The market for enterprise resource planning systems and financial management software might be consolidating around a small number of core vendors, but this doesn't mean the evolution of features and services will stall. IT managers and financial analysts will continue to benefit from new capabilities in the years ahead, analysts say, whether the innovations come from platform vendors themselves or from makers of third-party financial applications and services.
The biggest innovations could spring from two of the biggest forces shaping the enterprise applications industry: cloud computing and ubiquitous mobile applications. Experts predict both likely will have a long-term impact, not only on core financial management software but also on the vital related area of analytics.
Software-as-a-Service financial applications could soar
The various incarnations of cloud computing promise a range of potential benefits for financial management software, analysts say. These include the efficiency and flexibility of virtualized servers in private cloud environments and the predictable costs and simplicity that come with moving financial applications off-site to a public cloud. Either way, the cloud gives enterprises new options for scalability by enabling them to quickly add -- or reduce -- computing power and services as business needs change.
Over the coming months, Software as a Service (SaaS), the simplest cloud option and the easiest to implement, likely will see significant growth, said George Lawrie, vice president and principal analyst at Forrester Research Inc. a research company based in Cambridge, Mass. "Large global companies have huge plans when it comes to doing more with Software as a Service," he said.
A rise in SaaS adoption could come as an extension of the way enterprises are using third-party applications to augment the financial management capabilities of their enterprise resource planning (ERP) systems, a recent report by Lawrie found. Overall, large enterprises increasingly are adopting one main ERP platform and consolidating their IT infrastructure further by reducing the number of ERP instances within their organization. For example, 64% of respondents to a recent Forrester survey said they run one to four ERP instances, with just 6% saying they run five to nine instances. Two years ago, 12% of enterprises put themselves in the higher category.
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Forrester found, however, that 21% of the survey respondents still look for ways to fill gaps in their ERP systems, especially in areas that relate to financial management and analytics. A third of those organizations run custom applications for purchase-to-pay and record-to-report processes, while 79% use custom software for financial analysis, Forrester said.
The longer-term trend will be for enterprises to replace on-premises custom applications with SaaS financial applications to augment their ERP systems, Lawrie predicts. His research found that a third of the enterprises responding to Forrester's survey have added SaaS applications for financial analytics, while 18% rely on SaaS for record-to-report processes, 15% for order-to-cash processes, and 12% for purchase-to-pay processes.
Growth in SaaS-based augmentation of ERP systems won't be without problems, especially for IT departments, Lawrie points out. Business users increasingly adopt SaaS applications without consulting IT, a situation that can lead to integration problems. One of the most common questions he hears comes from IT managers struggling with reconciling separate instances of customer data in the core ERP system and a SaaS salesforce automation system acquired by the sales department, he said.
Large enterprises aren't the only ones gravitating to SaaS financial applications, other analysts point out. The SaaS option will grow in popularity at smaller companies that use independent certified public accountants to do their books. Through SaaS, the accounting professionals get remote access to all the financial accounting records they're authorized to see. That eliminates the need for in-person meetings or for having to send sensitive information over email when it's time to prepare new financial statements.
Financial analysis everywhere
The growing interest in mobile applications that is spreading throughout enterprises this year hasn't bypassed the creators and users of financial applications. For the time being at least, however, mobile applications will offer the most immediate benefits to the financial management software subcategories of financial reporting and analytics, analysts say. The reason is that enterprises increasingly are recognizing the benefits of anytime, anywhere access to traditional business intelligence and the ability to query and analyze near-real-time information.
Lawrie believes financial management software will be part of a larger movement toward what his company calls "an app Internet," where mobile workers run small, special-purpose programs to perform specific job functions, he said. "The ideal solution is to be able to access services that are in the cloud on your personal device using an app that has your personal preferences and perhaps enables you to match up different sources of data," he said. "This will accelerate the integration of internal and external data" to give analysts a complete view of their organization's performance and how it compares with other organizations in their industry.
What should finance managers do to take advantage of mobile innovations today and keep their options open for the future? Analysts advise paying close attention to the technology roadmaps of not only their current ERP and financial management software suppliers but their competitors as well. Look for leaders in this category that already are extending their core applications with mobile capabilities and offering customers previews of future services, said Robert Kugel, senior vice president and research director at Ventana Research Inc., an IT advisory company based in San Ramon, Calif.
This was first published in August 2012