accounting

The New Sage: Who and What Is It? Where Is It Going?

Early in his opening keynote for Sage Summit 2016, CEO Stephen Kelly announced, “Our real purpose is to champion the ambitions of entrepreneurs.” This sentiment goes well beyond the development and delivery of software products. Mr. Kelly himself is a business ambassador to the Prime Minister of the United Kingdom, representing the interests of small and midsize businesses to governments, in global markets, at colleges and universities, and on the political front as well. He has pledged to bring Sage’s products to the cloud and more innovation to the products. And he has declared that Sage is “The only company providing your digital heartbeat from Start-up to Scale-up to Enterprise.” [These are the new monikers for the markets in which Sage plays, replacing references such as “small” and “mid-size.”]

But, having grown through acquisition, Sage faces some challenges, not the least of which is the sheer number of products it owns, many of which are based on older technology and run exclusively on premise. I’ve never done a specific count, but based on a quote from Mr. Kelly presented in a Diginomica article by Stuart Lauchlan back in May after a mid-year earnings call,

“Our historic, federated and fragmented and de-centralized business model meant that we couldn’t fully leverage the scale and the global reach for the benefit of our customers or ourselves. In fact, it was actually hindering our ability to grow.

Our acquisition-led growth strategy compounded the internal fragmentation and complexity. And this fragmentation I’ve shared with some of you before in terms of 270 different products, 73 different code bases, over 150 different sales compensation plans, 139 sites, 105 databases from management accounting, 21 different CRM systems. I could go on and on.”

Wow! That’s a heck of a lot to consider. But Mr. Kelly seems up to the challenge. Make no mistake: This is a new Sage. Over the past year there has been a changing of the guard, with many departures, and many more new faces. But more to the point, Sage has re-architected its positioning. This started a year ago when Mr. Kelly declared Sage would no longer sell ERP, noting the acronym should really stand for expense, regret and pain. This year that sentiment persisted.

Throughout the keynotes, we heard reference to “accounting, payroll and payments,” but never “ERP.” Couple this with the heavy dose of “entrepreneurship” and you walk away thinking Sage is the place to be for small businesses in need of an accounting solution. With enormous installed bases from acquired products like Peachtree, AccPac and Simply Accounting, you might say, of course they are.

But what about all those “enterprise” customers running Sage 100, Sage 300 and Sage X3 where the founder of the business has long since exited? I found myself wanting to be their champion amidst all the accolades for the entrepreneurs in the audience. These enterprises need more than accounting, payroll and payments. They need to manage the complete system of record of the business, including orders and/or contracts. Fortunately the Sage products formerly known as ERP do just that.

And I felt for the partners who sell these products into the ERP market. When a new prospect wants to buy a new ERP solution, with this new positioning and the declaration that ERP is dead, will they even give Sage a look? Precise percentages might vary, but experts today estimate 60% to 70% of the evaluation process happens before a single vendor is ever contacted. Will those in the market for a new ERP system ever find Sage? The answer is maybe – but not necessarily because of Sage’s efforts, but rather because others still hang on to that label.

As I wrote last year, I have never been a big fan of the “ERP is dead” mentality. To my way of thinking, although the acronym itself has lost a lot of its meaning over the years, ERP is a convenient label. While early ERP solutions were fraught with problems, and indeed some of those problems persist today, calling it something else doesn’t fix it.

Based on my conversation this year with Mr. Kelly I understand his intent. This statement was his way of sparking some controversy, something Sage had previously been unwilling to do. However, based on how vigorously some of his Sage colleagues have defended this stance, I worry a little that the spark has become a flame that continues to burn at Sage. This is not only troublesome for existing ERP customers and partners, but also for those start-ups that will eventually scale up and become full-fledged enterprises. If Sage wants to continue to provide the “digital heartbeat” for these growing companies, it needs to provide a logical path forward that doesn’t require any steps back.

Sage provides different products for different stages of company growth. Early on, startups might run Sage One or the newer Sage Live (built on the Salesforce platform, which allows it to take advantage of many of the cloud, mobile and social capabilities inherent in the platform). But as the company starts to scale, perhaps it makes a move to Sage 50c, the Sage product most recently enhanced with integration to Microsoft Office 365. Or it might go to Sage 100, Sage 300 or skip right on up to Sage X3.

But Sage itself admits that it needs to catch up in terms of new features and technology. To its credit, Sage is not satisfied with just catching up, but wants to leapfrog its competition. But will all products along the path have some of the nifty new features inherited from the Salesforce platform or added to Sage Live? An example of this leapfrog effect was seen in a demonstration that linked Sage Live to TomTom WebFleet to record mileage as an expense in Sage Live without any human intervention whatsoever. In the future it will be possible to record billable hours this way using a Siri-like conversation to “start the clock.”

Another leapfrog moment on stage was the introduction of Pegg, an accounting chatbot that can take input from Slack and Facebook Messenger (for now, others to come) to report expenses using natural language English. Pegg combines a natural language interface with machine learning and intelligence to potentially do much more. Sage even describes it as a “personal trainer” for your business, but I suspect it needs to mature a lot before that really happens.

But what happens to this innovation when the customer outgrows Sage Live? Does it too get carried forward? Does the integration to Office 365 carry forward? Can you bring Pegg along or your TomTom? When you look at all the different paths forward, you start to realize the devil is indeed in the details. And all the permutations can be daunting.

This potential complexity is the reason why I think the most important Sage Summit announcement of all was the Sage Integration Cloud. During the keynote, we watched Nick Goode, EVP of Product Management integrate Sage One with Expensify in just a few minutes and a few clicks. As Nick said on stage, “No code, no fuss, no maintenance, no techy skills required.”

