By Jan Hoffmeister, Managing Director, Drooms
Digitisation cannot be put off any longer. Some still try to ignore this, but most have come to terms with the potential and challenges of digital transformation.
Today, business processes are not the same as before – they have been disrupted. As companies introduce digitised innovation, existing structures are reinvented, processes become slimmer and forms of entitlement change. A classic example of this revolution is the digitisation of executive communication, which requires not only being able to reduce paper documents, but also to review the importance of documentation and their organisation. We all have folders and documents that haven’t been looked at for years; however, we just cannot bear to delete them as we think they might be useful one day. The decision-making process itself has changed, as much of it has become automatised and new roles and leadership skills are required, like in newly created roles, such as chief digital officers and data scientists. Digital disruption has opened new horizons for the business world, which needs to be able to keep up with the change.
Migrating to the cloud
According to a recent study, cloud businesses can generate 25 per cent more revenue compared with cloudless companies.¹ This trend does not only pertain to big firms and it doesn’t show signs of slowing. In the US, 51 per cent of medium-sized and small businesses claim to use cloud services. Experts expect an annual growth rate of 40 per cent in the sector as more of the nation’s 12 million small businesses start using the cloud for storing data and other professional services. The UK is only marginally second to the US, with 47 per cent of companies using cloud software and 27 per cent using at least three cloud applications.
Managers employ cloud services to perform daily tasks, such as accounting, but also to optimise practices of internal data management and sharing. Also, instead of buying expensive software and keeping IT staff busy with it, a cloud provider allows accessibility to the same functionalities but at a much lower price. The cloud is managed by the provider and not internally, so the IT department can spend their time focussed on projects that are more meaningful for the company. Being able to do more with fewer resources allows a business to invest more efforts in R&D.
Before feeling overwhelmed by the number of cloud providers active in the market, it is important for businesses to assess their business needs. There are so many services out there, so it is most important to prioritise: it is better to scale than to purchase products managers are not ready to implement – or that may be useless to the business. The next step is determining what is most critical for the business by comparing the different providers and narrowing them down. In order to gain further portions of the global market, cloud providers need to ensure high security standards; this is at least required by companies entering digital transformation.
Global research firm MarketsandMarkets expects that the global cloud security market will grow to $8.71billion in 2019.2 This represents an estimated compound annual growth rate (CAGR) of 15.7 per cent from 2014 to 2019. This process has several benefits in store, the first of which is cost cutting. Some argue that the digitisation of labour-intensive processes can cut costs by up to 90 per cent. Managers who are still opposing resistance to digital transformation, who are primarily concerned about the costs involved in setting the process in motion, are increasingly becoming the minority. A survey by McKinsey of 850 business leaders found that one-third believed that 15 per cent of their growth in the following three years would result from digital initiatives.3 Improving connectivity is the second benefit spurred by this transformation. Today, people are flexible in their work practices and companies are becoming increasingly international.
In order to bring teams sitting in different global locations closer together, businesses need to provide themselves with technological support allowing for connectivity. On the one hand, employees who are on the move need to have access to relevant information anytime, anywhere; on the other hand, managers need to be sure that relevant documentation is kept safe from potential threats. Connectivity is not only about sharing; it is also about protecting data that is relevant to the survival of a business. When considering the transformative power of collaboration practices and technology, it is crucial to consider the risks implied in the adoption of the cloud in comparison with the use of on-site software. Many already do, according to the Cloud Security Alliance, as 64.9 per cent of IT leaders say the cloud is as secure, or more secure, than locally hosted software. With each wave of innovation comes its specific challenges.4
A study on cybersecurity recently published by PwC sheds light on the fact that data breach incidents dramatically increased in 2015.5 Data breach incidents increased by 38 per cent over 2014; theft of intellectual property increased by 56 per cent in 2015; data incidents attributed to business partners rose by 22 per cent. As a result, a positive transformation among leaders can be identified as companies are allocating more resources to protecting themselves from cyber threats and data breaches.
One of the trends of security and risk prevention is the increasing investment in secure cloud solutions, utilised by 69 per cent of the organisations audited. The location of the servers is a further crucial aspect of keeping data safe, and European locations guarantee the highest security standards worldwide.
Nevertheless, misuse or carelessness by a company’s employees still represents the biggest risk for data loss. According to SailPoint’s Seventh Annual Market Pulse Survey, in which more than 1,000 employees at large organisations were interviewed, password security still appears to be more of a suggestion rather than a must.6 More than half of those surveyed (56 per cent) reused passwords for both personal and corporate applications, potentially putting corporate data at risk when personal apps are compromised.
Roughly 20 per cent share their login data with team members and one in seven employees would even sell their password to a third party. Digital transformation cannot happen without the expertise of leaders who can guide the company to change.
