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FinancialForce.com, a provider of cloud-based financial applications, recently announced two pending acquisitions. One is Vana Workforce, which makes a human capital management (HCM) application aimed at small to midsize companies. The other is LessSoftware, a supplier of Web-based supply chain management (SCM) applications. The acquisitions are part of FinancialForce’s strategy to build a broad suite of applications that run on salesforce.com’s Force.com platform. The three companies already have joint customers, so they build on established use cases and relationships. FinancialForce.com itself is jointly owned by salesforce.com and Netherlands-based Unit 4.
The acquisitions are consistent with FinancialForce’s go-to-market strategy as well. Rather than sell only a complete suite, it offers customers the option of buying separate applications that address a specific need. For instance, one initial use case was to get FinancialForce’s sales order processing module to bridge cloud-based sales processes offered in salesforce.com to a company’s on-premises ERP system. At the time, many companies were using desktop spreadsheets or paper forms to pass order information. And rather than replicating the typical ERP and CRM forms-driven application design, FinancialForce aims to differentiate its software by designing it to facilitate communications and coordination in executing processes that connect functional silos in an organization – in this case the front office and the back office. Because all of the code within its suite is running on a single platform in the cloud, FinancialForce can offer an interoperable set of capabilities that can be purchased in entirety or in component form.
The two recent acquisitions further this strategy. Vana Workforce provides a necessary complement to FinancialForce’s professional services automation (PSA) capabilities, which it acquired in 2010. It provides, for instance, the skills management and basic HR functionality for staffing and scheduling consulting projects. These capabilities are notably lacking in a large majority (73%) of midsize and smaller businesses, which are an important segment of PSA and for FinancialForce generally. Moreover, since all three of the companies’ software is built on the Force.com platform, integrating them should be straightforward. Using this single platform allows for easier cross-application workflows, single sign-on and a single reporting database from which to generate reports, dashboards and scorecards. The applications enable social collaboration with Chatter, salesforce’s enterprise social networking application, but salesforce needs to develop it further to support narrowcasting and collaboration in context to meet the needs of Finance, the back office and other business functions, as I have pointed out.
Vana Workforce’s Human Capital Management application supports a range of hire-to-retire functions including core human resources management, applicant tracking and recruiting, onboarding, compensation management and learning management. Vana should benefit from having broader distribution and access to development funds to continue developing the suite. LessSoftware’s SCM suite offers a useful set of applications including Configure-Price-Quote (CPQ), Order Fulfillment, Service Contracts, Inventory Management, Supplier and Spend Management. The new owner will rebrand the suite as FinancialForce SCM.
From a business perspective, FinancialForce has flexibility in acquiring customers, selling whole suites or one or several parts that customers might need, especially as add-ons to their Salesforce implementation. And this product strategy is facilitated by use of the Force.com platform, which allows its main development focus to be on process design and capabilities, not the plumbing, and an indirect sales channel, which reduces the need for its own sales organization. However, I calculate that FinancialForce needs both a significant proportion of full-suite deals and a sufficient volume of component sales to achieve healthy margins. One challenge with implementing this strategy is that in many geographies – especially North America – the consulting partners that sell and implement business software usually focus on a single silo, whether it’s finance, HR, sales or logistics. Resellers of financial software may have little experience in implementing HR software and may not have much interest or skill in selling human capital management. And since the buyers of these functional components work in different departments, the ability to cross-sell is not a given. That noted, in some cases this is probably not going to be an issue. For example, partners that implement PSA software can readily master the Vana HCM components and seize the opportunity to expand their project scope. And there are plenty of consultancies served by FinancialForce and its resellers that do not have HR management capabilities, which they could acquire now.
There are many different types of companies that ought to consider FinancialForce to address their needs. One group is midsize companies that are looking for a financial management system in the cloud like California Blue Shield Foundation that we have previously awarded our Leadership Award. A second comprises professional services organizations that are looking to automate time-consuming administrative functions as well as enhance the effectiveness of their project staffing. A third is companies that need to connect their sales processes with finance and SCM capabilities to support more effective execution of these processes. These acquisitions should help FinancialForce serve all of them.
Robert Kugel – SVP Research
Host Analytics has introduced AirliftXL, a new feature of its cloud-based financial performance management (FPM) suite that enables its software to translate users’ spreadsheets into the Host Analytics format. I find it significant in three respects. First, it can substantially reduce the time and resources it takes for a company to go live in adopting the Host Analytics suite, lowering the cost of implementation and accelerating time to value. Second, it enables Host Analytics users who have the appropriate permissions to create and modify models and templates that they use in planning, budgeting, consolidation and reporting. This can enhance the value of the system by making it easier to maintain. Third, it can make it far easier to routinely collect and connect planning and analytical models used by all departments and business users as it has outlined in its planning cloud offering. Although it has limitations in its initial release, AirliftXL gives corporations a workable alternative to stand-alone spreadsheets and has the potential to substantially increase productivity and effectiveness of an organization in the full range of budgeting, planning, consolidation and reporting functions.
