Microsoft examines some of the key opportunities a CFO can gain through adopting the cloud.
As a result of the government’s continued focus on reducing the deficit, the UK health system is under increasing pressure to further tighten the belt when it comes to spending.
Indeed, while the 2015 Spending Review may have set out plans provide the NHS in England £10 billion per annum more in real terms by 2020-21 than in 2014-15, the NHS is expected to deliver £22billion of efficiency savings – as set out in the Five Year Forward Plan – without diminishing the quality of healthcare.
This is not just a UK challenge, however. According to global consultancy McKinsey & Company's latest report, Improving healthcare whilst curbing costs, healthcare systems across Europe and in the US are facing similar financial restrictions meaning healthcare organisations are having to think outside of the box when looking for solutions.
“Healthcare systems in the United States and Europe are under financial pressure, causing healthcare providers to look for new ways to manage costs while improving the quality of care,” stated the report.
For a Chief Financial Officer (CFO), the balancing act between finding savings and improving the quality of care is key. As financial gatekeeper, it is the central role of the CFO to find efficiencies while minimising the impact this has on the service and care that they provide.
So where does a CFO begin?
With future initiatives such as the goal for the NHS to be paperless by 2018, and the continued expiration of PACS storage contracts, exploring how technology such as the cloud can help meet these challenges and help health organisations ‘do more with less’ is a good start.
So what does it look like in reality, and how can a CFO weigh up the benefits of moving to the cloud? This article takes a look at some of the key opportunities a CFO can gain through adopting the cloud.
Understanding the cloud
Adoption rates of the cloud in the UK public sector is continuing to grow. According to a recent Kable report ‘XaaS technologies in the UK Public Sector’, cloud software and services will represent 3.8% of the circa £14.5bn public sector technology expenditure by 2018/19. This represents a CAGR of 45.6%.
As it is the core responsibility of the CFO to help react to the austerity measures, it is key to understand the economic value that the cloud presents for the NHS, and why this should not purely be a decision driven via IT.
There is still due diligence required around data security and privacy when it comes to moving from on-prem IT to the cloud, however the market has now to evolved to a point whereby providers such as Microsoft are able to provide world class secure cloud services which ensure your organisation are able to comply with CESG’s UK Government 14 Cloud Security Principles.
According to the NHS Choices Delivery Director Cleveland Henry, one of the key reasons why they opted to adopt Microsoft Azure (cloud) is that the solution is able to meet their requirements around data security.
He explained: “Microsoft Azure also meets the risk and security requirements for NHS Choices by design from every aspect of the information security and compliance arena”.
To find out more about how HSCIC were able to leverage the benefits of the Microsoft cloud through the NHS Choices program, click here.
As this industry grows and the technical challenges to cloud adoption quickly diminishes, let’s look at the economic benefits.
Trading capital expense for variable cost
The first opportunity the cloud presents for a CFO is to trade capital expense for variable costs.
With the Microsoft cloud customers simply pay for what they use. This means a CFO no longer needs to purchase expensive IT hardware like servers and storage arrays on depreciation cycles because Microsoft alleviates that overhead. This includes the cost of hardware maintenance, recurring hardware replacement costs and management costs.
This opportunity was realised by Homerton University Hospital Foundation Trust in 2015 who saved 90% on storage hardware through leveraging the Microsoft cloud for storing Medical Images.
According to Dzinja Kabambe, who was head of strategic IT projects at the time of adoption, moving to the cloud saved the Trust thousands of pounds.
He said: “Instead of having to spend on the order of £50,000 a year on storage, we can expand our cloud storage or buy some tier 3 storage instead. That’s an order of magnitude cheaper—we can literally knock a zero off that sum when we need to expand.”
To find out more about how Homerton University Foundation Trust achieved these cost savings, click here.
Reducing Variable Cost
Not only does the cloud help a CFO trade capital expense for variable costs, but it also helps reduce variable costs associated with the powering, cooling and real estate management.
Often these costs sit outside of the IT budget and it is important to note that the cost benefit evaluation of the cloud can stack up based on eradicating these costs alone.
Therefore, it is very important that the CFO introduces and highlights these costs when evaluating with IT to further invest in on premises technology vs adopting cloud technology.
Driving Down Infrastructure Costs through Microsoft’s Economies of Scale
Another opportunity for a CFO is to leverage Microsoft’s global buying power to drive down the cost of infrastructure.
Microsoft spend billions of pounds on infrastructure, which enables us to drive extremely low price points due to the economies of scale they are able to achieve. In turn Microsoft are then able to return these savings back to customers at a much lower cost than they could achieve independently themselves.
Naturally CFOs have already sunken costs in infrastructure but this does not preclude the adoption of cloud technology. In fact, one of Microsoft’s core strengths is the ability to provide a truly ‘hybrid’ solution, which enables customers to continue to leverage their on-premises investments with cloud based technology.
The opportunity this presents for the CFO is to stop any further investment in any new expensive infrastructure, and look to fully maximise and sweat these assets and use the cloud when capacity becomes constrained. It can even be used to enhance disaster recovery and business continuity of existing assets, which can help reduce risk associated with data centre and hardware failures for the NHS.
Providing Data Insight Driving Further Cost Saving Opportunity
Finally, there is an opportunity to leverage the cloud as a cost effective platform to provide data insight which can lead to critical business insight, and lead to further cost efficiencies.
This was demonstrated through Leeds Teaching Hospital’s use of the Microsoft cloud in 2014, which sought to improve the billing process of the hospital.
“We discovered that we had been losing money by not accurately recording and charging for diagnostic tests, such as CT scans, in our clinical software in a way that could then be picked up by those who do the billing,” says Iain MacBrairdy, Business Manager, Emergency Medicine at Leeds Teaching Hospitals.
To find out more about how Leeds Teaching Hospital used Microsoft cloud in 2014, click here.
What next?
The economics of the cloud that have been discussed are such that the cost of continuing to further invest in ‘in house’ data centres is not going to help a CFO achieve the efficiencies that are required in line with the spending review and austerity measures.
Furthermore, the business intelligence that can be achieved through improved data insight open up a vast range of opportunities for the NHS to analyse data to drive better decision making, better forecasting and evaluate return on investment.
To find out more about health and the cloud, click here.
To learn more about Microsoft Azure, click here.