Even as some ERP treasury modules have improved over time, there are still key market trends that have outpaced the ability of ERP vendors to serve this vertical in the ways that it needs to be served. These trends, namely those fuelling the dynamics of global treasury and the adoption of software-as-a-service (SaaS), are putting the buying decision for treasury technology back where it belongs: with the business.
The debate over choosing between ERP or specialty treasury systems is not really where the controversy lies. The market has already spoken, and it rewards those that can recognise and meet the needs of the global treasury organisation. The real issue, then, is how far treasury has come in influencing IT decisions, and how influential treasury has become in the business overall. The global financial crisis changed the way treasury is looked at by the C-suite and by treasurers themselves. No treasury team can afford to be caught off-guard by the board and CFO when they ask where and how much cash the company has, or how emerging regulations will affect operations, or what risk scenarios are on the horizon in the world, ready to destroy market value for the business, and for shareholders. This reality has not only changed the technology requirements of treasury, rendering simple cash management systems and installed treasury management systems irrelevant, but it has also changed the role of treasury across the global organisation.
Perhaps the more intriguing question is how far IT leaders have progressed along the continuum to a more visionary organisation, where business makes the business decisions. One enlightened CTO shared his desire for treasury to buy the treasury module of the company’s ERP system. However, he accepted treasury’s preference for an all-in-one SaaS solution for treasury and risk management. While the CTO had his own reasons for wanting to buy the treasury module of his ERP vendor, he also conceded to the fact that his role is to advise and support the business and its needs, so the choice of system, he said, was not his to make.
What was especially revealing about the forward thinking nature of this particular CTO, however, was the direction he was taking his own IT organisation. While he clearly understands the points of synergy that ERP systems have with certain areas of the business, he also knows that the world – meaning lines of business and areas of IT – is moving to the cloud. In fact, he said when he first arrived at the company, there were about 30 IT professionals whose responsibility it was to manage server stacks to keep the company’s various independent software applications up and running. Today, however, he is outsourcing as much as he can to the cloud. Those IT professionals who could make the transition from managing servers to managing outsourcing relationships are still there. And while the company’s ERP system is still managed internally, its disaster recovery and other areas of the IT organisation are outsourced to the cloud.
Several industry reports cite that the adoption of cloud-based applications and services is on the rise. According to research firm Apps Run the World (ARW), subscription revenues of cloud-based enterprise applications are growing 32% year-over-year. In the treasury space, ARW projects cloud-based treasury and risk mManagement (TRM) applications growing at a 23% CAGR through 2018. This compares with a 4% CAGR in licensed TRM applications over the same period. ERP providers, recognising the trend to SaaS, are beginning to reorient their product offerings to take advantage of this movement. Case in point is SAP’s US$3.4bn acquisition of SuccessFactors in the Human Capital Management space. Forrester analyst Paul Hamerman told the New York Times’ DealBook in an interview shortly after the deal closed that “The cloud has been a small part of SAP’s revenue stream, about 2%; the deal adds to the revenue base and shows SAP’s strong commitment to the software-as-a-service business model.”
As Gartner analysts Alexander Drobik and Nigel Rayner explain in their 31 July 2013 report, Develop a Strategic Road Map for Postmodern ERP in 2013 and Beyond, “The bloated, all-encompassing ERP suite was killed by megavendors when they realised they couldn’t keep up with users’ needs and had to acquire, rather than build, the required functionality.” Indeed, to remain relevant, ERP vendors will have to adapt. The report goes on to state, “The ERP suite is being deconstructed as part of what Gartner calls ‘postmodern ERP’. This will be a more federated, loosely coupled ERP environment with much (or even all) of the functionality sourced as cloud services or via business process outsourcers.” Gartner predicts that “by 2018, more than 80% of organisations will be operating a hybrid ERP model with most people-centric applications deployed as cloud services,” and also predicts ” cloud applications will also support more-specialised users, such as strategic sourcing and treasury management.”
In the end, the ERP versus specialty treasury system argument itself is irrelevant. Instead, it is how ERP works with specialty treasury solutions, delivered as SaaS TRM solutions, which will satisfy the needs of IT, treasury, and the rest of the global organisation.