FinancialForce’s next act
- Summary:
- Denis Pombriant offers an alternative perspective about FinancialForce. It is rooted in the focus on vertical markets.
It starts with the company’s new tagline “the services economy,” which is a good enough placeholder for what’s coming but that lacks in the ability to tell a story. We’ve had the subscription economy, thank you Zuora, but the nascent trend to label everything a less than well described “economy” will hopefully depart soon leaving us none the worse for engaging it.
Nielsen and his company are trying to convey two things, first that the subscription era has trained customers to behave like, well, subscribers including a tendency to churn whenever things are not to their liking. Second, and closer to home for FinancialForce, is the idea that services are now an essential part of any product offering to the point that some products are delivered at cost today while the vendor expects to make money on services. As a book author, I can say that books don’t make money any more, if they ever did, but delivering a synopsis of the book to a live audience pays the bills.
More prosaically for long time utilitarian companies like elevator makers have been delivering products at cost in return for lucrative maintenance contracts that could easily stretch into decades. This will spread and if the IoT’s rapid evolution is any indicator, we can expect to see much, much more of this kind of service delivery in the near term from the likes of GE and Caterpillar to name two companies with which I’ve interacted recently.
But perhaps the biggest tell in FinancialForce’s attempt to recast ERP is the guest list for day 2 of the conference. One Geoffrey Moore, author of such books as the iconic, “Crossing the Chasm” will speak. Back in the 1990’s Moore caused a sensation for several reasons but the one most germane here is his invocation of the term, “whole product” something I believe he borrowed from Regis McKenna. No matter.
The idea behind whole product is that it combines the core thing with services, policies, and procedures that together deliver value to the customer, just like a service contract tightly interwoven with an elevator. So when Nielsen announced an alliance with ADP for HCM, and the eventual winding down of his own product Vana, it seemed perfectly rational to me.
For certain, companies will need HCM functions for their employees who continue to deliver services especially in a PSA setting but there’s no reason that the ERP vendor has to do this. FinancialForce will have its plate filled with other things that are closer to home, like supporting new accounting standards such as ASC 606 or IFSR 15 whose impacts are about to be felt. So it’s far better to stay close to home and deliver on core ERP, in my humble opinion.
Trimming away non core elements is what good new CEO’s do and in this light Nielsen’s first act makes sense but trimming is not why CEO’s make the big bucks, they are, after all, builders, which brings me to my larger point, reinventing ERP.
Here I think Nielsen takes a lesson from Marc Benioff and Parker Harris, whom he worked for riding herd on the Salesforce platform team. Salesforce didn’t simply provide a new way to deliver CRM, companies that tried that evaporated. Salesforce reinvented CRM and from there all of enterprise software.
So far, ERP has proven to be a poor fit for cloud and by that I mean subscription computing. Companies like Zuora have delivered a patch that organizes subscription billing and revenue recognition and Zuora (led by another Salesforce alumnus, Tien Tzuo) has built itself into one of the world’s unicorns, a private company (still) worth north of a billion bucks.
Zuora has taken over subscription billing but there’s still the issue of how to bill for services which is what FinancialForce is set up for. As with subscriptions, you can wrestle a legacy ERP system into submission to bill and account for services that are delivered on an erratic schedule compared to products, but the result might spill out to be captured by spreadsheets and all the nonsense that goes with that.
My take
FinancialForce is now positioned to do the accounting for businesses that increasingly depend on delivering services to earn their supper. Services will encompass a greater part of whole product thinking and it should be noted that services will be delivered by humans and non-humans alike making the accounting even more “special.”
It strikes me that Nielsen is far from finished and now that the HCM trimming is out of the way, we should expect a strategic acquisition or two to follow as he builds a new platform over an idea that comes partly from prior ideas in the Salesforce ecosystem but mostly from a vision that is still being articulated, probably not “services economy” but something like it. In the process I think we will begin to see that the current generation of cloud ERP will either have to adapt or risk being labeled Cloud ERP 1.0 and we know what that means in a world reinvented by Benioff.