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FinancialForce recently introduced FinancialForce ERP, a family of cloud-based software designed to support a variety of customer-centric businesses such as professional services organizations or companies that specialize in business and industrial distribution. Many of these types of businesses are midsize or small (having 50 to 1,000 employees) and can benefit from the integration of FinancialForce’s accounting, professional services automation, human capital management (HCM) and supply chain management (SCM) software. The company added the last two capabilities at the end of 2013 with the acquisitions of Vana Workforce and Less Software, respectively, which I commented on. Like FinancialForce’s, their software runs on the Salesforce1 platform, which means that integration of these elements was straightforward. It also enables companies that use or are planning to use salesforce.com for sales and customer service to simplify integration of those with the operational and back-office software, by enabling single sign-on, end-to-end process management and a single data source for reporting and analysis. This integration can significantly reduce or even eliminate the need to re-enter information into systems or to use spreadsheets, documents and email to manage processes. With all of the data available in a single system, creating reports and automating their distribution becomes easier. All of this, in turn, should cut the amount of time and effort spent on administrative and clerical functions and enhance the productivity of the organization.
From its inception, FinancialForce has had a two-pronged market strategy. Like all ERP vendors, it offers a suite of back-office functionality, but it also offers the option of buying separate component applications that address specific needs. 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 as a single application or in components. In the latter case, its sales order processing module can be used to bridge the salesforce.com cloud-based sales process to the user company’s on-premises ERP system. This enables companies to replace desktop spreadsheets or paper forms to pass order information from one system to the next – a time-consuming and error-prone process. The unified approach also makes it possible for buyers to acquire a full suite in stages, which may be more appropriate for their needs and budgets. FinancialForce’s recent acquisitions and their integration into the single offering takes the strategy a step further. Companies can buy additional component pieces (HCM and supply chain) that operate on the Salesforce1 platform. Moreover, FinancialForce now has a more comprehensive suite for two types of businesses, professional services organizations (PSOs) and distribution companies.
The recent release of FinancialForce ERP was designed to put additional emphasis on the suite offering. As an ERP suite, FinancialForce is suited for a variety of businesses, but two in particular are worth highlighting. One is PSOs (consultancies and the like) as well as stand-alone professional services organizations within a large corporation that need systems to manage their operations effectively yet interoperate with the parent company’s core ERP system. The integration of the accounting and human resources capabilities with professional services automation (PSA) software provides a way of simplifying the management of day-to-day operations while substantially reducing the administrative burden for record-keeping, accounting and compliance. These sorts of businesses are well-served by an integrated suite of capabilities that automate and manage the sales, staffing and project management elements of their operations, while increasing the efficiency, timeliness and accuracy with which they perform critical tasks such as customer billing. Once a professional services company expands past a handful of billing individuals, the administrative burden on the senior members of the firm can be anything from a nagging distraction that saps their productivity to a time-sink that diminishes revenues. The right software enables them to scale their business without having to make corresponding investments in administrative personnel. Human capital management is especially important for PSOs since people are the core of their business model. Applications like Vana Workforce have the potential to improve the effectiveness with which a PSO handles its members. For small to midsize consultancies, however, the use of human capital analytics is especially important for improving efficiency and productivity, as our research has shown.
The other type is business and industrial distribution companies. These tend to be sales-oriented and, as such, might already be salesforce.com customers. In addition to the financial management functions, FinancialForce ERP provides necessary capabilities that support some of the supply chain management aspects of their sales processes, including configure, price and quote (CPQ) to maximize revenues as well as efficient and accurate order fulfillment, and contract, inventory and supplier management. Note, however, that although FinancialForce calls this part of its offering SCM, the software does not have the full set of supply chain functionality offered by established vendors in this field.
Since FinancialForce ERP is a cloud-based application, it’s suited to the needs of companies that have outgrown small business accounting software packages and can benefit from having the ability to connect sales, marketing and customer service capabilities with their back-office functions. Many companies with 50 to 500 employees still use basic financial software packages because they hesitate to make the investment in an on-premises accounting package and the IT staff they would need to support it. But they are foregoing the operational and management benefits they could have by using more capable software that doesn’t require a large up-front commitment and ongoing reliance on staff to support an IT system. The Salesforce1 platform also incorporates Chatter, messaging software that facilitates collaboration in context among employees.
