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Kathy Crusco is executive vice president and CFO of Epicor Software Corp. She recently discussed ERP challenges, as well as a range of other technology and financial issues with SearchFinancialApplications.
Activant Solutions merged with Epicor in May 2011. What happens when two ERP providers merge?
Kathy Crusco: First, you need to understand how it will impact customers, which goes to market strategy and what the organization needs to look like. Typically, in the back office, which I manage, there are a lot of synergies in bringing together two companies of roughly equal size. We brought the two organizations together and provided a better experience for customers, as well as took out roughly $20 to $30 million of costs in the combined companies.
What was involved in the merger for a CFO in terms of ERP challenges and other processes and systems?
Crusco: Both companies had, for the most part, different systems in place -- from sales force automation to ERP systems, to customer relationship management and [professional services] automation. On top of that, both companies in the past had been individually very acquisitive. In some cases, there are different systems even within one of the existing companies. One of the key challenges is rationalizing all of the systems. We needed to pick the right systems. It may be a newer system, in some cases, in order to build the infrastructure.
What are you using right now for ERP at Epicor?
Crusco: We will be going live on a brand new system in the next few months. We chose to go live with our own system, Epicor ERP 10.
What are the ERP challenges during implementation?
Crusco: We went with our own system for a couple of different reasons. We wanted to help our development organization understand what a best-in-class financial system needs. We also wanted to be an early adopter as they come out with new versions of the software so that we can provide feedback. Before we offer general availability of our software, we can provide early feedback to product development. We also wanted to bring our prospects into the company and show them how we are running the software. Another key goal is consolidating into one system a lot of the different ERP systems we are running today in different pieces of the business.
We literally took our best people in different functions and put them on a team to implement the software. One of the challenges involves taking some of the best people out of the organization and then backfilling with temporary contractors.
Also, because you are implementing your own system, you need to get agreement within the business to use some of the [employees] who would otherwise be billable resources as they worked on projects for customers.
Considering ERP challenges, is that in the cloud or on-premises?
Crusco: We are implementing the on-premise system. We've had to deal with some customization and integration involving contract management. We've had to deal with some third-party providers that don't necessarily operate in the cloud. As soon as we can get those integrations and those software providers to provide us with a cloud version, we would like to move to the cloud version of our software again to be a leader with respect to how we run our software, and to give customers an opportunity to see how that works.
Will all your financials be on-premises, at least when you go live and put behind the ERP challenges during implementation?
Crusco: There are other applications that we use in the company that are cloud based. For example, we use Salesforce.com for our sales force automation, which deals largely with looking at prospects and managing prospects.
What are the positives and negatives of Salesforce.com?
Crusco: I don't know of any negatives. It's a great system.
What does Epicor use for analytics?
Kathy CruscoCFO at Epicor
Crusco: We have two tools we use for analytics. We use Hyperion Essbase for our financial planning and reporting. It reports the actual financials versus the forecast for the annual budget. Recently, we also put in place Tableau for producing scorecards for key performance indicators. Tableau is versatile. You define the metric you want to track, link it with the required system and then it creates dashboards with very little manual intervention.
CFOs in general are planning an increased role in IT purchasing and governance. Are you involved in IT purchasing and governance at Epicor?
Crusco: I run the organization's procurement team, which does procurement for all functions of the company. I am not responsible for IT governance. We have a CIO who is in charge of our IT organization overall.
Because we have a cloud business and our CIO is largely responsible for the infrastructure that supports our customer-facing applications, we have chosen to give the CIO a bit more of a customer-strategic role. He reports directly to our CEO.
There's been a trend to tie operational data to financial data. Is Epicor integrating operational data with financials when it comes to measuring performance?
Crusco: Absolutely. That is a key reason we put in Tableau. We wanted a dashboard that encompasses not just the financial metrics, but also the operational metrics. Each organization has a scorecard that we review monthly that includes those metrics.
It is going very well. We really like the Tableau tool. We like to have a one-page scorecard that encompasses the key metrics, both leading and lagging indicators. It can provide early warning signs for possible adjustments in a particular area, and it can show us where things are going well.
The Financial Accounting Standards Board (FASB) is planning to enforce a new standard for recognizing revenue. What is Epicor doing to prepare for this new standard?
Crusco: We're very excited about the new revenue recognition standard. What I like about it is that it puts all companies on an even playing field rather than having industry-specific revenue recognition guidelines. Under today's software revenue recognition rules, we tend to have to defer revenue on certain transactions involving multiple elements in bundles of software products and services sold together as a unit. Under the new standard, we will be able to recognize more revenue upfront. Another element that is also beneficial to software companies is that today, if we discount a transaction for some reason, in many cases we have to apply that discount unevenly across all of the different elements. The new standard will allow us to discount more evenly across various elements and will enable us to take more license revenue. Whenever there is a new revenue recognition standard, it is a lot of work across the company to understand all of the changes and to be able to change your systems to account for the new standard. We have a revenue group in the organization. They are actively evaluating the standard.
Do you still use Microsoft Excel at all?
Crusco: We use Excel for a lot of different analyses in the company. Sometimes, you may want to complete a little more analytics or build a predictive model. We will use Excel for those items or we will download trends into Excel to sort or filter items a little more easily than perhaps doing it through a fixed report. Many companies, and we are no different, are still heavily Excel-based.
What are your biggest technology challenges at Epicor?
Crusco: We have developed a roadmap of applications that we want to streamline and get all on one system.
For example, because of past acquisitions, we are using multiple systems to run customer support calls. Activant and Epicor each had systems. We have completed a couple of acquisitions since the merger. Each has their own system. We just kicked off a project to bring all of those together under one system.
What are your overall biggest challenges as a CFO?
Crusco: All the things I can't control. Obviously, the economy still remains challenging, especially internationally. We have been impacted this year from a top-line perspective with currency exchange rates. The evolution of the cloud is not a concern. We have a solution for that. But obviously we are keeping an eye on that and trying to understand if that evolution moves more quickly or more slowly than anticipated. That will affect our financials. We have to make sure we are appropriately managing that transition.
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