Several survey highlights and analyst reports suggest that enterprise finance is at the cusp of moving to a cloud model. But is the research flawed?
First up we have a Saugatuck (PDF report available via form.) with a report entitled: Why Finance Management Moves to Cloud. It says that 65 percent of survey respondents (n=271) are planning, considering or executing against a plan to change finance systems. They then go on to outline the constraints on current systems per the image below. It comes as no surprise that new and emerging compliance issues are top of mind:
Unsurprisingly, Workday, which sponsored the survey homes in on the answer to a third question where the survey highlights:
...57% of 271 senior finance and technology executives surveyed said they believe cloud/SaaS financial management systems are already replacing on-premise systems, or will replace them within two years. One-third of respondents are uncertain, and only 10% said they don’t think financial management will ever move to the cloud.
Finally, the survey infers that the combination of these results means that finance will move to the cloud, reaping a laundry list of benefits along the way. I find this extrapolation troubling. Here is why:
- Holding the opinion that businesses will move to the cloud model is not the same as saying that the respondent will recommend or implement such a move. In my view, Suagatuck lost an opportunity to hammer home its message and left important holes in the research.
- The question: If you are considering a change of system and have yet to make a final decision, then would you actively consider a cloud offering? was not asked
- The question: If you have changed your system in the last two years, did you select a cloud system? was not asked
- The question: If you are considering a cloud model, then what benefits do you expect to see? was not asked.
- Finally - the report title is misleading because it is not directly supported by the published research. This - to me - is its greatest failing. I would have been far more impressed if the research had looked at Workday customers and examined their success record, the factors that were driving adoption internal to Workday customers and benefits achieved.
The risk is not just that Workday ends up confirming its own beliefs based upon survey highlight - a very easy thing to do - but that potential buyers might be misled by methodologically flawed research. Fortunately, buyers are savvy folk who see surveys as only one decision point. Workday notes:
What’s particularly enlightening about Saugatuck’s findings is that the finance community is no longer just talking about the obvious lower cost of ownership of the cloud model—it recognizes that cloud applications are more adaptable and flexible than on-premise applications.
That may be true but the published research does not directly support that position.
Agresso - aggressive?
Elsewhere, Agresso has been pushing favorable research highlights to support its cloud model of finance/ERP position. The two reports I saw came from Cindy Jutras and Eval-Source. The Eval-Source report (sent to me directly - provide details here to access the report portfolio) says:
One of the most apparent conclusions from the IT professionals surveyed was a high level of concern over their ability to quickly, easily and cost-effectively manage shifting circumstances.
Unfortunately, the report provides no evidence to support that contention. It then goes on to examine the broad technical areas where each of SAP, Microsoft Dynamics and Agresso are impacted when a change is needed. This is a horribly simplistic approach that ignores a plethora of factors impacting change.
Time and again we see that while technical changes can have a significant impact, they are only a fraction of what it takes for a successful implementation. Even then, the fact that a major technical change is needed does not necessarily have a direct bearing on total cost or time taken. We have for example seen successful upgrades in large SAP systems taking less than six months. Check this video I recorded earlier in the year as one example where the customer had a drop dead deadline it had to meet:
Cindy Jutras research was much more comprehensive, focusing on the high cost of change. Like the Suagatuck survey, she identified motivators for change - see image below:
More important, Ms Jutras goes on to ask about the risk of business impact resulting from change including factors such as lost opportunities, reduction in customer satisfaction and reduction in stock valuation. As might be expected, respondents identified all of the nine options in the range 13.8 to 15.8 percent. In other questions, the survey routinely found moderate to extensive customizations were required, the scale of which changed depending upon the type of driver for change. As example:In commentary, she says:
...compliance requirements have the most disruptive impact on external- facing metrics that measure lost market share (17%) and missed business opportunity (17%)...
...Even if an acquisition is viewed as accretive (adding to earnings per share), the combined companies run the risk of a decrease in market valuation unless they can prove to the financial world that they can integrate the acquired business quickly. The integration of people, processes and technology all play a role. Most look to improve efficiencies through cost reductions. The faster those cost reduction plans can be put in place, the more temporary the drop in market valuation will be. And yet modifications to ERP can significantly delay these cost reduction plans.
All vendor led surveys display problems that can be traced back to the agenda a particular vendor wishes to pursue. That is not to say that such surveys and reports are useless. Far from it. The commonality between factors identified in the Jutras and Saugatuck surveys should be a comfort. I also know Cindy Jutras works hard to ensure that her surveys provide a fair reflection of what is going on in the market. In the past, she has asked a panel of people (including myself) to sense test survey questions and answer options. On the other hand, Saugatuck has carved out a reputation for supporting cloud models.
The difficulty I have with this set of surveys is that they are one dimensional. While they may indicate disruptive influences and effects, they fail to discuss benefit and outcomes in any detail. Neither do they separate costs components in coming to their conclusions. Some elements e.g change management arise regardless of the technology choice.
No company CFO/CIO I know wakes up one day and says: 'Heh - let's do an upgrade/implement a ton of modules.' Most change I see is imposed in some way or another. It should not therefore surprise that cost is a high priority item in the decision making. However, taking cost alone as the benchmark is a poor way to make buying decisions.
Disclosure: at the time of writing, Workday and SAP are premium partners.
Image credit: © Photo-K - Fotolia.com