It was so incredibly simple, you knew there had to be something more to it than met the eye. And there is. This is built on Cloud Elements, an API Integration Platform for application providers. And the author of the “add-on” product (in this case Expensify) has to do some work in order to allow customers to connect it this easily. The level of preparatory effort will depend a lot on the technology and architecture of the solution(s). But Cloud Elements has created a Sage Hub, which means in connecting it to one Sage product, it connects to all (relevant) Sage products.

This is incredibly important for those on older Sage products, particularly as Mr. Kelly reinforced a commitment he made to customers at last year’s Sage Summit:

  • No forced migration.
  • No end of life for any Sage products.
  • If you love your current Sage solution, whether it is desktop or cloud, Sage will support your continued use of it.
  • When you are ready to move to cloud, full mobility and real-time accounting, then Sage is ready to take you there.

Sage is essentially promising never to “sunset” a product. Sage is not the only company making this promise. Infor, which also grew through acquisition and faces similar challenges, makes a similar promise, although Infor is also clear on saying it provides no real innovation to these non-strategic products. That’s the difference. I sense that Sage is (or should be) going down this “no innovation beyond compliance” path, but has not been as forthcoming with that statement. But both Infor and Sage continue to support a very broad and diverse portfolio.

On the surface this might seem quite noble of both Sage and Infor, or perhaps simply the right thing to do. But is it? Do they actually do a disservice to these customers by making it too easy to simply stay where they are and continue to be severely limited by this old technology? We understand the fear of disruption of ripping out an existing solution and replacing it, but in reality this fear and these older solutions are holding these customers hostage.

In order to make it less easy to stay put, Sage will most definitely use the carrot and not the stick. And the Sage Integration Cloud could be a very appetizing carrot. By offering some add-on components that might help these customers emerge out of the dark ages, Sage could “show them the light” (so to speak) and get them hooked on the opportunities newer technology provides. But in order for these customers to make a giant leap to a newer cloud product, with mobile and social capabilities built in, they will need to drag these new components along with them. That is the role the Sage Integration Cloud can play.

And it will also serve to make the Sage solution much more than “accounting, payroll and payments.” Sounds a lot more like ERP (and more) to me. This whole positioning exercise sort of reminds me of when Prince changed his name to a symbol. Everyone simply started calling him “the artist formerly known as Prince.” Ultimately (and fortunately) Prince went back to just being Prince, only better than ever. I am still hoping Sage might come full circle too.

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ACS 606 and IFRS 15 Revenue Recognition Rules Are Coming

Are You Prepared? Intacct Has You Covered.

In May 2014, FASB issued Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). At the same time the International Accounting Standards Board (IASB) also issued International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers. In doing so, these two governing bodies largely achieved convergence, with some very minor discrepancies. These converged standards for revenue recognition go into effect the beginning of 2018 for public entities, and in 2019 for privately held organizations, bringing very significant changes to financial statements and reporting for any company doing business under customer contracts. And of course with these changes come new audit challenges.

“The core principle is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”

Source: FASB ASC 606-10-5-3 and 606-10-10-2 through 10-4

As a result of these changes, revenue is no longer recognized on cash receipt, but instead on the delivery of performance obligations. In summary, there are 5 steps:

  1. Identify the contract with the customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price for the contract
  4. Allocate the transaction price to the performance obligations
  5. Recognize revenue when or as the entity satisfies the performance obligation

Sounds simple enough, right? Not really. Unless your business is dead simple and you operate on a completely cash basis, the process of billing, accounting for and forecasting revenue, in conjunction with expense and revenue amortization and allocation has never been simple. But with these changes, it is about to get harder – at least for a while.

Why? First of all, while you can prepare for the change, you can’t jump the gun. You can’t recognize revenue based on the new rules until those new rules go into effect in 2018. At that point public entities must report under the new guidance and private companies can, but they have an additional year before they are required to do so. So any public entity better be ready to flip the switch, so to speak. But flipping the switch doesn’t only mean recognizing revenue in a new way. For any contract with outstanding, unfulfilled obligations, you also have to go back and restate the revenue for prior periods under the new rules. And for a period of time, you will need to do dual reporting: old and new. In addition, when contracts change, this can potentially have an impact on revenue previously recognized, including reallocation and amortization of revenue and expenses.

If you are managing billing, accounting and/or revenue forecasting with spreadsheets today… good luck. If you are an Intacct customer, luck is on your side. Earlier this week Intacct announced a new Contract and Revenue Management module. Intacct claims it is the first solution to fully automate the new complexities created by ASC 606 and IFRS 15. They are certainly not the only company working on it. In fact QAD (which targets a completely different market: the world of manufacturing) highlighted its efforts in its own event in Chicago recently. But I have to say, Intacct seems to be right out front leading the charge in helping companies deal with what is sure to be a complex and potentially disruptive transition.

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Intacct Advantage 2015: Education, Collaboration, Inspiration and lots of Predictions

The tag line for Advantage 2015, Intacct’s annual user conference, was “Education, Collaboration, Inspiration.” But the real message I heard was this: The world is changing rapidly and Intacct is doing everything in its power to help customers survive and thrive by helping them keep up with change. In order to keep up today, you can’t sit back and wait for change to occur; you need to anticipate it. You need to make predictions, which was an additional theme running as an undercurrent on the main stage. Indeed Intacct’s CEO Rob Reid delivered some predictions of his own, promising customers, “We are your partner… thinking ahead, innovating ahead, scaling ahead.”

