Backing the Right Horse: Which Delivery Platform to Choose for your TMS Application
Since those early days, a broad range of SaaS applications have come
online, and many enterprise software category leaders exclusively offer
SaaS-based solutions. So it’s likely that, even while the treasury management
function is still running on application service provider (ASP) applications and
server-based software (or even spreadsheets), much of the organisation is
already benefiting from SaaS, in the form of vendors such as NetSuite
(enterprise resource planning (ERP)), Cornerstone OnDemand (talent management),
Concur, (travel management) – to name just a small sample.
Standing: Knocking Down the Barriers to Adoption
So why is treasury often
the ‘last man standing’ when it comes down to the adoption of SaaS? Much of the
hesitation comes from a chief financial officer’s (CFO) and treasurer’s aversion
to risk, including technology adoption. While this is obviously a critical trait
for an individual whose role is focused on compliance and risk management, SaaS
is a mature and widely-adopted software delivery mechanism, which is often a
safer bet than having software hosted on a corporate server. In addition to this
inherent hesitation, there are several concerns that legacy software vendors –
who don’t offer SaaS solutions – will offer as reasons to keep mission-critical
software out of the cloud.
Security has long been viewed as a
major barrier in keeping sensitive applications within the four walls, and there
has been reluctance to hand over the hosting to a remote third party. However,
many IT professionals argue that, when done properly, cloud deployment is
actually safer than internally hosted software.
Cloud providers invest
significantly in high-end physical security measures (such as back-up power,
mirrored servers and highly secure buildings) as well as IT security measures
(including data encryption, secure connections to clients and robust intrusion
prevention security). Although these investments are costly, the expense is
spread across the entire client base, making the per-client cost palatable once
economies of scale have been reached. For an internal IT team to offer the same
level of security would be prohibitively expensive for the organisation and its
internal ‘clients’ such as treasury.
Lack of scalability:
Among the major
pieces of misinformation spread by legacy software vendors is that SaaS is a
solution suited to small and medium-sized enterprises (SMEs), but it can’t scale
to the needs of a major organisation. While during the nascent days of SaaS in
the early 2000s, this may have held true (as SaaS vendors began with relatively
simple applications), more than a dozen years of development in SaaS have led to
a market where solutions have the sophistication and scalability to be as
suitable for US$100bn multinational corporation (MNC) as they are for a
single-market, US$30m company.
Ironically, with agile development
structures and more functionality delivered per release, end users appreciate
that SaaS solutions offer more features, more quickly.
A third issue that is often cited, particularly in emerging
markets, is the potential challenges with technology and communications
infrastructure (notwithstanding the earlier security arguments). Will a
company’s telecoms provider be able to provide the necessary bandwidth? What if
the communications infrastructure isn’t adequate?
Both of these arguments
are quickly becoming outdated. For a start, the vast majority of organisations
of a scale that features a formalised treasury function locate their remote
offices in areas where there is adequate communications infrastructure. Many
emerging markets, which previously had limited landline infrastructure, have
leapfrogged western nations in the roll-out of high-speed cellular and wireless
data networks, as this has proven to be more cost-effective in bringing their
populations online. Second, with SaaS applications, all of the computing is done
at the host’s end, so all that is delivered to the client’s browser is a web
page. If you can access Google from your desktop or mobile device with no
issues, accessing a SaaS application will not cause any headache.
for these same remote offices, SaaS applications offer lower bandwidth and IT
requirements than deploying ASP or installed applications.
So why go
Assuming that these initial barriers have been overcome, what are the
compelling reasons to move to a SaaS platform?
in-house solution, SaaS does not require a large upfront cost. The technology is
typically billed on a ‘pay-as-you-go’ or subscription basis, enabling companies
to spread the cost. Upgrades take place automatically and frequently, requiring
no additional investment of time or money. Not only does this mean that you have
cost certainty, but you can always be assured that you are running on the latest
and greatest version of the platform. Redundancy itself becomes a redundant
Ease of implementation and maintenance:
A cloud solution is easier to
acquire than a hosted system, and also easier to roll out across the
organisation. In addition, in-house IT support is no longer required either to
support the technology on a daily basis or to carry out upgrades, eliminating an
often significant internal cost. The implementation time for a SaaS based
treasury platform can be as little as three months.
For legacy systems,
implementation usually takes two to three times as long. The benefits do not end
once the system has been installed: upgrades and updates happen automatically
and new users can be set up directly via the website without difficulty.
Higher performance – everywhere:
Financial applications typically carry a lot
of data and internal networks can get overloaded, particularly at month-end when
multiple people in multiple geographical locations are all trying to access the
same information. This can adversely affect the performance and timeliness of
non-SaaS based systems. Even ASP solutions are not optimised for high
performance, given the limitations of their architecture and development. So
even if your communications infrastructure is not ideal, there should be no
challenge with accessing and manipulating data.
Know Your Cloud: SaaS vs.
It seems that every software provider offers cloud solutions. But do
they really? The answer is no, despite the claims of salespeople and marketing
The US Department of Commerce’s National Institute of
Standards in Technology (NIST) is recognised as the authority for defining what
is – and isn’t – cloud. The NIST defines cloud as a model that provides for
on-demand access to a shared pool of pooled resources in a multi-tenant model.
The key to cloud is that the service is elastic and measured, meaning that
resources can be automatically added or removed to continually offer scalability
and optimised performance. The key difference between the ASP versus the cloud
model is that for cloud this can be done across the entire user base at the same
time, and can span multiple locations in the event of a disaster or business
disruption. There is no individual attention required for a specific client’s
setup, which obviously would impede the scalability when it comes to important
tasks such as maintenance, upgrades or disaster recovery.
Cloud software is
delivered in a SaaS, not ASP, model and is available to users through their
browser and device of choice.
For those of us in treasury, the differences
may not be as obvious as to our IT colleagues. Yet even without the benefit of
IT’s expertise, the wide chasm between ASP and SaaS is obvious for upgrades,
daily support, performance and, most importantly, business continuity. ASP is
really not good enough, which is why the most successful software vendors have
all rebuilt their solutions as SaaS offerings. Even the investment community
agrees, valuing SaaS companies at 8-10x recurring revenue, while ASP and
on-premise counterparts rarely achieve even half that valuation, as has been
evidenced by recent acquisitions in the treasury system space.
the move to the cloud will undeniably be a step up from an existing solution, be
it spreadsheets or server-based, treasury teams should be armed with the
knowledge and questions to ask potential vendors. One of those key questions is
around viability. The switch to subscription revenue from upfront software
license fees is difficult for many small software companies. Small, poorly-
capitalised treasury vendors have been acquired one after another in recent
years for this very reason. They couldn’t, or wouldn’t, invest appropriately to
achieve economies of scale. Ask any treasurer whose software provider was
acquired what level of support and product innovation they enjoy.
the move to the cloud is a compelling argument on many levels, organisations
still need to thoroughly review their vendor selection, to ensure it meets their
specific requirements. As many treasury departments will be making their first
foray into the world of cloud technology, they need to ensure that instead of
implementing a solution which could itself border on obsolescence in a couple of
years, they future-proof their investment for many years to come.