Cash Management in an ASP Environment
What started out as an attempt to simply obtain balance information to meet funding requirements on a bank by bank basis (early 1990s) has evolved into a regional and sometimes global multi financial institution quest to manage funding (single and sometimes multiple currency), investments, and corporate borrowing.
The impact on the cash management office is substantial. They are required to perform an increasingly complex array of activities with a decreased budget and reduced staff. To mitigate this effort, the following enhancements and tools have been introduced over the past 10 years to help manage this process:
The application or series of applications chosen by the treasury office needs to blend with the capabilities and behaviours of the corporation. A mismatch between a selected application and the people who utilize and maintain it can be problematic. Once the requirements have been formalized, the following issues should be considered in the decision making process:
When the treasury office is evaluating cash management support software they should review the following checklist when putting their wish list together:
Once the client has identified and prioritized their informational and transactional requirements, they need to choose an implementation strategy that meets their time to market and cost objectives. There are three major alternatives to consider:
Or hybrid of the above. Each of these strategies has its own series of strengths and weaknesses. It is important to note that while there is no correct answer an accurate review process can help guide the key parties to the proper choice.
In-house development provides the customer with the opportunity to specify the exact requirements needed for their cash management activities. A properly developed in-house application can meet all of the users’ cash management requirements. The in-house model faces many challenges, including development costs, implementation and systems, costs, application upgrade costs, etc. The user will require a dedicated staff of developers and systems resources to develop, host and upgrade the application. All training will be provided by internal resources.
In this environment the treasury office purchases software from a vendor who then works the purchaser to implement (and possibly modify) the software based on the user’s business and technical requirements. Enhancements to the application can include modification of special reports, modules, functionality, etc.
The vendor’s expertise is critical to ensure that the application is properly configured within the user’s operating environment and communicates effectively with all internal and external partners. This solution affords opportunities to the purchaser to implement in less time than the typical in-house model, but can be very expensive and difficult to implement depending on the compatibility of all elements involved with the end-to-end process.
In an ASP environment, the cash management team makes use of an externally developed and hosted application. The typical ASP application is a standard offering that is marketed as a full package to the client. The main characteristics of a successful ASP application are ease of installation and rapid deployment. The application is not usually modified for the customer unless treated as client initiated funded development. The ASP provider owns the application and is responsible for all upgrades and maintenance associated with the development. The ASP provider will provide the user with:
The application resides solely within the data centre (and back up site) of the ASP provider. It is their responsibility to ensure that the application works within expected tolerances (processing speed, reliability, data backup and storage, etc.)
The client will work with the ASP provider to discuss their current and future data processing needs to ensure that the ASP host will be able to meet processing and storage requirements.
Application upgrades to the client require no additional modification to their site beyond specialty communication requirements (if needed). The ASP provider will inform the customer regarding application and operational enhancements.
The ASP model provides the following benefits to the customer:
The ASP model provides the following shortcomings:
The ASP model provides a cost effective and rapid deployment model for the cash management team. In order for the cash manager to make a proper decision on the type of application model to roll out, they need to have a clear vision of their requirements, timeline for release, and budgetary constraints. This involves feedback from their management team as well as the cash manager to determine what information is required by management and the best way to transact and obtain data.
In many instances the correct ASP provider can provide the cash manager with the key tools required to manage their business effectively. The ASP solution can usually be implemented in a reasonable period of time and the team brought up to speed in short order. The ASP provider needs a track record of implementation successes and customer support to make the client feel comfortable that their current and future needs will be met.
A well-chosen ASP model provides the user with a time proven application and operational model to support their cash management needs. Over time the client and ASP host can work together as partners to help the application evolve to meet both current and future cash management requirements. The ASP model can provide support for all or part of the cash management model by integrating with the clients key internal and external partners as required.
A proactive ASP provider recognizes the importance of the client vendor relationship and will work with the client to partner with them as part of the product strategy and implementation process.