For those of you not familiar with Intacct, it is a cloud financial management solution provider. Bringing cloud computing to finance and accounting, Intacct’s applications are the preferred financial applications for AICPA business solutions and are used by more than 10,500 organizations from startups to public companies. The solution has evolved over time to provide all of the functions necessary to provide an operational and transactional system of record for the types of businesses the company sells to, bringing it more into the realm of an industry-specific ERP.

The Intacct system includes accounting, cash management, purchasing, contract management, financial consolidation, revenue recognition (a particular strength), project accounting, fund accounting, inventory management and financial reporting.

Here are Mr. Reid’s predictions:

Prediction #1: 20 is the new 80

While today finance executives spend 80% of their time completing tasks and 20% of their time planning for the future, Mr. Reid predicts that Intacct customers will flip these percentages, spending 20% of their time completing tasks and 80% planning strategically. I buy into the concept, but perhaps not at that level. Sure you can automate a lot of the tasks performed manually today, but I worry a little about leaders spending four times as much time planning as executing on the strategy.

Prediction #2: The business model is liberated

I view this as less of a prediction than an observation. New business models are disrupting whole industries. You’re already familiar with many of the consumer-oriented examples including Uber (transportation), Airbnb (hospitality), Netflix (entertainment), iTunes (music). But this business model disruption is affecting many other industries. More and more are moving away from simply delivering a product for a price and instead moving into subscription model pricing and delivery. Intacct is well positioned to support customers moving in this direction, including enhancements to its contract billing functionality. So this prediction is meant to exhort customers to adapt models to let their customers consume offerings the way they (the Intacct customers’ customers) want.

Prediction #3: Project finances get a freeze frame and zoom lens.

In this prediction, “project” is used as a noun, not a verb (as in “to project”). This is a prediction with about 100% probability of coming about, because it was simply a means of introducing Intacct Project Management. While Intacct has long been strong in project accounting, this new offering is an exception-based module meant to be used to evaluate progress and performance and predict profitability and utilization… i.e. manage the project rather than just do the accounting. In doing so, customers can assess project health and the impact on financials. Dashboards are meant to “freeze the frame” and give a snapshot of status in real time, also allowing managers to “zoom” in by drilling down to the detailed transactions.

Prediction #4: Finance is strategic planning

Mr. Reid is predicting that the finance department will become “the ultimate strategist.” This has actually been the goal of CFOs for a long time now and there was a time when many were marching determinedly in that direction. Then came Sarbanes Oxley and many took a U-turn and focused primarily on governance and control. By automating finance processes and reporting, many are now in a position to resume that march towards innovation and strategic purpose. But good strategy can’t be just guesswork and bright ideas. It needs to be based on real data and many CFOs still wait for the metrics needed to formulate a strategic plan. When finance departments spend hours, days or weeks gathering this data and formulating the metrics, they are often out-of-date, or even downright wrong, by the time they reach the desk of the CFO.

In days gone by C-level executives, including the CFO, rarely ever put their hands directly on accounting and ERP systems. It was far easier to get data in than to get data and insights back out, and they were just too hard to navigate. That is changing however. Today executives at the majority of companies have direct access to data within these systems, but some take more advantage of this access than others. Those running SaaS solutions (like Intacct’s) seem better positioned to take full advantage (Figure 1).

Figure 1: What level of access does your top executive management have to ERP?

Figure 1 IntacctSource: Mint Jutras 2015 Enterprise Solution Study

Intacct has been hard at working delivering several different vehicles of communication to make this enterprise data easier to consume, including dashboards and a particular delivery method called “ Intacct Digital Board Books.” With both, decision-makers have instant access to data organized for action. However, Digital Board Books are very industry-specific and the first one off the shelf is designed for software businesses that, like Intacct, deliver software as a service (SaaS).

So for those finance departments running Intacct in a SaaS software business, this prediction is spot on. For nonprofits that depend on fundraising, the prediction is likely to become a reality this fall, when Digital Board Books for Fundraising is scheduled for release. Intacct customers in other segments might have to wait a bit longer, but all the (technical) heavy lifting has been done in producing the first Digital Board Books. Now it is just a question of Intacct selecting and defining the right metrics and developing the content for the “books.” Intacct intends to produce these for each of the major segments in which it is strong, and will also continue to innovate those for SaaS software companies and nonprofits.

Prediction #5: You’ll do more with less. Others will fall behind

This sounded more like a promise than a prediction, a promise of new technologies, faster speed and more automation. This was actually a great segue to Intacct CTO, Aaron Harris, who approached the stage on a hover board. Once on stage he proceeded to demo the new Intacct Collaborate, a new “social” capability based on Salesforce.com’s Chatter product. Through Collaborate, Intacct customers can initiate conversations online, in real time, but more importantly, those conversations can be stored along with the business objects that are the subjects of the conversation: customers, orders, products, etc.

Mint Jutras research consistently finds “social” capabilities at the very bottom of the list of priorities for selecting finance and accounting and ERP solutions. However, when we separately ask how important some of those actual capabilities are (without calling them “social”), the ability to capture and retain conversations is consistently rated as valuable. Forty percent (40%) rate it as useful and 21% say it is a “must have.” And when we look at the responses by millennials, the percentage that rate it as “must have” almost doubles. No surprise there. These younger workers that never knew life without the Internet, are quite accustomed to electronic conversations. It is often their first communication method of choice.

Some of the baby boomers out there might need a little push in this direction, but once there, the value of keeping an audit trail of communication will become very obvious. And the good news is, even though it is based on Salesforce Chatter, you don’t have to be a Salesforce customer in order to use Collaborate. Even better news: it’s free (included in your standard subscription fee).

