'Digital Disruption' is everywhere. Technology is changing the way business is done, rendering old legacy software obsolete.
But with the disruption digital brings, there are many distinct advantages, as well. In the realm of finance, digital technologies are used to improve the growth and profitability of the business, moving away from the old batch processing into real-time analytical capabilities. Furthermore, as aspects of finance like forecasting are made easier by new digital technologies, the business can take advantage of more advanced capabilities such as predictive analytics. Then the finance department becomes a truly valuable leader within the business.
EPM in the Cloud
This is the landscape in which enterprise performance managment (EPM) software now resides. Upgrading to new EPM software no longer means long, expensive, disruptive processes of selecting and implementing the product. Cloud, also known as Software as a Service (SaaS), makes EPM software less expensive, faster to implement, and enormously more powerful. Additionally, it eliminates the ongoing maintenance and upgrade efforts and costs. And with cloud-based products you don't have to wait 12 - 18 months for new releases, the innovation comes faster, typically in quarterly feature releases. Cloud-based EPM software also frees the finance team from total dependence on the IT department.
To discuss the current climate of SaaS EPM software, Host Analytics recently invited Paul Hamerman of Forrester to speak about what their research has uncovered about this fast-changing field for the webinar Navigating the SaaS EPM Landscape. Hamerman is Vice President and Principal Analyst serving Application Development and Delivery Professionals for Forrester. To discuss the situation from a customer's perspective, the webinar also included Rick Odom, the Senior Manager of Financial Planning and Analysis for Welch Allyn.
The Three Dimensions EPM Software Needs to Cover
Hamerman opened the presentation by explaining the three dimensions of EPM software. In the digital age, EPM software must operate across all three dimensions in order to serve today's companies.
- EPM software must provide strong internal and external reporting capabilities. This is how the software gives the company a valuable historical perspective.
- EPM software must provide strong enterprise performance analysis. This is how the software gives the business a valuable perspective on the present time.
- EPM software must provide strong planning, budgeting, and forecasting functionality. This is how the software delivers value to the company for the future.
The Pain Points Driving Demand for EPM Software
According to Forrester's research, businesses have a number of pain points when it comes to financial and enterprise performance management processes. Hamerman identified these as:
- Businesses lack the planning accuracy and outcome predictability they need.
- Businesses are often working with stale or old business intelligence, due to the lag in collecting, analyzing, and reporting on the issues through outdated legacy software systems.
- Businesses lack the continual, consistent collaboration to act on business intelligence in a timely fashion.
- Businesses lack a strategic focus, primarily because they lack visibility and a solid means for forecasting.
- Businesses lack good insight into their revenue and operations.
How EPM Software Should Help Finance and Their Stakeholders
Hamerman explained that the finance department's traditional priorities have made it difficult to drive growth strategies. There is often an inability to address the needs and concerns of both internal and external stakeholders. CEOs and CFOs are often stuck between internal stakeholders' priorities (investors, the board, and management) and external stakeholders' priorities (the customers' need for a positive experience).
Internal stakeholders are usually concerned with issues like revenue and compliance, as well as the ability to grow. External stakeholders (customers) are usually concerned more with a strongly positive customer experience, gaining access to innovative products, and a simple, straightforward pricing structure and contractual terms.
The right EPM software will allow executives to evaluate and address all the needs of all the stakeholders, because it will drive growth strategy, open up new markets, improve the customer experience, and even help fund mergers and acquisitions as the business grows.
Software Spending is Down, But Spending on SaaS Products is Up
The market for business applications as a whole is worth $160 billion for packaged software applications, plus another $90 billion for industry-specific applications. Of these, financial software is the second largest category of business applications, worth $23 billion worldwide. This includes core accounting software packages and EPM software. EPM software alone is a $3 billion per year industry.
Spending on software applications as a whole is down, but spending on SaaS software products is growing by over 20 percent each year. Revenue for traditional software licenses and maintenance is down. Almost all of the growth in the software industry is now in the SaaS market. SaaS product adoption by category looks like this:
- SaaS CRM software is up by 56%
- SaaS commerce servers is up by 56%
- SaaS e-purchasing and business networks is up by 53%
- SaaS HR management is up by 41%
- SaaS risk management and payment is up by 38%
- SaaS supply chain management software is up by 30%
- SaaS governance, risk, and compliance products is up by 23%
- SaaS financial management systems is up by 22%
- SaaS product lifecycle management is up by 10%
- SaaS call center systems is up by 10%
- SaaS manufacturing resource management software is up by 7%
- SaaS electronic design automation is up by 3%
According to Forrester's research, 19 percent of businesses have already replaced most or all of their finance systems with SaaS, and another 27 percent plan to do so within the next two years. Planned adoption rates for SaaS finance and accounting systems are up from 11 percent to 46 percent in just four years.