Companies with 50 to 1,000 employees, especially those in professional services and distribution, that have a fragmented collection of software for sales, accounting, order and inventory management, and HCM, should consider FinancialForce to address their needs. This is especially true for midsize companies that have outgrown their entry-level accounting packages and are held back by their limited analysis and reporting capabilities.
Robert Kugel – SVP Research
As I’ve noted before, it’s common for CFOs of companies that are transitioning from being a small to a midsize business (that is, when they grow past about 100 employees) to find that the entry-level accounting package that they have been using no longer fits their needs. This software may be inexpensive to purchase and easy to use but it lacks many of the customization and business process management capabilities that become increasingly important as organizations grow. The transition from such an application is especially difficult when it involves an on-premises system, because the up-front and ongoing costs of implementing and using these can be daunting. Usually, the shortcomings start off as minor annoyances for companies that have between 100 and 500 employees and grow over time, and usually the pain increases with the number of employees and the volume and complexity of the underlying business. Yet because of the cost, finance executives usually don’t want to migrate to a new system until their old software threatens the orderly management of the business or becomes an overwhelming burden on finance operations. For that reason, increasingly we are finding companies choosing to migrate to a cloud-based ERP system sooner in their evolution because it is usually a more affordable and easier transition than using on-premises software.
The Blue Shield of California Foundation, which won the 2012 Ventana Research Business Leadership Awards in the Chief Financial Officer category, found itself in this position. The foundation is one of California’s largest health philanthropies, supporting organizations that deliver health care and address the needs of the underserved and victims of domestic violence. Its finance department had been using QuickBooks, but the software was becoming increasingly difficult to use in a distributed operation, and there was no easy way to integrate it with other systems the foundation used to run the business. CFO Scott Travasos and his team decided they needed a more sophisticated system that could deliver up-to-date information to executives.
The BSCF team wanted to move to the cloud so they could have an affordable yet sophisticated system that allowed executives the ability to easily see financial dashboards and reports, and that supported remote and mobile users. Earlier, the foundation had elected to adopt the Salesforce.com cloud platform that won the 2012 Ventana Research Technology Innovation Award for Cloud Computing category, so that it could work in a single applications and data infrastructure. Since its IT organization had already evaluated the security of the Salesforce cloud (and therefore did not have to take another set of rigorous assessments) and because it offered a common look and feel with other, already deployed applications and reports, the Foundation chose FinancialForce Accounting, a Salesforce-based package.
FinancialForce Accounting changed the way the foundation’s finance department works. After migrating to the more sophisticated package, the organization was able to streamline the close process, remove bottlenecks from processes through better and more automated management of work flows, and enhance financial performance visibility. It enjoys better access to data anywhere, anytime, which supports more fact-based decision-making. For instance, the application presents key business metrics to individual executives using alerts and conditional formatting so they can quickly spot issues that need their attention. Finance department employees can now work remotely if necessary. Training is easier in the current environment since the larger number of people using the system can train new employees.
BSCF also elected to utilize Salesforce Chatter to foster better collaboration and more effective execution of core finance department processes. Since Chatter can be tied to specific projects and invoices, when questions arise, employees can more easily determine the history of a particular issue because they don’t have to dig through email or paper files. And because it’s especially easy to use, employees are more likely to make notes as situations arise, so there is more background “chatter” stored for people to refer to later on. This is especially useful and engaging for people under 40 who increasingly expect this sort of capability because it’s natural to the way they interact with electronic systems.
In any business that is transitioning from being a small to a midsize one, one of the biggest mistakes that a finance executive can make is sticking with an entry-level accounting package. Until there were cloud-based solutions, it was easy to justify waiting because of the cost and the need to manage a more formal IT infrastructure associated with such packages. Today, that’s no longer an issue. Finance executives have been wary of cloud-based systems because of potential security and reliability problems. These are legitimate concerns, of course, but they ought to be considered in context. On-premises systems have vulnerabilities too and are not inherently safer. Large, inexpensive thumb drives make it possible for an employee to walk out with a company’s on-premises financial and customer data in a matter of minutes, and on-premises systems are vulnerable to fire, flood and other catastrophes. I believe every company that is using entry-level accounting software and beginning to run up against its limitations should look into a cloud-based alternative, especially if buying, deploying and maintaining an on-premises system is a daunting prospect.
Robert Kugel – SVP Research