In addition to Collaborate, Intacct has been investing in its data centers, including the installation of new servers that are 35% faster, with 2X more application server memory. And beyond investing in more computing power, it has also been using newer technology (including in-memory computing) to speed the processing and analysis of data. It has achieved some pretty impressive results:

  • Intacct can now process 1 million customer invoices in 4 seconds
  • It can produce an analysis report on 20 million orders in 45 seconds
  • And it can produce a vendor ledger with 30 million transactions in 33 seconds

All of this investment puts Intacct customers in a very competitive position. We’ll be watching to see if they can make these predictions come true.

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What are you running your business with? Is it ERP?

Perhaps you’ve heard me ask the question, “Is it ERP?” about various solutions on the market. Maybe you were thinking, “Does it matter?” The answer to that question is, “Yes and no.” “No,” in that ERP, like any software category, is just that. It’s a category, a label and you shouldn’t read too much into that. “Yes,” in that the category is often misused and maligned.

While the acronym itself (short for enterprise resource planning) can be somewhat misleading, I have always been very clear on my definition of ERP:

ERP is an integrated suite of modules that form the operational and transactional system of record of the business.

The rest of the world doesn’t see it quite this clearly. Of course my definition is intentionally quite broad, but it needs to be simply because the operational and transactional needs will vary quite significantly depending on the very nature of the business. You can’t run a service business like a manufacturing or distribution business. Retailers, government and non-profits all have their own unique requirements.

This situation is also clearly exasperated by the fact that the footprint of ERP has grown to the point where it is getting more and more difficult to determine where ERP ends and other applications begin. Functions like performance management, talent and human capital management, etc, that used to sit squarely outside of ERP, today might sit either inside or outside that boundary. While operational accounting has long been a core competency of ERP, more robust financial management can be an integral part of ERP, or a stand-alone solution. Likewise, the footprint of solutions that have traditionally been marketed as financial and accounting solutions have expanded as well. No wonder there is so much confusion out there.

As a result, I thought it would be a good idea this year to see what people actually think they are using to run their businesses. While I have been conducting an annual ERP survey since 2006, much of the data I collect is relevant to other solution providers as well, particularly those that focus primarily on finance and accounting, with perhaps some project management and/or human resource management included. So this year I changed the name of the study to the Mint Jutras Enterprise Solution Study and added a new question at the very beginning.

Question: Which of the following best describes the software you use to manage your business?

  • Primarily enterprise level finance and accounting solutions (might include project management and/or human capital management)
  • Integrated enterprise level finance and accounting solutions supplemented with other operational applications (e.g. inventory, warehouse management, etc.)
  • An integrated suite of modules that provides a full system of record of our business (often referred to as ERP)
  • Desktop solutions such as Quicken, QuickBooks, Peachtree, etc.
  • Mostly spreadsheets and/or some low-cost or free tools (Google apps, Zoho, etc.)
  • Don’t Know

While data collection is still underway, we have collected almost 300 responses thus far and the results are quite interesting.

Note that participants checking spreadsheets and “Don’t Know” were disqualified and therefore will not be represented in any results. While those running desktop solutions qualified, only 1 participant checked this option and therefore I will only include the first three listed above in our discussion here.

During the course of the survey, participants are asked to check off all the different accounting/ERP solutions they have implemented across their entire enterprises and then asked to select one of those and answer implementation and performance questions for that specific solution. While 84% of the participants selected a solution that is clearly marketed as ERP, only 33% of this segment selected the third option above, which is reflective of the Mint Jutras definition of ERP. So they have purchased an ERP solution, but by my definition, they aren’t running ERP.

The remaining 16% selected solutions that are generally marketed as finance and accounting solutions. And yet 21% of these participants described the solution they were running as an integrated suite that provides a complete system of record of their business (i.e. ERP). So it would appear the majority of those running full ERP solutions are not making the most of what they have. And at least one in five of those running solutions primarily marketed as accounting solutions seem to have all they need to run their businesses. The full breakdown of responses is summarized in Figure 1.

Figure 1: What runs your business?

Figure 1 Blog postSource: 2015 Mint Jutras Enterprise Solution Study

These (somewhat surprising) results caused me to dive a little deeper, looking for, if not an explanation, at least a pattern. This early sample represented a pretty diverse group with the largest representation from manufacturing (41%) and service related businesses (36%). Given ERP evolved from MRP (material requirements planning), one would expect a higher adoption rate and more mature ERP implementations in manufacturers. While very few manufacturers run the solutions marketed primarily as finance and accounting solutions, 41% indicated the software running the business was primarily a finance and accounting solution. Another 26% had integrated finance and accounting solutions supplemented with other operational solutions such as inventory and warehouse management, presumably purchased from another vendor or a partner of their ERP solution provider. Again, only 33% described their implementation as full ERP. So no, manufacturers are not ahead of the pack.

I also looked at individual solution providers where I had a sample of at least 20 responses for smaller vendors or 40+ for larger ones. What segments were most likely to be running an integrated suite that provides a full system of record? The answer: Those running solutions that specifically target small to mid-size businesses. Does this mean small and mid-size businesses were more likely to describe what they were running as ERP? Not necessarily. It depends a lot on the solution provider and the solution itself.

Sixty-eight percent (68%) of those running Aptean’s solutions and 67% of those running SAP Business One described what they were running as ERP, per the definition above. Those running Acumatica’s cloud-based solution were also more likely to do so at 55%. And yet those running any of the four Microsoft Dynamics ERP solutions (AX, NAV, GP, SL), all of which target small to midsize enterprises (SMEs), were less likely, with only 28% indicating they were running a full ERP. Instead, they were more likely to report running integrated enterprise level finance and accounting solutions supplemented with other operational applications. My guess is that the partners that sold them the Dynamics solution (note: all Dynamics solutions are sold exclusively through partners) provide these other operational applications. Yet clearly these add-on’s are not so fully embedded and seamlessly integrated that they appear to simply be part of the ERP solution.

