Five ways FinancialForce is changing under CEO Tod Nielsen

Changes are afoot at cloud ERP vendor and longstanding Salesforce partner FinancialForce. Newly installed CEO Tod Nielsen faced a grilling from analysts and media during yesterday's annual customer conference, Community Live, in Las Vegas.

Based on his answers during the Q&A session, here are five key takeways for how FinancialForce is set to evolve under Nielsen's leadership.

Pulling back from HCM to focus on proven strengths

The big news at yesterday's event was a brand-new partnership with payroll and HCM giant ADP, signed less than a week prior. FinancialForce is sunsetting its own HCM offering, which is based on its acquisition of Vana Workforce in 2013, and will encourage the 170 customers that have bought HCM (out of a total 1,350) to migrate to ADP's Workforce Now and Vantage products. We'll have more detail on this news in a separate article, but Neilsen didn't mince words about the reasons for the retrenchment from HCM:

The answer is focus. One of the things I've learned in my career is that when you're a startup, when you're ten, twenty, thirty people, you have to focus because if you don't focus you don't eat. When you're VMWare, Microsoft, Salesforce, you have to focus or you just step on each other every day and you can't get anything done. At about $100 million in revenue, companies get this infusion of multiple resources and they say, 'We can do everything.'

Essentially, when I joined, our roadmap was, list every feature of every ERP product out there, and then that's our roadmap. That's just not realistic. We have to be great at a few things instead of average at a lot of things.

For me the focus was, where can we be great? We clearly have a strong footprint and leadership position in PSA. There's great opportunity in financials. We have great opportunity with billing and revenue recognitions, and so let's focus there.

In the HCM space I had a few customers that were hopeful that I was going to give them Workday. And I'm a long ways from there. I can't move as fast as they need to move. So instead of having disappointed customers, I wanted to focus and say, 'Here's what we're going to do.' We have a great skill and resource in talent management capabilities that we'll be integrating into our PSA offering, but I'm not going to be able to do benefits, or leave, or payroll, or a bunch of the other things.

So instead of building out functionality across the full range of ERP capabilities — supply chain management will also have a more restricted scope under the new regime although inventory management and sales order fulfilment remain fully supported — the company will focus on integration of third party offerings to fill in capabilities it doesn't offer itself. This is not because it is stretched too thin, added Nielsen, but rather because it wants to succeed at what it's good at.

I am not resource constrained. As you can hopefully imagine, I've got strong support from my board, Salesforce being one of our board members, [who are] more than willing to give us dollars and resources.

I think it's just a matter of execution. This is an opportunity in my mind. A lot of companies, you need the stars and the moon to align and you need a miracle to happen to be successful. This one is going to be execution. If we are not amazingly successful going forward it's just because I screwed up and we screwed up the execution. I love the fact that this is within our control and domain, and we will make it happen.

A big expansion in partner channels

FinancialForce is going to have a stronger focus on partner relationships and massively expand its partner channel, says Nielsen.

I think that as a company we've been so focused on firefighting that we haven't provided the visibility or transparency of, here's what you're going to get in this partnership, here is what we're going to get.

Success is a team sport. We've got to go in with our partners and make this happen. I think today we've got forty partners. I'll be disappointed if we don't have hundreds of partners at this time next year, as far as people that are adding value and driving it.

A new relationship with the Salesforce platform

Nielsen says that FinancialForce will no longer build its entire application on Salesforce's Force.com platform, but instead will build some components on heroku, which allows for more flexibility in how the code operates.

Things today that may take a little bit longer performance-wise or may run into some governor limits or constraints on Force.com, I can now run on heroku compute, and still stay within the Salesforce App Cloud family, but use the right tool for the job to be able to get things done.

You'll start to see that roll out in some of our products over the next nine months. One thing I should say from a customer perspective is, there'll be no change. From a customer perspective it'll still look and feel like the same thing. But I'm just, under the covers, doing the balancing of the right resources.

With that architecture change, it's increasing the productivity level of my developers significantly and our agility to be able to respond and get things done at scale and get the performance. We've got some interesting things we'll talk more about when we're more into the space, but I'm confident we have a foundation for it.

Partnering even more closely with Salesforce

FinancialForce is going to go all-in on its partnership with Salesforce under his leadership, Nielsen indicated.

I think that Salesforce's view of FinancialForce has changed since I came on board. They now look at, 'Hey we can lean in and really partner with these folks.'

When you look at the momentum inside the business, we are the largest ERP vendor on the Salesforce platform and most successful — and growth-oriented. That's where they are — if someone's going to work well and partner with them they're great.

If you were Sage or if you were Kenandy or some of the other folks on the ERP space [on the Salesforce platform], they're probably a little disappointed that I came over and that Salesforce is leaning in and we're getting customer momentum here, but speed is the new currency, so we've got to move fast and take advantage of that.

Therefore FinancialForce will be staying loyal to the platform, says Nielsen, contrasting its position to Apttus, a Salesforce-native ISV which launched its application on the Microsoft Azure platform last year.

Look at what Apttus did. Look at [Apttus CEO] Kirk [Krappe], he took 18 months to move Apttus to Azure. At the end of the day, he has the exact same product he had 18 months ago, now on a different platform. I argue that his customers don't go, 'Wow! it's on a different platform.' They're like, 'There's no new functionality here, it took 18 months to get here, what's going on?' Whatever product you use in this space, I think you care about performance, you care about integration, you care about agility, you care about features. To take what we have and move it to another platform? There's no benefit.

I know the strengths and weaknesses of both [Salesforce platforms] Force and heroku. I can use them appropriately and blend to provide the best of both worlds. My opinion is that Salesforce will hold us up, maybe as soon as Dreamforce, as a poster child of the type of architecture they want ISVs to use going forward and being a great example of, hey, here's how you get the best of both worlds.

There's no rush to sell up

Asked when an IPO or acquisition might take place, Nielsen insists neither outcome is in his sights for now.

IPO is a milestone, it is not a goal. It is not something that I'm striving for. Running this company, my focus is growth and our success. If an IPO happens down the line, that's great, we want to keep that in play. But really I'm not focused on the IPO or acquisition, I'm focused on success.

I think we have an opportunity here to turn this into an amazingly significant company and build this into the leading cloud ERP for the entire market. NetSuite [in its acquisition by Oracle] showed us that, hey, there's a possibility for a $10 billion market cap. I think that opportunity is out there and I want to take advantage of it. I've been primed my whole career to lead a company like this and we're going to make it happen.

My take

Perhaps unsurprisingly given Nielsen's background as platform chief at Salesforce, the strategy is clearly to work a whole lot more closely with Salesforce than the previous leadership. But allied with that is a significant shift in the product strategy and architecture that may give current customers pause for thought. We'll have more analysis over the next few days as we weigh up the implications of FinancialForce's new strategy.

[Updated from an earlier version which stated that FinancialForce is sunsetting the full SCM product].