While the reasons cited for moving to the cloud often include less cost and maintenance, there’s much more to this shift than those benefits alone.

The market for financial management software is undergoing a major transformation, as more companies look to deploy cloud-based finance applications. In a survey that included 271 senior finance and IT executives, 57% of respondents said they believe cloud/SaaS financial management systems will replace on-premise systems over the next two years, according to research completed in April 2013 by Saugatuck Technology (and commissioned by Workday).

While the reasons cited for moving to the cloud often include less cost and maintenance, there’s much more to this shift than those benefits alone. What follows—in my view, and based on what I’ve heard from customers—are five key reasons why the cloud is better.

1. The Cloud is One Global System.

Cloud-based financial management can deliver anytime, anywhere access to one system, ensuring finance and business managers across the globe are getting the same picture of the business and a single source of truth. This can be a huge boon for troubleshooting any business performance issues, particularly when analytics are embedded within a cloud-based financial management application.

Reports and key performance indicators (KPIs) are based on this single source of truth using data that’s more likely to be current and accurate, sharpening a company’s competitive edge. Powerful cloud-based analytics technologies that fall in the area of Big Data make the value proposition even stronger. A single global system also makes it possible to support multiple currencies, accounting standards, internal controls, and global and local compliance in one place.

Compare this to on-premise ERP systems, which are based on architectures developed more than 20 years ago and were designed to support financial accounting (GAAP), but nothing more. The enterprise software industry’s answer to these systems’ limitations has been to develop and market additional applications, such as business intelligence, compliance management, and mobile device management, all of which must be purchased, implemented, and integrated with the finance system.

Analysis of business performance requires data to be extracted from finance systems and moved to business intelligence applications. Because of the time and effort involved in this process, business decisions are often made on data that’s no longer current. This complex approach has cost businesses a lot of time and money over the years and heavy reliance on their IT departments for the integrations.

As businesses grow, the on-premise finance system approach also can result in fragmentation of applications and data across the globe. This is particularly common for companies that grow through acquisitions. Regions and business units may have their own systems and may be on different versions or even different brands of software. Regions may pursue their own approaches to financial reporting using spreadsheets and separate analytics applications. Currency, regulatory compliance, and accounting standards may be managed independently within those regions. This fragmented approach makes it impossible to deliver a complete and timely picture as to what is happening across the company.

2. The Cloud is Always Current.

This is one of the most significant—yet most often overlooked—benefits of the cloud. A cloud vendor using a multi-tenant model is able to continuously make available important updates and new innovations to all customers. In the rapidly changing world of financial management, this continuous innovation approach can be a significant competitive and operational advantage.

Cloud systems are more flexible, allowing organizations to more easily adapt to change. Consider that laws and regulations are constantly changing both locally and globally. If new legislation is passed, a multi-tenant cloud application can deliver, within a relatively short period of time, updates to all affected customers that support compliance of the new law.

Technology is constantly evolving, too, creating new and better user experiences with modern user interfaces and ways to connect to business systems from an ever-shifting landscape of mobile devices. The cloud’s distribution model makes it easier for customers to quickly embrace new innovations with the user in mind.

Compare that with the traditional on-premise ERP vendor’s model that feeds off the cycle of the expensive, resource-intensive maintenance and upgrades while supporting multiple versions of its software running across the customer base, literally crippling its ability to keep up with the rapid pace of change and deliver a continuous flow of innovation to users.

3. The Cloud is Secure.

Nothing is more important to financial managers than having the assurance that their company data is secure, yet most companies and public institutions are not in the business of security. A reputable cloud vendor is in the business of security. And not just any security, but a strong, ongoing focus on rock-solid security.

This requires multiple layers of authentication for accessing areas where servers are kept and two-factor biometric authentication. It entails camera surveillance at entry points, constant security personnel, and close monitoring and logging of any suspicious access-attempt activity. From the technology standpoint, it requires cloud system architectures that are specifically designed to protect customer data, including database encryption.

These efforts require huge investments by cloud providers and are critical to their success and survival. Businesses that choose to keep their financial management applications on servers located on their own premises may not be able to, or may not have prioritized, such high levels of security.

In addition, cloud providers that are serious and transparent about their practices for protecting data will provideindependent SOC 1 and SOC 2 audit reports, along with international certifications, such as ISO 27001.

4. The Cloud Offers Superior Economics.

There is no question that the total cost of ownership of cloud applications versus on-premise software is superior, in regard to both deployment and ongoing support. We often hear from customers that they’ve achieved anywhere between 30% and 50% cost savings over a five-year period compared with on-premise software applications. However, I purposefully use the word economics instead of total cost of ownership, because the cloud’s benefits reverberate beyond not spending money on hardware and software licenses, onsite software implementation, and ongoing maintenance and upgrades.

The cloud’s update cycle is easier and faster, resulting in not just lower cost of training, but higher adoption of innovation. That provides companies with a competitive advantage against peers who are caught in the slow-paced legacy model. IT resources can be transitioned away from time and talent spent maintaining systems to focus on projects that generate profits for their businesses. In addition, some of the things mentioned above—one global system, always current—also contribute to lower operational costs and speedier response to changes in market conditions and regulations, all of which add up to superior economics.

5. The Cloud Fosters a Strong Community.

The cloud enables the possibility of greater and faster innovation when customers are on the same version of the application and able to collaborate and share ideas on technology and features within the community, making the product even stronger.

With on-premise software, customers can be on many varying versions, hindering collaboration and sharing. The vendor has to support multiple versions of the software, when most of its energy should be spent listening to customers and delivering innovations that’ll drive their businesses forward. In a cloud community, the power of one drives the momentum of the cloud applications; in the legacy software world, fragmentation among customers and partners funnels away energy, time, and money.

Also in the Saugatuck Technology survey, 65% of respondents said a finance systems change is being considered, planned, or executed at their organizations, and cited “inflexibility and fragmentation” as key hindrances of their current systems. As finance and IT executives consider the replacement options, they should weigh these distinct five benefits of the cloud against their specific goals and needs. The results can be eye-opening.

Raphael Bres is vice president, financial product strategy, with Workday.