This is in stark contrast to solutions sold by Intacct partners, where I have noted previously that it is nearly impossible to distinguish where Intacct ends and the partner solution begins. As a result, 23% of Intacct customers indicated they were running an integrated suite that provides a full system of record, even though Intacct doesn’t portray its solution as ERP. It is one of those financial and accounting solution providers.

Another factor at play here is the whole concept of 2-tier ERP implementations. A full 85% of our survey respondents operate in more than one location and 69% are multi-national enterprises. This lends itself to the scenario where each operating location (division, subsidiary, business unit, etc.) may be run as a business all on its own. In fact if these units are in different countries they are also separate legal entities, requiring their own P&Ls. So you might have one system running at corporate headquarters (HQ) and other systems running the divisions.

The requirements at corporate HQ are largely financial, particularly if all orders are placed and fulfilled at the divisional level. This contributes to a larger percentage of respondents only running financials.

In days gone by these operating units might have been left to their own devices to find a solution to help them run their individual operations. Those days are long gone though. Today, 96% of our survey participants with multiple locations have established corporate standards and 64% of the time these are multi-tier standards, meaning a different ERP is used at the divisional level than at corporate. But even with a corporate financial solution in place, divisions still need some sort of finance and accounting in order to roll up to corporate. You can push the corporate financials down to the divisional level and then supplement them with other operational solutions. Or you can implement a full ERP at the divisional level and then integrate the divisional ERP with corporate financials.

This alone could be a very good reason why SAP Business One customers are more likely to be running a fully integrated suite. Of course if they are truly a small stand-alone business, they need a complete solution and probably don’t have the budget to be looking for disparate solutions that need to be integrated. Even if they are part of a large corporate enterprise, there is a pretty good chance corporate is running some version of SAP ERP. Because SAP Business One is pre-integrated with SAP ERP, the division has an integrated suite of modules providing a full system of record of the division’s business, that also happens to roll up to corporate financials.

With this as a likely scenario, you might think that the vast majority of SAP ERP customers are simply running integrated financials. They are not. Only 19% reported running primarily enterprise level finance and accounting, while 29% reported running integrated financials and other operational applications and a (relatively) impressive 52% reported running full ERP. Many assume SAP, being the 800-pound gorilla and therefore open to attack, is so complex and hard to implement that many never get beyond the basics of accounting. Yet in comparison to others, it is actually more likely to provide that full system of record.

This is not the case with Oracle, the other giant in the ERP industry. Almost half (46%) of Oracle users participating in the survey characterize their implementations as primarily accounting and only 28% describe them as ERP.

So while I would like to conclude that I found a distinct and recognizable pattern in all this data, the bottom line is that implementations vary quite significantly, particularly in comparing different solution providers. I am excited to have the beginnings of this new and extensive data set and look forward to sharing other insights as we move through the data collection and analysis phases.

Solution providers interested in collecting data from your own installed bases, feel free to contact me directly at cindy@mintjutras.com. There is still time but the window of opportunity will be closing soon!

 

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Investors: Why You Should Invest in Apparancy, Powered by Corefino

As an investor, you invest for many reasons. But chances are, the primary motivation is a return on that investment (ROI). You look for ideas, innovation, differentiation, marketability and sustainability. New ideas based on hot technology are very appealing. After all, a little sizzle doesn’t hurt. But that next “new thing” must address a real need. It can’t be elegant technology in search of a problem. And the need must be sustainable, or the business is not. And finally, businesses don’t run themselves, so strong management with a proven track record is a big factor in your decision.

It’s not often that investors can quickly and confidently check all the boxes. So when an opportunity like Apparancy comes along, it makes perfect sense to take a closer look. Apparancy is a new venture, powered by and launched as a sister company to Corefino. Its tag line: Purpose-built, compliance-centric workflow solutions for transparent business process management. Apparancy is the brainchild of Karen Watts, founder and CEO of Corefino, herself a former CFO. While Corefino delivers a turnkey, outsourced model to manage recurring financial processes through the cloud, Apparancy was inspired by the very real need to apply the same level of control and business process optimization to every structured process.

Who are Apparancy and Corefino?

Apparancy and Corefino are sister companies. Corefino is the big sister, founded in 2004. Five years later Corefino officially launched the “Future of 21st Century AccountingTM, a three part solution for the strategy-minded CFO.” At the time I called it a triple play; Corefino called it people, place and platform:

  • People: Corefino is a business process outsource (BPO) provider, completely taking over all routine accounting functions of a company, eliminating the need for an in-house accounting staff and freeing up the CFO to focus on revenue and profit strategies.
  • Place: Operating as a value added reseller (VAR) of software as a service (SaaS) accounting solutions, Corefino established strategic partnerships with cloud-based enterprise application solution providers such as Coda, Intacct, Intuit, NetSuite and SAP for accounting applications, ADP for payroll, Xactly for incentive compensation and Adaptive Planning for financial planning and budgeting.
  • Platform: A framework of best practices and workflows, introducing yet another “triple” play, trademarking its Triple-C PlatformTM to connect, correct, and comply. “Connect” refers to 24 x 7 connectivity to financial data and processes. More than 500 best practices for accounting business processes, including workflows and quality assurance checks assure “correct” and auditable financials that “comply” with requirements such as GAAP, Sarbanes Oxley, and IFRS.

