Backing the Right Horse: Which Delivery Platform to Choose for Your TMS Application

By Bob Stark September 10, 2013

The past 10 years have seen a major shift in the delivery method for enterprise software platforms. Starting off with customer relationship management (CRM) applications such as Salesforce.com, there has been a wholesale shift from on-premise, legacy applications to cloud-based software-as-a-service (SaaS) platforms.
 
Since those early days, a broad range of SaaS applications have come online, and many enterprise software category leaders exclusively offer SaaS-based solutions. So it’s likely that, even while the treasury management function is still running on ASP applications and server-based software (or even spreadsheets), much of the organisation is already benefiting from SaaS1, in the form of vendors such as NetSuite (ERP), Cornerstone OnDemand (talent management), Concur (travel management) – to name just a small sample.
 
Last Man Standing: Knocking Down the Barriers to Adoption 
So why is treasury often the ‘last man standing’ when it comes down to the adoption of SaaS? Much of the hesitation comes from a chief financial officer’s (CFO) and treasurer’s aversion to risk, including technology adoption. While this is obviously a critical trait for an individual whose role is focused on compliance and risk management, SaaS is a mature and widely-adopted software delivery mechanism, which is often a safer bet than having software hosted on a corporate server. In addition to this inherent hesitation, there are several concerns that legacy software vendors – who don’t offer SaaS solutions – will offer as reasons to keep mission-critical software out of the cloud.
 
Security: Security has long been viewed as a major barrier in keeping sensitive applications within the four walls, and there has been reluctance to hand over the hosting to a remote third party. However, many IT professionals argue that, when done properly, cloud deployment is actually safer than internally hosted software. 
 
Cloud providers invest significantly in high-end physical security measures (such as back-up power, mirrored servers and highly secure buildings) as well as IT security measures (including data encryption, secure connections to clients and robust intrusion prevention security). Although these investments are costly, the expense is spread across the entire client base, making the per-client cost palatable once economies of scale have been reached. For an internal IT team to offer the same level of security would be prohibitively expensive for the organisation and its internal ‘clients’ such as treasury.
 
Lack of scalability: Among the major pieces of misinformation spread by legacy software vendors is that SaaS is a solution suited to small and medium-sized enterprises (SMEs), but it can’t scale to the needs of a major organisation. While during the nascent days of SaaS in the early 2000s, this may have held true (as SaaS vendors began with relatively simple applications), more than a dozen years of development in SaaS have led to a market where solutions have the sophistication and scalability to be as suitable for US$100bn multinational corporation (MNC) as they are for a single-market, US$30m company.
 
Ironically, with agile development structures and more functionality delivered per release, end users appreciate that SaaS solutions offer more features, more quickly.
 
Challenges with infrastructure: A third issue that is often cited, particularly in emerging markets, is the potential challenges with technology and communications infrastructure (notwithstanding the earlier security arguments). Will a company’s telecoms provider be able to provide the necessary bandwidth? What if the communications infrastructure isn’t adequate? 
 
Both of these arguments are quickly becoming outdated. For a start, the vast majority of organisations of a scale that features a formalised treasury function locate their remote offices in areas where there is adequate communications infrastructure. Many emerging markets, which previously had limited landline infrastructure, have leapfrogged western nations in the roll-out of high-speed cellular and wireless data networks, as this has proven to be more cost-effective in bringing their populations online. Second, with SaaS applications, all of the computing is done at the host’s end, so all that is delivered to the client’s browser is a web page. If you can access Google from your desktop or mobile device with no issues, accessing a SaaS application will not cause any headache. In fact, for these same remote offices, SaaS applications offer lower bandwidth and IT requirements than deploying ASP or installed applications.
 
So why go SaaS?
Assuming that these initial barriers have been overcome, what are the compelling reasons to move to a SaaS platform? 
 