The Key Benefits of SaaS
What are the driving forces behind SaaS adoption rates? Hamerman says that according to Forrester's research among companies with 1,000 or more employees, the primary reasons are:
- To improve agility
- To accelerate speed of implementation and deployment
- To focus resources on more important projects
- To drive down costs
- To quickly deliver new functionality that isn't available in traditional packaged software
- To regulate and automate software upgrades
- To support the business' innovations with new capabilities
- To replace upfront capital expenses with monthly operational expenses
Even though adoption rates for SaaS software are incredibly high, there is still some resistance to cloud-based software. According to Hamerman, the reasons are contrary to what the reality is. Some of the reasons for resisting cloud-based, or SaaS software applications include:
- Data security
- Unauthorized access by foreign governments or agencies
- Challenges with integrating these applications with other business applications
- The total cost is higher
- Worries over compliance with local data privacy laws
- Unauthorized access by the SaaS providers
- A lack of control over upgrades and release cycles
- Application performance affected by being offsite
- SaaS vendor lock in
- Migration is too complex and risky
- Pricing structures are unclear or too complicated
- SaaS applications are not customizable
- Can't find the application they need
- The technology is immature
Hamerman says that SaaS is now mainstream, and is as secure and reliable as most businesses are able to maintain in their onsite data centers. None of these issues should be barriers to SaaS adoption.
Why Businesses Tend to Choose SaaS EPM Software
When it comes specifically to EPM software, Hamerman says that there are a number of reasons why businesses opt for SaaS. Particularly:
- Business flexibility (less dependence on support from IT)
- The software is updated regularly and continually
- The costs of ownership are transparent
- Improved ability to connect with internal and external systems via data integration technologies
- Receiving business insight quickly and in context
Tech Trends Driving SaaS in Finance
Hamerman listed five tech trends that are driving innovation in finance. These are:
- SaaS/The Cloud
- Data Integration
- Advanced Analytics
- User Experience (UX)
SaaS EPM software and other finance applications must support integration. These products need to integrate with data visualization tools, include pre-built connectors for on-premises and cloud applications, and openness by software vendors when it comes to sharing API libraries.
SaaS EPM software and finance applications also need to support advanced analytics. Analytic capabilities need to be in-memory, and offer support for Big Data, NoSQL, machine learning, predictive analytics, and advanced visualization techniques.
When it comes to user experience, today's users are looking for real-time analytical capabilities, as well as a primarily mobile experience, and user engagement with social collaboration, gamification, and analytics. Over the years, the user experience has evolved from total pragmatism to a transformative experience that involves enhanced business models and is powered by user data (think the Siri experience).
SaaS EPM software and finance applications must also support collaboration. Collaboration support needs to be embedded in business applications natively, so that executives, managers, and finance workers are less dependent on email. Mobile is becoming the preferred platform, so it is essential that EPM software and other finance applications support mobile as a primary platform.
Hamerman recommends looking for a SaaS EPM software solution that:
- Is fast to implement and is regularly updated
- Offers advanced real-time analytics and predictive capabilities
- Provides a simple mobile experience throughout the application
- Supports real-time collaboration
- Integrates with all on-premises and cloud-based applications
- Delivers deep insight into revenue, expenditures, and cash flow
A Customer's Perspective on SaaS EPM Software
Forrester's research is based on what companies worldwide have to say about EPM software and using the cloud for critical business applications. Sometimes it pays to get input and insight from a specific business that's gone through the selection and implementation process for themselves. For this purpose, Host Analytics invited their long-time customer from Welch Allyn. Rick Odom is the Senior Manager of Financial Planning and Analysis for Welch Allyn.
Welch Allyn was founded in 1915, and until recently was a family-owned manufacturer of medical diagnostics devices, patient monitoring systems, and miniature precision lamps. The business was purchased by Hill-Rom in 2015, but maintains their headquarters in Upstate New York. Welch Allyn employs 2,500 people across 26 countries around the globe.
Welch Allyn depends almost completely on outside contractors for their IT needs, so when it came time to replace their EPM software about six years ago, it was important to them that the product didn't require a lot of technical support or additional IT infrastructure. They were looking for simple administration that could be overseen completely by finance, with little administration time. Ideally, they wanted the product to require no dedicated staff.
Initially, Welch Allyn's finance team wasn't even looking for a cloud-based solution. They wanted exceptional functionality. After reviewing a number of EPM software products, they decided on the Host Analytics Cloud-Based EPM software. The reasons Odom gave for their decision were:
- They wanted the very latest technology available
- They wanted to dedicate a limited number of resources to implementing, deploying, and managing the software
- They wanted to keep costs manageable
According to Odom, the benefits of SaaS EPM software became clear immediately. Even taking a break to work up the general annual budget, the team was able to implement the Host Analytics EPM software in less than six months. The product streamlined their forecasting and planning, allows them to spend more time analyzing financial data and less time administering a system, and drastically improved their reporting capabilities.
Odom and his team like the fact that they don't have to do lots of testing every time there is a new feature added to their EPM software. The team gets instant access to quarterly product releases, while incurring absolutely no disruption to their daily workflow. Odom said that he and his finance team would gladly choose Host Analytics' SaaS EPM software if they had it to do over again.
To hear the entirety of the webinar with Forrester's Paul Hamerman and Welch Allyn's Rick Odom, check out the webinar Navigating the SaaS EPM Landscape.