While I found the price and value offered remarkable at the time and Corefino did attract some early strategic thinking pioneers, it proved to be a bit ahead of its time. In 2009 most CFO’s were simply not ready to trust their financials to the cloud, and perhaps not even willing to let go of the day-to-day control of accounting, even if it meant less headaches and lower cost. So while Corefino still retains and supports those early adopters, it didn’t grow very aggressively. That gave founder and CEO Karen Watts the opportunity to rethink the concept to extend it beyond the CFO. She took the best part of business process management, workflow, cloud and compliancy, added social and mobile components, and built new repeatable purpose-built business processes into a compliance-centric, audit-worthy framework. And Apparancy was born.

There are lots of tools on the market to build workflows. This isn’t one of them. It is actually much, much more. It started with those 500+ best practices and went beyond financial requirements to address compliance needs of new and additional stakeholders, combining technology with rich content in the form of intellectual property: best practices.

The result: a purpose-built, compliance-centric workflow solution for transparent business management. But while Corefino remains in the service business, offering a turn-key CFO-centric solution, Apparancy is all about platform and content for a purpose-built solution. But it doesn’t deliver the people performing the service. It leaves that enormous opportunity to its BPO service partners.

Apparancy is actively recruiting these partners, tapping into a huge market potential with the prospect of establishing win-win relationships. Never has the BPO industry seen more opportunity or more challenges. As compliance requirements continue to grow and change, more and more companies are turning to the experts: BPO service providers.  In turn these BPO providers need to:

  • Leverage leading edge technologies
  • Create new opportunities
  • Scale their businesses

As a true cloud-based, compliance-proven veteran, Apparancy can provide a jump-start in building or extending BPO portfolio offerings.

It’s All About Process: Filling a Real Need

Apparancy is a unique blend of technology and rich content to preconfigure, manage and monitor industry-specific best practice processes. Every business must manage processes but especially for the first industries and organizational roles targeted, these processes aren’t “nice to have.” The first industry Apparancy has set its sights on is healthcare. Healthcare is a highly regulated industry where compliance can mean life or death and it is also an industry undergoing very significant change and facing enormous challenges.  So the ability to manage, monitor and control falls in the “must have” category.

The first organizational role that Apparancy will go after is closely related: The human resources management function in mid-sized U.S. businesses and organizations in the private/public sector needing to comply with the new Affordable Care Act (ACA) requirements.  Confusion is rampant and a plethora of questions remain regarding roles and responsibilities. While some will try to go it alone, many will turn to “experts” in the field, including BPO providers. But where do these experts turn when they need to scale their businesses? Instead of just throwing more people at the opportunity, BPO providers can benefit enormously from pre-defined best practices and a framework of compliance.

While every business recognizes it must manage processes, there might be more here to manage than initially meets the eye. In addition to business processes, there’s also the decision-making process itself. These are processes often overlooked. While there is a lot of talk today about big data and hot technology to analyze it, data and technology are useless unless you have processes in place to utilize both and bring value to the business. This is an area where Apparancy can add even more value.

Recession proof: Healthcare, Death and Taxes

While the Affordable Care Act adds some urgency and unprecedented opportunity, it isn’t just a flash in the pan. Healthcare, along with food and pharmaceuticals are probably the most recession-proof of all industries. So whether the economy continues to recover or takes another dip, the demand for Apparancy will continue to rise. Regulation and the increasing scope of government oversight and compliance requirements is similarly recession proof.  The old saying that “there are two things you can’t avoid – death and taxes” is the truism for why both healthcare and compliance are growing markets under any circumstance.

Feeds the growing appetite for cloud solutions

The platform on which Apparancy’s solution is delivered as software as a service (SaaS). The appeal of SaaS has been growing quite steadily over the past decade. The Mint Jutras 2013 Enterprise Solution Study found that interest has accelerated dramatically over the past two years. The study asked survey respondents which deployment options they would consider for future purchases of enterprise applications like Enterprise Resource Planning (ERP) (Figure 1). ERP is the source of much of the data used in compliance reporting, particularly when the ERP footprint is extended to include human resource management.

Figure 1: Which deployment options would you consider in the future?

 Apparancy fig 1

Source: Mint Jutras 2011 and 2013 Solution Studies

Respondents were instructed to select all that apply

Note: the time span between when the 2011 and 2013 responses were collected was actually about 18 months. Also, Mint Jutras believes the percentage that will consider SaaS may be understated. Some survey respondents, particularly business users (versus IT), can’t clearly distinguish between SaaS and a solution “hosted by their solution provider,” particularly if they access it through a web-based interface. This supposition is substantiated by the fact that we found a certain percentage of participants known to be running via SaaS (because the solution they use is only available as SaaS) who did not indicate they would consider SaaS. But in each of these instances, they would consider it hosted by their solution provider.

The bars on the far right hand side of the chart (circled) speak volumes. The percentage of companies that will even consider a traditional on-premise deployment shrunk dramatically over a short 18 month time period. The appetite for cloud-based solutions is becoming voracious. However, even though demand is high, the transition to cloud-based deployments will not happen quickly, simply because so many currently implemented solutions are on-premise today.

Figure 2: Percentage of Business Software that is SaaS

Apparancy fig 2

Source: Mint Jutras Understanding SaaS Study

Many companies will be looking for ways to gain advantages from the cloud without ripping and replacing current solutions. By layering a cloud business process management (BPM) solution on top of existing solutions, Apparancy will be feeding the cloud frenzy without requiring a full-scale, big bang change.

It is also likely that this cloud frenzy will result in hybrid environments, where cloud-based solutions will surround and extend existing applications with a proliferation of niche functionality acquired from specialist providers. When these cloud-enabled “apps” play a role in business processes, it will be increasingly important to have a single interface to keep them all “on process.” Apparancy can provide this unified user interface.