“In order to gain further portions of the global market, cloud providers need to ensure high security standards; this is at least required by companies entering digital transformation”
Experts believe that technological disruption is outpacing the job market.7 Over the last five years, cybersecurity job postings grew more than 90 per cent. Security professionals see before them a bright future of exciting and well-paid jobs versus generalist IT professionals. In other words, cybersecurity is the hot topic for 2016. Creating a security-sensitive workforce is a challenge that will pay off.
Smart executive communication
At the core of the digital enterprise is ensuring that communication processes between executives are current with the latest technological developments, i.e. stored in a secure cloud, enabling increased connectivity. Tools allowing for better board communication must enable flexible and agile data sharing while ensuring compliance with the highest security standards. As regulatory pressures towards compliance increase, managing documents requires more control and continued overview.
“Migrating to the cloud means revolutionising the way people manage information and workflows. It is not about running old processes with new tools; it is about thinking differently.”
Moreover, streamlining board communication requires having software accessible beyond company firewalls. Stricter compliance requirements, managing numerous confidential documents, the seemingly endless preparation and follow-up to board meetings, and preventing confidential documents from falling into the wrong hands – whether at a small- or medium-sized enterprise or big corporation, are some of the challenges corporate secretaries and other executive staff are familiar with.
Centralised virtual communications and document storage platforms allow professionals to focus on making business decisions instead of being concerned with a pile of paperwork for the preparation and follow-up of board meetings. Not only will boardrooms benefit from streamlined processes, but they will also optimise time. Moreover, executives and board members can access cloud applications from their mobile devices, thereby eliminating the constraint of meeting on the premises.
Today, executives can fully benefit from paperless workflows by checking their virtual notes during the meetings and making new notes that will stay protected in the secure cloud. The entire history of decision-making is documented in the data room, allowing for better prioritising processes. Therefore, it is crucial that managers can easily find documents in their most updated versions. To facilitate this process, tools can notify every board member when a document is uploaded. The whole team is then aware of changes instead of falling into banal misunderstandings that commonly happen in regular email exchanges. Omitting someone in email copy, or even sending a confidential document to the wrong email address, can not only jeopardise security, but also hinder internal decision-making processes. Instead, keeping the documentation within the data room allows the entire team to prevent the dispersion or spoliation of relevant information.
Executive communications are required to comply with increasingly stricter reporting requirements and regulatory pressures. Managers need to keep the most relevant company documentation ready at hand because the chances of having an audit have increased in the past few years. According to a survey of the top risks for 2015, companies fear that potential changes in trade restrictions or other government sanctions may limit their ability to operate effectively and efficiently in international markets.8 The ability to respond to macro-economic changes in a timely manner will depend on the boardroom’s ability in increasingly complex knowledge management.
As threats to cybersecurity increase, companies need to protect their data and keep confidential processes safe. A leak of management bonuses posted online by a malicious hacker can be highly damaging to a company’s reputation and have an impact exceeding reputation alone. It can turn prospects and potential customers away from the company.
In addition, data privacy regulations are also becoming increasingly strict, in that the dispersal of personal information regarding employees of a company can have, for instance, severe legal repercussions. To this extent, making sure that data is stored in Europe and handled by a European provider can make a big difference in keeping this information safe, especially given the uncertainty around the Privacy Shield agreement. The encryption of data with a 256Kbps key is the core requirement for secure data rooms. In addition, managers should be able to administer permissions and monitor access to the data room. Functionalities, such as real-time reporting, allow for keeping track of who is looking at relevant documentation.
Migrating to the cloud means revolutionising the way people manage information and workflows. It is not about running old processes with new tools; it is about thinking differently and adapting to an increasingly complex macroeconomic context. Companies that accept the challenge of digitisation have a chance to improve their processes by leveraging cutting-edge technology. Over time, the cloud will be able to process increasingly large amounts of data to deliver the most relevant information at a glance. The era of manual information digging that took hours and days has passed. Today’s executives need only to focus on making decisions that grow their business.
About the Author:
As co-founder of Drooms, Jan Hoffmeister was one of the trailblazers for the introduction of virtual data room solutions in Europe. In 2001, Jan Hoffmeister founded the company to provide physical data rooms for transactions. His real goal, however, was to digitise this process and offer an online due diligence platform. After an intensive development phase, his ideas about how such a platform should look and perform came to fruition. As a result, Drooms is now the leading virtual data room provider in Europe. Jan has over 15 years of experience as a manager, mainly at Siemens, in the areas of corporate finance and M&A in Germany, Switzerland, and the USA. After an apprenticeship at Siemens AG in Berlin, Jan studied business economics at the Technical University of Berlin and specialised in the Economics of Finance.