BACKGROUND IMAGE: iSTOCK/GETTY IMAGES
The finance department has often been called the last holdout against Software as a Service, but one expert thinks this is unfair.
"There's a misconception about CFOs [being] laggards," said Bill McNee, founder and CEO of Saugatuck Technology Inc., based in Westport, Conn. "Part of it has to do with a very conservative approach to begin with in this area, but I think there's been a lack of credible products in the marketplace as well."
Change has been brewing in the past year, however, and experts seem to agree the stars are aligned for the rise of Software as a Service (SaaS) financial management software in the coming year.
The reason, according to McNee, is that the barriers to broader adoption of SaaS financial management software are now breaking down at both ends. While offerings from vendors have become more legitimate, CFOs are also coming to terms with security and privacy concerns.
McNee's summation was echoed by Wendy Baum, executive vice president of finance at NPD Group, a market research firm based in Port Washington, N.Y. "Putting our entire financial system, including transactions, reporting, [and] key performance indicators where someone could get a complete picture of our organization has given us pause in the past," Baum said. "That has eased a bit as the cloud environment has matured. Or maybe our thinking has?"
Whatever the reason, at least one other expert predicts a banner year for SaaS financials.
"What I'm expecting to happen in 2013 is a significant increase in adoption," said Paul Hamerman, vice president and principal analyst at Forrester Research Inc., based in Cambridge, Mass. "And not just [of] core accounting systems, but planning and budgeting systems and other solutions."
Finance should ease, not dive, into SaaS
One reason CFOs are softening their resistance to the cloud is the realization that SaaS financial management software is no less secure than software running on servers inside an organization's walls.
Protecting your organization is paramount, but thinking you can only get exposed externally is naïve.
Wendy Baum, executive vice president of finance, NPD Group
That's the case with NPD Group, which has been using SaaS budgeting and forecasting tools from Adaptive Planning for three years. "As a private company, we have some concerns about security [with SaaS], but [these] have to be addressed with internal applications, hosted applications and cloud applications. At some point, you realize that you could have the same concerns in your own backyard," Baum said. "Protecting your organization is paramount, but thinking you can only get exposed externally is naïve." When asked whether she could envision a day when all of NPD's financial systems will be cloud-based, she said, "That could very well be the case."
As evidence that SaaS financial software is becoming increasingly viable for mid- to enterprise-size businesses, Hamerman cited Oracle Fusion financials, Workday Financial Management, SAP Financials OnDemand, and NetSuite's financial offering as examples of products that have "legitimized the delivery model."
McNee pointed out that giving users a choice between cloud and on-premises deployment is already being phased out entirely in some cases. "Some of these vendors are only offering next-generation solutions as cloud solutions," he said. "It's becoming less of an issue of choice between on-premises and cloud if you want to take advantage of some of these new process-based solutions."
NPD Group, which has 180 departments spread throughout 20 countries, started with cloud-based budgeting and forecasting software as a way of testing SaaS in a discrete business area. It's the same approach McNee recommended for organizations that are starting the transition from on-premises to SaaS financial management software in 2013.
"I would say, start small and do some sort of a trial, whether it's around a business function like budgeting, or a cloud-based analytical framework or even around a specific function, like treasury or tax," McNee said. "These are things you can get started with and get value from immediately."
From Baum's point of view, this is precisely how many of her peers in finance are tackling the problem. "People are finding the parts that work for them and sticking their toe in the water -- not necessarily diving in. We started with budgeting and forecasting, which is a really good, quick and easy place to start," she said. "At some point, if you feel good about the results and you find good applications and providers, you wade in a little deeper."
She added that a comprehensive financial systems review is planned for the current fiscal year.
Disclosure management software to see increased adoption
Hamerman mentioned three additional trends that he thinks will develop in 2013. First, he predicted increased interest in automated disclosure management software that addresses the so-called "last mile of finance."
"This notion of 'close to disclose' is gaining some momentum in the market," he said. "When we talk about the last mile, or what happens after you complete your financial statements, what you have to do then is go through steps to put them in a regulatory format. There's a lot of interest in [automation] because people have been doing this on [Microsoft] Word docs and [Excel] spreadsheets for a long time."
More on financial management software
Discover the top five risks of SaaS financial software
Find out how SMBs are taking advantage of SaaS for financial management
Read about one company's transition from Excel to cloud financial software
Hamerman also expects financial data visualization to become more popular. "Although finance people tend to want to view numeric information in rows and columns, there's some very interesting and powerful ways to deliver financial information using mobile technology and also rich visualizations, so I think we'll see more adoption of that," he said, adding that the technology might make financial data more accessible for non-finance users.
Hamerman's final prediction concerns the impact of "big data" and in-memory computing on financial management software. Through advances in big data technology, he said, companies will be able to assimilate more and more external data, allowing them to enhance their planning and analysis processes; and in-memory computing developments could give CFOs better access to real-time financial information.
But whatever else is in store for 2013, experts say the predominant trend will be that of finance departments making the switch to SaaS. Baum agreed that a lack of legitimate products is no longer an obstacle to adoption, but the disruption caused by a system overhaul will likely be a sticking point, she said. However, it's a necessary evil at this juncture.
"There is never a perfect time [to change]," she said. "So you need to make the time, and take the hill and then reap the rewards. This puts the entire organization in a position where it can really drive bottom-line business results."
Emma Snider is the associate site editor for SearchFinancialApplications.com. Follow her on Twitter: @emmajs24.