Other Trends:  Social and Mobile

In addition to cloud, social and mobile are equally hot trends. Applying social concepts to business process management results in improved collaboration, connectivity and transparency. Concepts like “friending” and “following” are particularly effective in fostering improved two-way communication.  Apparancy is building in these social components, including following or subscribing to the communications of people that play a role or perform a function within the workflow. This keeps everyone on the same page and encourages and supports more active communication.

As more and more human touch points become embedded within workflows, it becomes equally important to support more real-time communication, particularly in compliance-centric processes. The good news today is that mobile devices allow these decision-makers to be “always on” and “always connected.” Of course the bad news for those workers is that the more untethered these devices become, the more tethered they are to work. Yet if the critical process can be completed, monitored and managed entirely from a mobile device, they suffer less from the intrusion on their personal lives. Get an alert, monitor the process, take action… and move on, without leaving Apparancy or your child’s soccer field.

Proven Expertise and Vision

As an investor, you need to have confidence in the person (or people) at the helm of the business venture. Where technology and trends are involved, those individuals must have a vision to see beyond what others see. Karen Watts established herself as a visionary when she launched Corefino. She saw the value proposition of delivering services supported by cloud-based systems back when others were still wary of the concept and fearful of security and privacy issues.

She proved herself to be patient as the industry caught up to her vision. And in the meantime she has proven she can deliver a compliant process in what is probably the most heavily regulated segment of anyone’s business: the financials. And she is showing she is still a step ahead as Apparancy is the natural evolution from Corefino to advance the technology as well as the business needs in a field where it can be best applied.

Summary and Key Take-aways

As an investor, you look for innovative ideas, differentiation, marketability and sustainability. The concept of a purpose-built, compliance-centric workflow solution for transparent business management is new, innovative and different. In some ways it is “one of a kind.” Of course, investing in a “market of one” where there are no viable competitors is risky. But Apparancy does have competitors. There are plenty of business process management tools and lots of applications that provide the data that flows through these processes. This validates the market for the product. However Apparancy is alone in providing a unique and complete solution.

Apparancy satisfies a real need in managing compliance-centric processes. While there is some very real urgency in the first target markets for Apparancy (the healthcare industry and the human resource management organization), this urgency does not signal a small window of opportunity. Just as you can’t avoid death and taxes, businesses will always be faced with managing the process of compliance.

Cloud, social and mobile are important ingredients. It is much easier to attract attention with hot technology trends, and in the world of enterprise applications, you can’t get much hotter than these. And capping off this investment opportunity is a true visionary with a proven track record for managing compliance-centric processes. All these factors combine to make it very worthwhile for a potential investor to take a closer look at Apparancy.

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BPO’s: Why You Should Partner with Apparancy, Powered by Corefino

The business of business process outsourcing continues to evolve, presenting new challenges, but also new opportunities. Companies have long been comfortable with the concept of outsourcing certain back office functions like payroll. Outsourcing providers can handle the ever-changing tax and regulatory requirements faster, less expensively and more reliably than their clients can internally.  Today more and more business processes are impacted by a combination of new regulatory, legal and even internal board-driven compliance requirements.  This new dynamic, the potential for automation and the increased use of cloud technologies and software as a service (SaaS) options that allow processes to be managed and delivered from virtually anywhere in the world, create a perfect storm to make the outsourcing of back office processes very compelling.

As a business process outsource (BPO) service provider you face some of the same challenges that drove your clients to you. How do you master the art and science of providing compliant-ready solutions, leverage leading edge technologies to create new opportunities and scale your business? The answer might be more “apparent” than you think. There’s a new kid on the block named Apparancy that can help. But that new kid is no rookie because Apparancy is powered by Corefino, a cloud pioneer with a ten-year history of defining and refining business process excellence in meeting financial compliance.

Who are Apparancy and Corefino?

Apparancy and Corefino are sister companies. Corefino is the big sister, founded in 2004 by Karen Watts, who is herself a former Chief Financial Officer (CFO). Five years later Corefino officially launched the “Future of 21st Century AccountingTM,” a three part solution for the strategy-minded CFO. At the time I called it a “triple play;” Corefino called it people, place and platform:

  • People: Corefino is a BPO, completely taking over all routine accounting functions of a company, eliminating the need for an in-house accounting staff and freeing up the CFO to focus on revenue and profit strategies.
  • Place: This is the cloud part. Operating as a value added reseller (VAR) of software as a service (SaaS) accounting solutions, Corefino established strategic partnerships with enterprise application solution providers such as Coda, Intacct, Intuit, NetSuite and SAP for accounting applications, ADP for payroll, Xactly for incentive compensation and Adaptive Planning for financial planning and budgeting.
  • Platform: A framework of best practices and workflows, introducing yet another “triple” play, trademarking its Triple-C PlatformTM to connect, correct, and comply. “Connect” refers to 24 x 7 connectivity to financial data and processes. More than 500 best practices for accounting business processes, including workflows and quality assurance checks assure “correct” and auditable financials that “comply” with requirements such as GAAP, Sarbanes Oxley, and IFRS.

While I found the price and value offered remarkable at the time, and Corefino did attract some early strategic thinking pioneers, it proved to be a bit ahead of its time. In 2009 most CFO’s were simply not ready to trust their financials to the cloud, and perhaps not even willing to let go of the day-to-day control of accounting, even if it meant less headaches and lower cost. So while Corefino still retains and supports those early adopters, it didn’t grow very aggressively. That gave founder and CEO Karen Watts the opportunity to rethink the concept to extend it beyond the CFO. She took the best part of business process management, workflow, cloud and compliancy, added social and mobile components, and built new repeatable purpose-built business processes into a compliance-centric, audit-worthy framework. And Apparancy was born.