AirliftXL addresses a fundamental issue that diminishes the productivity of companies, especially finance departments. I’ve noted in the past that desktop spreadsheets are indispensable tools for individual tasks and ad-hoc analysis and reporting, but they are poorly suited to repetitive collaborative enterprise-wide functions such as planning, budgeting, consolidation and reporting. Spreadsheets are seductive because so many people are well trained in using them that they can translate their ideas into even complex models, do analysis and create reports. However, the productivity that spreadsheets afford in authoring is more than offset when they are used over time. Desktop spreadsheets have fundamental technological shortcomings that make them unwieldy for any repetitive, collaborative task. After more than a few people become involved and a file is used and reused, cracks begin to appear. Very quickly, a large percentage of the time spent with the file is devoted to maintaining and updating them, as our spreadsheet research has shown with up to 18.1 hours per month in maintenance that I have analyzed. Spreadsheets are notoriously error-prone. In addition to monetary losses, some of which have been spectactular, there is a drag on productivity as users try to locate the source of errors and discrepancies that routinely occur in spreadsheets and then fix those mistakes.
AirliftXL enables ordinary users to create spreadsheet models and reports in Microsoft Excel and then quickly convert these to the Host Analytics enterprise system. Those that “own” a model, analysis, report or process can control these in Host Analytics. This speeds the process of setting up Host Analytics because there’s no need for someone to “translate” the company’s current set of spreadsheet models, analyses and reports. This cuts the time (and therefore the cost) of setting up the new system.
It also means that whenever changes need to be made, those responsible can make the changes themselves. Allocations and analytical models used in planning and consolidations can become part of a company’s system almost immediately. These alterations can be effected by “exporting” the Host Analytics object to a spreadsheet, modifying it and uploading back to the system. As well, users can create new models, analytics and reports in Excel and import them into the Host Analytics system. There’s no need for resident expertise or consulting time to make such changes. AirliftXL provides an organization with the best of both worlds: first, the up-front productivity that comes from enabling the author, a subject-matter expert, to quickly translate his or her ideas into a spreadsheet and, second, the ongoing productivity that is achieved when the plan, analytic model or report is kept in a centralized, easily accessible and controlled environment. These same authors can update and expand their analytical models or reports. Host Analytics can render models back into an Excel spreadsheet and the owner – not a consultant or trained IT person – can make the necessary changes and then upload them back into the system. This is an important capability because change is a constant in businesses and these changes must be reflected in financial performance management systems.
Organizations have hundreds, sometimes thousands, of spreadsheets circulating that support a multitude of processes and users in every department and business unit. AirliftXL can help incorporate them into a controlled enterprise software environment. Information that today is kept in one part of an organization can be viewed and used by others. Budgets and integrated business plans can quickly incorporate the most up-to-date information. Complex models now held in spreadsheets can be more controllable, consistent and safely accessible to a wider group of users. Creating links across individual spreadsheets (say, sales forecasts prepared by the sales organization and a company income statement forecast prepared by Finance) is straightforward, although linking to external data sources (say from a spreadsheet to a relational data store) is a little trickier. As well, Excel’s built-in financial, statistical and logical functions are all maintained in Host Analytics.
AirliftXL has the potential to be an important differentiator for the company. IBM Cognos has had something like this in Cognos Insight but from my analysis it is not as easy to use as the Host Analytics feature. Some corporations have finance IT professionals with deep subject-matter expertise as well as IT systems skills, but even their presence does not address the root cause of the misuse of spreadsheets. Most people who understand the needs of the business lack the IT skills necessary to use their company’s systems. They default to using spreadsheets because it is more expedient than trying to transfer their knowledge to someone who understands IT systems.
While AirliftXL is an important first step in taming the spreadsheet problem, it has limitations. For one, it’s not possible at this point to create a dynamic model such as an integrated income statement, balance sheet and statement of cash flows. This is a snap in a two-dimensional spreadsheet grid but much harder when working with a relational or multidimensional database. Moreover, there’s no guarantee that the spreadsheets imported into Host Analytics will be free of formulaic errors or even if it is well constructed. Thus, companies will need to put quality control processes in place, especially if a spreadsheet can have a material impact on the accuracy of financial statements or could defeat controls for fraud. It also would be handy if some vendor would create a product that could automate the digestion of masses of spreadsheets floating around companies as described in this patent for extracting semantics from data.
Despite these reservations Host Analytics’ AirliftXL provides an important capability that can cut costs of deploying and maintaining its software and increase its value to a company. This advancement builds on top of its recent rating as a Hot Vendor in the 2013 Value Index on Financial Performance Management. I recommend that corporations looking to change or upgrade all or some of their financial performance management suite consider Host Analytics and how AirliftXL helps transition the use of spreadsheets to a dedicated application approach.
Robert Kugel – SVP Research