Adoption of Software as a Service (SaaS) financial applications is steadily rising, according to experts. But while the trend is just now picking up speed with core accounting systems, a fair portion of the growth to date represents adoption of SaaS applications that address specific, tangential financial processes.
In fact, according to survey data from Forrester Research based in Cambridge, Mass., the percentage of companies that complemented their financial systems with a tangential SaaS application had grown to 22% by the end of 2013, up from 10% a year earlier.
"Companies are more likely to adopt complementary SaaS solutions than move into a core accounting system," said Paul Hamerman, vice president (VP) and principal analyst at Forrester. "The way SaaS is being adopted for finance is more around the edges."
And this approach can be appealing for finance executives who can't quite make peace with the idea of core financials in the cloud.
Deep functionality attracts financial services company to WebFilings
When it comes to pursuing financial systems for tangential functions, specialty providers often get the nod.
Sure, legacy financial software providers Oracle and SAP have each invested millions of dollars to cloud-enable their application portfolios. And SaaS-native vendors such as NetSuite and Workday offer financial systems that are built for cloud delivery and integrate easily with the rest of their SaaS stacks.
But Hamerman said SaaS applications that were purposely built to meet specific needs -- such as Adaptive Insights (planning and budgeting), Kyriba (treasury and risk management), Blue Ridge Inventory Group (inventory and demand management), and WebFilings (regulatory compliance and reporting) -- have had significant success because of their depth of functionality, and in many cases, friendlier pricing.
It was functionality that attracted one large financial services provider to WebFilings (now known as Workiva). The company, which asked not to be identified, by 2011 had grown frustrated with the outmoded process for reporting financial data to the U.S. Securities and Exchange Commission (SEC).
The multibillion-dollar securities company, like many of its competitors, had relied upon a printing company to aid it in assembling and packaging of data for submission to the SEC. In more recent years, that printer had enlisted the services of a third-party software company to help tag financial data using eXtensible Business Reporting Language, or XBRL, a standard adopted by the SEC in 2008 to make it easier for investors to analyze data.
But that process made things too complicated for the company. "We didn't understand it," said the company's vice president and manager of SEC reporting. "It would take them hours to make very simple changes, like changing a figure in a footnote. In our world, that should take minutes to do."
What's worse, the printer mandated that no changes be made to financial documents in the last three days before filing.
"Three days is a long time," the VP said. "In those three days, companies typically have audit committee meetings and board of directors meetings. There will likely be changes. It wasn't fair."
The company decided to do something. It reached out to WebFilings, and after comparing it with several on-premises alternatives, including a product from IBM, signed on not only for the financial system's functionality, but also because the vendor was committed to getting the environment up and running within 90 days.
It also didn't hurt that the up-front costs were lower than those for on-premises alternatives -- and the software wouldn't require investing a half-million dollars a year on licensing and maintenance costs.
Kicking the tires didn't reveal any security concerns. "We just really wanted to understand how it all worked," the VP said. "How was it encrypted? How secure was the information? We got very comfortable with all of that."
SaaS financial systems transform reporting
The company used WebFilings to prepare its 10-K for the SEC in 2011 while also using its legacy process, and it compared the results. What it discovered transformed the company's regulatory filing processes.
To start, while WebFilings' document format has a similar look and feel to Microsoft Word, which the company had been using, it allows for numerous people to access and edit a document at once, an important advantage when preparing financial documents that reflect many areas of the business. In fact, the VP said the company has been breaking its WebFilings documents into as many as 70 subsections, enabling dozens of people to make changes simultaneously.
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Furthermore, in the old process, after a document was sent to the printer for submission, any changes had to be done manually, with copies being emailed back and forth.
"It was a very time-consuming process," the VP said. "On average, for two to three hours every day we were having two or three people solely responsible for making sure comments were being gathered or emailed."
Now, with WebFilings' version control capabilities, the company has drastically reduced the back and forth, and it no longer has to devote so much staff time to the effort. The software also enables the company to replicate templates of a reporting document for each business unit with the click of a button, and then automatically merges all the resulting templates, eliminating more manual intervention and further speeding up the process.
In addition, the company is now able to do more financial analysis, allowing it to get to the bottom of discrepancies and quarter-to-quarter fluctuations, the VP said.
And the impact has reverberated throughout the company. Other departments, including legal and investor relations, are now using the software for their own internal reporting purposes, and additional groups, such as resolutions and recovery, are experimenting with it.
All of this adds up to a less stressful filing season for the finance department. Whereas the old process forced them to remain at work until between 11 p.m. and 1 a.m. for the bulk of the evenings in January, April, July and October; today they rarely have to stay later than 9 p.m. "It's a huge boost to morale," the VP said.
About the author:
Tony Kontzer has been writing about technology and business for nearly 20 years and currently freelances from his home in the San Francisco Bay area community of Albany. A 1988 graduate of the University of Missouri-Columbia School of Journalism, Tony spends his spare time relaxing with his wife, playing with his three sons, tinkering around his home, and when time allows, playing saxophone and traveling. His somewhat infrequent Twitter posts can be found at @tkontzer.