There are lots of tools on the market to build workflows. This isn’t one of them. It is actually much, much more. It started with those 500+ best practices and went beyond financial requirements to address compliance needs of new and additional stakeholders, combining technology with rich content in the form of intellectual property: best practices.

The result: a purpose-built, compliance-centric workflow solution for transparent business management. But while Corefino remains in the service business, offering a turn-key CFO-centric solution, Apparancy is all about platform and content for a purpose-built solution. But it doesn’t deliver the people performing the service. It leaves that enormous opportunity to its BPO service partners. That’s just one of the reasons BPOs that provide back office services might want to strongly consider partnering with Apparancy. Are you a BPO service provider looking to expand your business? Or make it more efficient and productive? If so, read on to discover why a partnership with Apparancy could very well be a win-win.

Expertise: Compliance-Centric Best Practices

While you (the BPO) are an expert in your business, Apparancy is expert in applying technology to compliance-centric processes. Born out of the need for financial compliance and strong enough to satisfy the toughest critics (the CFOs), Corefino’s offering was built on the foundation of over 500 best practices. While the initial value proposition of Corefino was to free up the CFO from day-to-day operations in order to add more strategic value, its early customers also reported 30-50% cost savings. This speaks volumes in terms of Corefino’s expertise and the effectiveness and efficiencies of operation.

 

While the initial value proposition of Corefino was to free up the CFO from day-to-day operations in order to add more strategic value, its early customers also reported 30-50% cost savings. This speaks volumes in terms of Corefino’s (hence Apparancy’s) expertise and the effectiveness and efficiencies of operation.

 

Not only has Apparancy inherited these processes, along with the business process expertise, it has expanded beyond the needs of the CFO and has also added a strong technology platform to deliver these processes. Apparancy has the advantage of being both new and cutting edge, yet has the maturity of ten years in business at the same time. It adds a new approach and new ideas, on top of solid experience and a strong track record of delivery.

Scale Your Business: Work Smarter, Not Harder

If you are a BPO, you are essentially running a service-based business. Unlike a manufacturer or a software vendor that can design and develop a product once and put it on the shelf to deliver, you constantly design processes and execute them.  While you might not be billing by the hour, you still don’t have the natural scale of a product-based business.

Reusable, Repeatable Processes

As in any service-based business, the key to profitability is efficiency and productivity. The key to efficiency and productivity is making the process reusable and repeatable. While each of your customers might be unique, most portions of their processes are not. If you can deliver a custom-configured process without having to design it from scratch, you save time and money. If you base that common process on industry best practices you not only stand to improve it, but also you start producing your own revenue faster. And that revenue is “sticky.”

Apparancy delivers a framework and best practices designed for specific processes and even for specific industries. Think of the platform delivered as the technology and the best practices as “content” for the tool. “Content” is king. While there are plenty of tools on the market, adding intellectual property (IP) to build in best practice process models, workflows, exception handling, activity monitoring, audit trails and more allows you to scale your business well beyond the limits of a traditional service billing.

The Critical Link: Process to Systems

While the process (defined as a best practice) is essential, it brings no value unless it can be executed. And where processes are required for compliance with tax, regulatory, legal or internal regulations, they must also be auditable. This means linking the process, not only to the people but also to the enterprise systems, the applications that provide a system of record of the business. Linking the process to the systems insures the process is repeatable with no variation: the very definition of quality. BPO providers that are long on processes and short on systems may have difficulty in insuring that processes are executed efficiently and accurately.

If as a BPO provider you occasionally (or regularly) resort to throwing people at a problem, you know this can potentially result in not only making matters worse, but also having a significant and negative impact on the profitability of your own business. The premise behind Apparancy’s marriage of platform and process is to keep systems, people and processes aligned so that your capacity can increase without unnecessarily adding people or complexity.

Purpose-Built Content

Because this content (IP) is so critical, Apparancy will deliver purpose-built solutions for different industries and different organizational roles. Healthcare is the first of these target industries, chosen for two very good reasons: it is a highly regulated industry where compliance can mean life or death and it is also an industry undergoing very significant change and facing enormous challenges.  The human resources management function is also a target across all mid-sized U.S. businesses and organizations in the private/public sector needing to comply with the new Affordable Care Act requirements.

The market for healthcare-related BPO services needs no stimulus and BPO providers can benefit enormously from pre-defined best practices and a framework of compliance. Through a partnership with Apparancy, a BPO can combine tools with expertise and intellectual property and deliver a turnkey solution with far less design and development up front.

Added Opportunity

Social, cloud, mobile and big data are the big hot trends in the industry today. Yet many BPO customers have yet to avail themselves of these new technologies. Whether they are stuck on legacy solutions, or simply have their heads stuck in the sand, these companies are prime targets for modernization yet may not have the budget or the stomach for ripping and replacing existing systems. By layering Apparancy on top of existing solutions, you, the BPO provider can bring these modern trends to your customers.

Of course if you have progressive thinking customers, they might be leading you down this path already. Stay a step (or two) ahead of them by building a center of excellence with proven pre-built processes, designed for specific compliance requirements  and packaged with ROI-based testimonials. Or take the next step and attach your own custom-built or personalized extensions to create upsell and cross sell opportunity.

Summary and Key Take-aways

Never has the BPO industry seen more opportunity or more challenges. As compliance requirements continue to grow and change, more and more companies are turning to the experts: you, the BPO service provider.  Where do you turn to accelerate your go-to-market strategy for offering compliance-built business process management solutions? If you want to:

  • Leverage leading edge technologies
  • Create new opportunities
  • Scale your business

… you may also want to consider a true cloud-based, compliance-proven veteran like Apparancy to get a jump start on building or extending your portfolio offerings.

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