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When it comes to evaluating their requirements for moving to SaaS financial software, CFOs would do well to heed the words of author Lewis Carroll: "Begin at the beginning and go on till you come to the end; then stop." And that means first figuring out what they want to accomplish by moving their financials to software as a service.
"It is really important to understand the needs of the business first," said Heidi Pozzo, founder of Pozzo Consulting. "Only then can the [SaaS financial software] be lined up to determine the best solution."
When CFOs think about what they want to do with SaaS financial software, they should determine whether they're specifically trying to handle payments, planning and budgeting, or if they want to improve analytics or consolidation as well as close and related audit capabilities, said Hyoun Park, a Boston-based consultant in enterprise technology offerings and strategy. "Companies shouldn't simply think about moving financials into the cloud as this one big giant task that needs to be done all at once," Park explained. "It's better to think about specific pieces of finance that are currently broken or could be improved."
Every company is going to have different types of challenges transitioning to SaaS financial software, depending on complexity and size, according to Park. "Relatively simple companies or centralized companies will probably have an easier time handling consolidation and close [in the cloud]," he said. "But at a certain size, everybody is looking for better analytics and the ability to drill down in greater detail and provide that across the entire company."
Dan Wallvice president, A.T. Kearney Inc.
Companies running on-premises systems that decide to deploy SaaS financial software also have to think about connectivity from an IT perspective, Pozzo said. "Payroll is usually the most critical function," she noted. "If the pipeline goes down for any reason, how do they gain access? They need to think about the ability to connect and get the information. And if they're already in the cloud, the SaaS financials still need to talk to the other systems."
How to evaluate your requirements
To evaluate their requirements for implementing SaaS financial software, CFOs should run through all their accounting functions and determine whether they can replicate their basic accounting processes in the SaaS module, said Dan Wall, a vice president at consultancy A.T. Kearney Inc. "What analysis are you doing in FP&A [financial planning and analysis]? Are you doing margin analysis, this analysis, that analysis? Can you replicate those in FP&A?" he asked. "If you can't, can you customize or bolt on something to the SaaS module to enable that capability that's core and critical?"
Basically, it's just a requirements match for CFOs to determine whether the SaaS financial software being considered will allow them to execute the business functions they consider to be core to the company, Wall said. "We did a comprehensive review on the basis of selection for a large pharmacy retailer not only of [financial accounting and controlling] and FP&A, but also merchandising, warehousing, human capital management," he reported.
Wall said his team evaluated whether the company could move to a SaaS multi-tenant system for both functions. "We started by going through a number of user stories and feature sets," he explained. "The first thing you want to do is ensure that the functionality you have in an on-premises solution, assuming that's the initial state, can be replicated sufficiently in the SaaS model. There are tradeoffs there."
Very often the on-premises system has been customized to such a degree that a company will spend an enormous amount of money maintaining it and keeping the integrations to other third-party applications current, he added. "You might have found that you're not keeping current with the latest releases because you can't maintain all of those integrations, or those customizations prohibit you from moving to the next version," he said. "So while you might find that the functionality is limited in a SaaS application, you might find that to be a benefit because it forces you to keep current; it forces you to maintain consistency with best practices."
Usually, that's the driving factor for transitioning to SaaS financial software and not necessarily replicating functionality from on-premises to the cloud, Wall said. It's not so much whether an organization can actually execute certain processes that are "commodity" processes. Rather, it's about whether the organization is willing to give up some customization, which is not often a core differentiator, and shed some of the baggage and deploy SaaS financial software that might provide less functionality but will keep the business current and costs down, he said.
Pozzo said there are a number of things that set good finance departments apart today, including the ability to work strategically with the rest of the business, find new revenue sources to help improve profitability and point out trends that sales or operations need to know. "If you're thinking about spending money on technology today, you'd be looking for those more strategic [SaaS financial] tools because pretty much any system can do the block-and-tackle stuff," she said.
What to ask vendors of SaaS financial software
When it comes to evaluating vendors of SaaS financial software, CFOs need to ensure that the systems integrate with products they already use, said Dave Key, managing director of consultancy Cloudstrategies.biz. "If you're a big Salesforce shop, then you want to make sure it runs well with Salesforce," he said. "It's very important to look at the ecosystem because financial systems move together with your other systems."
For larger companies, legacy ERP vendors such as SAP, Oracle and Sage are the best fit. Smaller companies looking to adopt SaaS strategy for financials would do well to consider first-generation SaaS vendors such as NetSuite or more modern SaaS platforms like Intacct, according to Key. "With SaaS vendors, look at their pace of innovation and look at what new capabilities they've introduced over the last two years," he said. "You're looking not just at what you're buying today, but what you're going to have a year or two years from now."
CFOs should also insist that vendors have policies in place to enable them to choose when they take new software releases, Key suggested. "You don't want to a take a new software release when you're in the middle of your quarter-end close," he said.
Therefore, CFOs should ask vendors if they can choose when to do upgrades, and the answers should be "yes" 100% of the time. "If the answer is 'no,' then say, 'No, thank you. I'm not going to take the chance of you doing an upgrade in the middle of one of my closes,'" Key advised. "If the answer is 'yes,' ask what kind of window you have to choose your time when it's convenient. That should be a minimum of 60 days, but 90 is preferable."
Although most systems have sound general ledgers, CFOs should also ask vendors about whether their systems can report on profit by customer as well as by product or service line, according to Pozzo. "That way you can see, when you're looking at your business, how much money you're making in each of the areas of the business," she said. "It's those sorts of things that people really aren't thinking about. Many times that comes in a reporting tool that isn't always the part of the financial package of the ERP system. Sometimes a bolt-on tool is all the business needs." Pozzo said one of her clients was looking at spending millions of dollars on a new ERP system. However, when the real business needs were outlined, the company realized it only needed a reporting tool, resulting in a fit-for-purpose solution that saved millions.
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