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Is Finance the Next SaaS Frontier?

by Ric Ratkowski, http://www.hostanalytics.comThursday, August 26, 2010

Delivering software as a service (SaaS) holds the promise of cost reduction, quick deployment, lower implementation risk and higher ROI.  In addition, SaaS applications marry the business users with the application and with the application vendor providing services to fill the skills gap between the customer’s processes and industry best practices.  But as SaaS and the cloud move onto nearly every enterprise IT agenda, the potential has been realized incrementally in a “patch work quilt” approach rather than any larger shift in architecture.  In other words, it’s being used as an effective fix for small “rips” in the fabric of IT.  The question is, why aren’t companies using this effective tool for stitching together more of what matters for making businesses better?

Typically, many of the lower risk processes like email and calendaring have been moved over quickly and successfully to SaaS but they are more of commoditizing an IT operation rather than revolutionizing operations within a company.  Certain other SaaS application areas like customer resource management and marketing automation have taken a revolutionary role to standardize certain processes for companies of all sizes.  It seems where SaaS gets the most “bang for the buck” are the areas within companies that provide a high level of “application leverage.”  That’s where (similar to financial and operational leverage), an advantage is gained when the effort implemented is minimized and is out of proportion to the value received.  In a nutshell, this is minimum effort for maximum results.  This is something that companies wrestle with every day because these are the functional areas fraught with frustration, undo complexity, and risk.  So which application is next?  

Many finance departments, even in the largest enterprises, still rely heavily on old-fashioned spreadsheets for forecasting, budgeting and planning and then “bet the farm” on decisions driven from those plans.  SaaS for finance can take key planning processes to the cloud, establishing a single repository for up-to-date information and improving collaboration, reporting and performance across first a department and ultimately the entire enterprise.

Application Leverage

As we focus on the framework of SaaS for finance, it is important we look back at history and at the value proposition of both software and the processes and decisions it automates.  Through the last 60 years, software has provided three key benefits:

  • Software organizes us.  Historically software first automated the more routine critical processes such as payroll and accounting.  As it has moved up the company ladder, it has automated more complex processes like demand management, customer satisfaction, sales contact and pipeline information, while at the same time providing reporting and in some cases heuristics to help decisions.
  • Software educates us.  As software applications standardized and the industry moved from custom developed applications, best practices emerged.  It was no longer up to the internal software developer on how we should process transactions; software companies analyzed how companies should perform functions and introduced best practices.
  • Software facilitates growth.  In the 1950’s my mom worked in the accounting office of a factory and did payroll.  She was one of a number of payroll accountants each responsible for manually calculating the pay checks of 20 employees on a weekly basis.  The minute she was done with one week’s payroll she started with next week’s payroll.  Without computers we would not be able to manually handle the sheer volume of calculations to run today’s business.

As we look back over history, as the business community began to reach the limits of existing information technology, advancements were made to extend usability and dramatically increase benefits:

  • As processing power at the mainframe was stretched, personal computers were introduced to automate the desktop.
  • As storage of information became disorganized and difficult to manage standard SQL databases came onto the scene.
  • As data analysis was constrained by spreadsheets, multi-dimensional databases were introduced.
  • As the globe shrunk and companies became global, the Internet was introduced.

Amid growing complexities of: software applications, IT infrastructure, data integration, the hyper speed of business and the uncertainty in the economy, all of which serve to freeze decisions, SaaS and cloud computing for finance enters the scene.  

Learning from History

The pioneering application, which effectively jump-started the SaaS ”scene,” was Salesforce CRM.  In a climate when most sales reps independently managed their own “sales pipeline” via prospect lists in PDA’s, physical file folders or disconnected databases, salesforce.com entered the scene as the “no-software” company.  In an industry characterized by large lethargic enterprise software companies or “one-off” single user contact management applications, salesforce.com provided an application that appealed to both large and small companies.  Providing a simple, yet honed user interface, making implementations easy without compromising robust functionality, it revolutionized the industry. 

Because it was delivered SaaS, and had a tight, ongoing relationship with customers (they sent a check in monthly), Salesforce was able to stay close to customer requirements and if it didn’t get it right the first time, it would the next.  In addition, it was available to companies of all sizes, providing organization to a traditionally disorganized sales group. Salesforce.com revolutionized both the sales industry and B2B web marketing, and spawned an industry of “sales operations consultants” and “data integration gurus,” helping to optimize workflow and allowing reps to do more with less.  Salesforce.com served to educate, organize and facilitate the global reach of companies.

Salesforce worked because it was timely and addressed a key problem limiting sales effectiveness, which functionally had to be solved to move us to the next level of consistent, repeatable global sales.  It was solved with a solution that was easy to implement, easy to use, and provided a quick time to value.  The decision maker wasn’t committing hundreds of thousands of dollars in hardware, software and implementation costs and it was near risk free from a career and an investment perspective – no one was betting the farm. Implementers got a win under their belt and earned additional political capital to implement Salesforce deeper into the organization and automate more complex sales processes.  Salesforce consultants became a trusted advisor, standing by with the best practices and consulting services when a company’s sales culture was ready to accept the next level of organization, education and automation.

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