For most CFOs, a new finance system is as welcome as a root canal
- In an exclusive interview, FinancialForce CEO Tod Nielsen feels the pain of CFOs who find a new finance system about as welcome as root canal treatment
When Tod Nielsen took over as CEO of cloud-based financials and PSA vendor FinancialForce two years ago, he had come from a background in infrastructure software at tech industry giants Salesforce, VMware and Microsoft. The extended sales cycle for business finance systems therefore came as a particular surprise, he told me yesterday in an exclusive catch-up with diginomica.
You'll be amazed at how many customers I'll talk to that'll have 20-year-old implementations of financials that they just hate. And yet they're still reluctant to move.
A common theme that I see is, a customer will do an RFP and they'll review seven or eight vendors, do proof-of-concepts and all the like, and they'll come down and choose FinancialForce.
When I first started I thought, 'OK, great. That's a deal we're going to close now, in the next 50, 60, 90 days.' Instead it might not close for a year!
What he came to understand was that finance systems are so fundamental to business operations and decision-making that replacing them — even when they've become painfully cumbersome to use — is a big step that most companies hesitate to take:
I talked to a bunch of these customers, and what I realized is to change out your financial system is really an intrusive process and requires a bunch of work. It's like when the dentist says you need a root canal. You're like, 'OK, I'll get the root canal, but it doesn't hurt right now. Until it really hurts, I'm going to wait and kick the can.'
However strongly FinancialForce makes the case for quick action, aided by programs that help make the implementation process as rapid and smooth as possible, in the end the customer has to set the pace, he believes:
Some of this transformation the customers are going through, we can't force it. They have to be willing to do this with us, because if they're not equal participants leaning in, they're going to have a difficult time.
Despite these hurdles, sales of the vendor's financials software are ramping up, accounting for the majority of deals in the past six months, he tells me. These deals inevitably tend to be smaller than those that lead with the vendor's professional services automation (PSA) product, which appeals to larger enterprises where the requirement is more extensive in scope — but the growth is there, both in the US and in the UK and Europe.
The financials proposition offers what Nielsen is calling "customer-centric ERP" for services-oriented, midmarket companies, up to 1500 employees in size. The best fit is where a prospect is one of the many businesses nowadays that sell a product with a services component, he says. Two examples from the FinancialForce customer base are Quench, which provides filtered drinking water to businesses, or Sirius Computer Solutions, which offers packaged services and managed services alongside integrated technology solutions.
What we're finding is, our financial system, our billing, our revenue recognition, as well as our professional services automation, really provides a nice complete solution to those customers. Coupled with being built on the Salesforce platform, it gives them insight and transparency into their customers and their opportunities and really sets us apart.
Built natively on the platform, FinancialForce shares a common data model, function set and user interface with Salesforce's own sales automation and customer service applications. This is where the 'customer-centric' aspect comes in — it means that all the sales pipeline and customer service records sit in the exact same system as the financials and billing information. The ability to start from an invoice and simply double-click down into Sales Cloud to see the opportunity that led to it is a real eye-opener for prospects, says Nielsen:
We talk about the blending of the front office and the back office. It sounds like a soundbite, but when you actually see it in a demo or a presentation, it's exciting to watch the controller's eyes light up and go, 'Wow, that's really cool to be able to have that visibility and that seamlessness between my financial system and my customer system.'
Digital change agents
The challenge for FinancialForce is to kindle enough enthusiasm for that end-to-end engagement to overcome the customer's understandable fear of painful surgery in their business systems. The market is starting to recognize the value of moving to the cloud and the transformation it can bring, Nielsen believes. But he senses a shortage of CEOs and CFOs that are ready to drive digital transformation and modernization:
One of the limiting factors I think is, who are these change agents that are going to stand up and say, 'I'm going to drive the company into the modern era as far as taking advantage of these technologies'?
It does take someone on the customer side that we or any vendor can partner with to say, 'OK, I'm going to champion this through,' versus holding on to saying, 'I don't want to change because that's going to be more work' or whatever.
Selling cloud-based finance systems is one of the most difficult tasks in the SaaS landscape, as a host of vendors from FinancialForce, Intacct and NetSuite in the midmarket all the way up to Infor, Oracle and SAP in large enterprise have discovered. It's not just reluctance to trust the cloud — that's largely gone away. Instead, it's a reluctance to face up to the pain of moving off an existing system, even one that's not working that well.
FinancialForce is wise therefore to focus on what it's calling the customer-centric segment of the market. Businesses that want to be more responsive are realizing that they need joined-up processes at the back-end to be able to deliver on the engagement they're promising customers at the front-end (a phenomenon that diginomica calls The XaaS Effect). It still takes fortitude to make the move, but at least there's a strong motivation to go ahead.
The same effect, by the way, is taking hold in the PSA market, as we'll discuss in the second part of this interview, coming next.