The value of real-time software-as-a-service (SaaS) solutions has been proven by many businesses that have experienced the benefits of easy deployment, a subscription-based pricing model and multi-tenancy. Despite the prevalence of cloud computing in almost all other business functions, finance departments have been resistant. A company’s financial operations are too critical to risk being left in the technology rear-view mirror.
With cloud technology now a mainstream option for other corporate functions, why are CFOs and treasurers holding back?
Treasury Temperature Check
Two critical impeding factors in the adoption of SaaS-based treasury management solutions are culture and past experience.
The SaaS business model is a radical departure from what most CFOs and treasurers have previously used, with expensive custom software roll-outs having been commonplace for enterprise platforms, such as treasury management. Companies of all revenue brackets have typically been dependent on spreadsheets as the primary management tool for complex treasury activities, such as cash forecasting and risk management. Many have continued to use such manual processes despite the increasing availability of sophisticated treasury management solutions.
Though this may suffice for small businesses with relatively simple financial ecosystems, the complex nature of most companies’ financial landscape renders spreadsheets burdensome, incomprehensive and, most importantly, prone to human error.
Treasury departments are historically known for their risk-adverse attitudes, especially when it comes to technology. Ill-founded concerns about hosting vital corporate information on third-party platforms can further increase this reluctance to act. Misconceived risks have fueled ”no” decisions by many would-be adopters, at least until more information was gathered.
With more information now available, not surprisingly, many industry professionals expect new treasury installations to be cloud-based in the coming years. With broad adoption on the horizon, it appears that the treasury landscape is on the brink of a major cloud computing paradigm shift.
Debunking Cloud Misinformation
Another barrier to SaaS adoption for today’s treasury professionals is the lack of clarity around what the the cloud is — and isn’t. Industry jargon, vague messaging from vendors and lack of proper education have created the perfect storm of confusion and misinformation.
Industry hype and overuse of cloud buzzwords have made it difficult for treasury departments to distinguish between — and determine the individual benefits of — solutions like ASP (application services providers), SaaS, private, community, public and hybrid clouds.
Exacerbating the confusion even further, some vendors are acting as a “wolf in sheep’s clothing,” claiming to provide a SaaS solution, though they are offering a solution that can often simply be legacy software delivered through a browser. As a result, treasurers can become confused between the various terms and be left questioning where the true benefits of cloud technology lay.
In addition to the confusion surrounding terms and technology that abounds in the marketplace, the sensitive nature of financial data has made finance and treasury departments a laggard in technology adoption, for fear of security risks.
This concern is not without reason. Financial data is highly sensitive and companies are right to demand high levels of security. However, other sensitive corporate data — including sales, payroll and human resources information — is already commonly served from the cloud using banks’ own portals, while companies are also likely using solutions such as Salesforce.com or SuccessFactors.
In all likelihood, CFOs have recently signed off on cloud systems for other parts of the organization and may already be using SaaS solutions outside of treasury.
Though information security is rightly a concern for treasurers, hosted solutions are often more secure than their on-premise counterparts. SaaS providers invest heavily in their information technology infrastructure and data security to ensure that they meet externally audited industry standards, such as SSAE16 or SOC1.
Many providers also make use of robust, multi-tenant datacenters, which provide the highest possible levels of physical security and business continuity.
As a result, cloud solutions allow for improved control and dependability. Simply put, increased data integrity and availability, through robust security and disaster recovery provisions, are the key reasons IT professionals in organizations favor SaaS-based technology.
Minimizing Cost
Treasury is one of the most cost-sensitive departments in the organization, so it is no surprise that the cost benefits of cloud solutions are particularly attractive to the CFO and treasurer. Traditional software implementations are incredibly expensive for treasury specifically, as treasury’s requirement for high service levels, disaster recovery and frequent software upgrades require significant IT support. Technology analyst firm Gartner Inc. estimates that after six years, 75 percent of the original investment is spent on a major upgrade.
Internal IT costs to support the treasury software match or exceed the cost of the annual subscription when the software is installed. ASP solutions — taking the same installed software and simply hosting the database offsite — incur the same level of cost, although this is often built into the annual software cost by the vendor. In either respect, there are individual costs to manage that unique software configuration, which make it unnecessarily expensive for treasury.
The SaaS model, on the other hand, is cost effective because those infrastructure and support costs are amortized across a client base of hundreds or thousands, making the per-client cost budget-friendly. This is in addition to the efficiencies of supporting hundreds or thousands of customers on the same application, making routine troubleshooting more efficient.
Making Software Obsolescence Obsolete
A challenge that has always beset major IT installations is the tendency for software to become obsolete even before implementation is complete. Most software vendors issue updates and new versions quarterly or a few times per year. For even the simplest treasury implementations, it is likely that new features would have been released before the implementation was complete, meaning upgrades are required to keep current.
With older technology, including both hosted and installed, treasury teams end up playing catch-up with their platforms.
A proper SaaS model enables vendors to be agile in their delivery of software. As soon as updates or new versions are completed, functionality is immediately rolled out to all clients, without any need for client intervention. Put simply, with SaaS every client is always on the latest and greatest version of the product. Obsolescence is obsolete.
Forecasting Tomorrow
The ultimate goal of today’s treasury technology is to become a strategic partner to the organization. To achieve this and provide actionable intelligence for business decisions, a treasury platform must provide visibility, boost efficiency and productivity and standardize controls and workflow, easily and quickly.
Cloud solutions provide a secure and cost-effective way for organizations to deploy robust treasury management solutions across multiple locations and ensure organizations have the most sophisticated version of the platform at all time. By enabling treasury teams to avoid cumbersome software or outdated spreadsheets, SaaS platforms enable them to focus their energies on high-value, strategic tasks.
To truly maximize the benefits of the cloud, treasury and finance departments must embrace a re-education on SaaS and broaden their understanding of how it aligns with their goals of secure high performance. SaaS-based solutions offer finance departments an opportunity to streamline and automate processes, freeing up treasurers’ time to focus on important initiatives.
To glean all of the potential value, businesses should not adopt SaaS solutions blindly. As with all investments, research, careful selection and alignment to specific business objectives will ensure that the treasury management solution chosen will deliver exactly what a business needs.
Bob Stark ([email protected]) is vice president of strategy at Kyriba Corp., a San Diego, Calif.-based global provider of next-generation cloud-based treasury solutions.
This article first appeared in the April 2013 issue of Financial Executive magazine.