responsibility to ensure sensitive data is secure. That means there is always concern about where data is hosted and whether it complies with local jurisdiction, however, in reality, it shouldn’t be much of an issue. All big cloud platforms are fully certified and well aware of their regulatory responsibilities. They also incorporate best-of-breed security as standard which should allay any worries.
How can a cloud first strategy boost innovation?
The traditional desktop approach is very siloed, with restricted communications between services, applications and teams. Moreover, relying on a single, monolithic, legacy vendor for multiple functions ties our hands and limits what we can do. Instead, the cloud is ushering in the era of microservices and APIs where we can pick and choose the best components for individual needs and connect them seamlessly in the cloud. That has huge implications for how we work and how we build our technology landscape. It enables organisations to be more agile, deploy faster, and empowers teams to share resources and work together more quickly and efficiently. Combined, this leads to a company-wide boost in collaboration and productivity, driving innovation even further, faster.
How does the cloud help us become more sustainable?
First off, you are eliminating all those old servers, which can be hugely inefficient as they require significant volumes of electricity, whilst also costing a fortune to run. A 2018 study found that using the Microsoft Azure cloud platform can be up to 93 per cent more energy-efficient and up to 98 per cent more carbon efficient than on-premises solutions, as you only consume what you need. That makes migrating to the cloud a hugely important component of our journey to carbon neutral.
How do I know moving to the cloud is the right thing?
Across all industries, businesses are moving to the cloud and those that have gone before the tax industry have reaped the benefits. From increased efficiency to improved innovation, the cloud can offer a range of opportunities. However, it is important not to be intimidated – cloud migration may seem like a drastic change but this does not have to be the case. Moving to the cloud needn’t be a big bang that immediately changes how everything works. Think of it as a gradual progression that will better prepare you for the future – the cloud will put you in much better stead for the implementation of MTD for CT, scheduled for April 2026, for example.
Take your time and do your homework – research each cloud tax solution and determine which one is best for you now, and in the future. Soon enough, you will be enjoying a flexible, robust and scalable platform, with zero maintenance requirements and rich features. Best of luck!