Lower cost: Unlike an in-house solution, SaaS does not require a large upfront cost. The technology is typically billed on a ‘pay-as-you-go’ or subscription basis, enabling companies to spread the cost. Upgrades take place automatically and frequently, requiring no additional investment of time or money. Not only does this mean that you have cost certainty, but you can always be assured that you are running on the latest and greatest version of the platform. Redundancy itself becomes a redundant term.
 
Ease of implementation and maintenance: A cloud solution is easier to acquire than a hosted system, and also easier to roll out across the organisation. In addition, in-house IT support is no longer required either to support the technology on a daily basis or to carry out upgrades, eliminating an often significant internal cost. The implementation time for a SaaS based treasury platform can be as little as three months. 
 
For legacy systems, implementation usually takes two to three times as long. The benefits do not end once the system has been installed: upgrades and updates happen automatically and new users can be set up directly via the website without difficulty. 
 
Higher performance – everywhere: Financial applications typically carry a lot of data and internal networks can get overloaded, particularly at month-end when multiple people in multiple geographical locations are all trying to access the same information. This can adversely affect the performance and timeliness of non-SaaS based systems. Even ASP solutions are not optimised for high performance, given the limitations of their architecture and development. So even if your communications infrastructure is not ideal, there should be no challenge with accessing and manipulating data.
 
Know Your Cloud: SaaS vs. ASP2
It seems that every software provider offers cloud solutions. But do they really? The answer is “no,: despite the claims of salespeople and marketing one-pagers. 
 
The U.S. Department of Commerce’s National Institute of Standards in Technology (NIST) is recognised as the authority for defining what is – and isn’t – cloud. The NIST defines cloud as a model that provides for on-demand access to a shared pool of pooled resources in a multi-tenant model3
 
The key to cloud is that the service is elastic and measured, meaning that resources can be automatically added or removed to continually offer scalability and optimised performance. The key difference between the ASP versus the cloud model is that for cloud this can be done across the entire user base at the same time, and can span multiple locations in the event of a disaster or business disruption. There is no individual attention required for a specific client’s setup, which obviously would impede the scalability when it comes to important tasks such as maintenance, upgrades or disaster recovery. Cloud software is delivered in a SaaS, not ASP, model and is available to users through their browser and device of choice.
 
For those of us in treasury, the differences may not be as obvious as to our IT colleagues. Yet even without the benefit of IT’s expertise, the wide chasm between ASP and SaaS is obvious for upgrades, daily support, performance and, most importantly, business continuity. ASP is really not good enough, which is why the most successful software vendors have all rebuilt their solutions as SaaS offerings. Even the investment community agrees, valuing SaaS companies at 8-10x recurring revenue, while ASP and on-premise counterparts rarely achieve even half that valuation, as has been evidenced by recent acquisitions in the treasury system space.
 
So, although the move to the cloud will undeniably be a step up from an existing solution, be it spreadsheets or server-based, treasury teams should be armed with the knowledge and questions to ask potential vendors. One of those key questions is around viability. The switch to subscription revenue from upfront software license fees is difficult for many small software companies. Small, poorly-capitalised treasury vendors have been acquired one after another in recent years for this very reason. They couldn’t, or wouldn’t, invest appropriately to achieve economies of scale. Ask any treasurer whose software provider was acquired what level of support and product innovation they enjoy. 
 
While the move to the cloud is a compelling argument on many levels, organisations still need to thoroughly review their vendor selection, to ensure it meets their specific requirements. As many treasury departments will be making their first foray into the world of cloud technology, they need to ensure that instead of implementing a solution which could itself border on obsolescence in a couple of years, they future-proof their investment for many years to come.
 
This article originally appeared in gtnews.
 
References
1. Bessemer Cloudscape
2. For more information, download Kyriba’s white paper, SaaS vs ASP – Beware of the wolf in sheep’s clothing
3. NIST definition of cloud computing
img
Activate Liquidity.

Transform how you use liquidity as a dynamic vehicle for growth and value creation

Find out how