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Cloud financial systems adoption in 2013: How'd we do?

Last year, experts predicted that 2013 would be the year of SaaS financial management systems. So, was it? Find out in this follow up.

'Tis the time of the year for technology prognostication. Every December, tech news publications churn out breathless predictions of what to expect during the coming year. And each year, most of these predictions go largely unchallenged.

SearchFinancialApplications decided to break that mold by going back to the experts who last year predicted that 2013 would bring widespread adoption of Software-as-a-Service (SaaS) applications for finance departments.

So, did the year live up to the hype? The answer is: It depends.

Interest in cloud financial systems growing steadily

Paul Hamerman, vice president and principal analyst at Forrester Research in Cambridge, Mass.,, said recent research indicates that his prediction a year ago of increased adoption of financial SaaS apps was accurate. Or at least, it shows that there's substantial movement in that direction.

Forrester's annual year-end Forrsights Software Survey found that the percentage of companies that are planning to replace their finance and ERP applications jumped to 24%, up from 13% a year ago. Similarly, the percentage of companies planning to supplement existing financial systems with a function-specific SaaS application rose significantly from 23% in 2012 to 34% in 2013.

"Finance and accounting applications will approach the adoption levels we are currently seeing in HR and CRM [customer relationship management] software within three years," Hamerman said.

On the other hand, he admitted that his prediction that big data and in-memory computing would help CFOs take in more information and squeeze more real-time insight out of their finance systems during 2013 was a bit bullish.

"This new technology provides the opportunity to move processes that were based on batch feeds to a real-time situation. It's going to have a big impact," he reiterated. "But it's probably not going to happen for a few years. Finance is going to be reluctant to recalibrate a lot of its processes that revolve around the monthly close."

One thing that causes SaaS adoption to occur in fits and starts is that life -- or, more accurately, business -- gets in the way. Market research firm NPD Group is living proof.

A year ago, Wendy Baum, the company's executive vice president of finance, told SearchFinancialApplications that NPD planned to complete a financial systems review during 2013. As the year comes to an end, the company, which employs 1,300 people in 20 countries, still finds itself in the midst of evaluating options for a cloud-based ERP system.

"We are behind where we would like to be, but only due to resource and time constraints," Baum said recently via email. "Other internal priorities took time and mindshare away from moving this forward."

But Baum said the slower-than-anticipated progress hasn't dampened her -- or the company's -- enthusiasm for the potential impact of SaaS.

"Our thinking has 'matured,' which also seems to be the case within the field as evidenced by reported adoption rates for mid-sized firms," she said. "SaaS is a great option for us to improve our products and support at what we believe will be a lower cost of ownership and with more scalability."

Sometime during 2014, assuming nothing else gets in the way -- an admittedly big assumption -- NPD will put that to the test with a new SaaS-based ERP environment.

CFOs entering 2014 with more faith in cloud security and privacy

Despite the clear progress that occurred in 2013, NPD's move to adopt full-blown cloud-based ERP remains an uncommon one as 2014 approaches. Bill McNee, founder and CEO of Westport, Conn.-based IT research firm Saugatuck Technology, told us last year that a lack of credible products was preventing CFOs from adopting SaaS-based financial software.

During a recent phone interview, McNee said that while the market now offers more choices, and demand for such products is growing, it is still early in the adoption cycle with CFOs continuing to adopt SaaS applications at a much slower clip than their counterparts in sales, marketing and HR.

That said, research Saugatuck conducted earlier this year indicated that 57% of finance and IT executives expect cloud-based systems will replace on-premise finance applications within the next 24 months, and only 10% still believe that their financial systems will never move to the cloud.

Such widespread embracing of SaaS is likely due in part to the significant progress made by big-company CFOs and their fellow executives over the past year in shedding their security and privacy concerns as they relate to the cloud, McNee said. Such concerns have traditionally been a significant obstacle to migrating financial systems into SaaS alternatives.

"Most senior business and IT executives now realize that the security in the cloud is better than it is in their own data centers," McNee said. "I view this as a sales objection to be overcome rather than a real issue."

Eventually, such objections will be a moot point, as McNee pointed out the "vast majority" of startups bringing new software products into the market are pure-play cloud vendors building their products to take full advantage of related hot technologies such as mobile, social and analytics.

In other words, adoption of SaaS will become more a matter of when than if, and rather than making a cloud versus on-premise decision, enterprises will simply be determining the right time to modernize IT.

Said McNee, "It's really about a new platform around which applications are being designed and a new workflow is being established."

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 @tkontzer.

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