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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
One of the potential benefits of cloud computing to access business applications and data is its potential to improve the situational awareness of executives and managers. By this I mean their understanding of what’s going on outside their company in addition to what’s happening within it. Today people have access to a trove of information about their own company, which is the result of decades of investment in an expanding range of enterprise transaction systems (ERP, CRM and supply chain management, for example) and convenient data stores that make accessing data easier than ever. But although people have access to internal information, most have big gaps in their knowledge about what’s going on in the outside world. Take, for example, market trends, information about a competitor’s, supplier’s or customer’s financials or industry-specific demand forecasts. Our benchmark research shows that while two-thirds of companies are satisfied with their ability to integrate information from standard internal sources, only 39 percent feel that way about reference or competitive data from external sources and 36 percent about text data from social media.
Cloud-based deployment of applications has the potential to address this intelligence deficit, but only if users demand it. In some respects, the dearth of external information today is a legacy of limits imposed long-ago by computing infrastructure. Obtaining information about the world outside the four walls of an organization used to be difficult, time-consuming and not always trustworthy. Some people may have had subscriptions to magazines or industry newsletters. Yet unless these publications were nearby and you knew it, accessing their information was difficult. Today, however, almost all such information is available on the Web, often for free. If, say, you need to track production of closed die forging, press and upset forging by country in Europe, you simply look here. The Web has made it easier to receive and use information. Not too long ago, updating third-party data stores involved getting delivery of physical media (such as optical or magnetic storage discs). However, the bad old days linger on in attitudes. Most business people are not in the habit of thinking about integrating external data into enterprise systems, which I assert is one reason why only about one-third of companies have satisfactory access.
Human nature is another reason why external information is not as available as internal. Organizations tend to look inward. Too often, performance is assessed only on an us-vs.-us basis, as in comparing actual results to a budget or to the same period a year ago. But business is a competitive game, not solitaire. In the past, it might have been difficult to use external benchmarks to measure an organization’s own performance, but in today’s environment it’s not. And there’s no good excuse for persisting in bad habits that prevent companies from using more information about the outside world. Organizational habits can be altered, but doing so usually requires a change of tone at the top. CEOs and senior executives stand to gain the most from better situational awareness, but I worry that few of them understand that a lack of readily available external information is undermining their company’s ability to compete.
Speaking of bad habits, the integration of new technology into business operations has long been unsteady and inconsistent. It took about half a century after the invention of the fractional horsepower electric motor for the redesign of factories to take advantage of the greater flexibility of that technology over steam engines. By comparison, adoption of the Internet by business has been stunningly swift in some respects but not others. When it comes to the cloud, the extent of adoption differs considerably. Businesses that thrive on novelty – and the parts of the business that are most engaged in novelty (such as marketing, sales and product design) – have been the earliest to incorporate cloud technology into their processes and systems. Industrial companies and departments such as finance and operations have been slower to bring new information sources into their management processes. All companies can benefit from increasing their understanding of what’s going on outside their four walls. The cloud is there to help – but only if companies and their executives want that help.
Robert Kugel – SVP Research