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Cloud sparking innovation in ERP financial systems

Analysts might suggest that innovation in ERP financial systems is moribund, but thanks to the increasing popularity of the cloud, ERP financials may instead be coming back to life.

Has innovation for ERP financial systems died? Depending on who you ask, the answer is "maybe, maybe not."

Vendors say that reports of innovation's death in ERP financial systems have been greatly exaggerated -- to paraphrase Mark Twain.

According to Betsy Bland, vice president of financial management products at Workday Inc. in Pleasanton, Calif., "innovation is not dead for ERP financials." The increased adoption of ERP financial cloud models, she said, will create an endless opportunity to innovate.

"We talk a lot about evolving market conditions in ERP financials, and for good reason," Bland said. In today's fast-paced and highly competitive business environment, she said, finance teams are pressured to respond quickly and provide information that can help drive business strategy and decision making. "Legacy systems make that difficult for finance leaders who have to spend more time on upgrades, and reconciling data that looks backwards, not forward."

Change ERP financial requirements keep innovation alive

Terrance Wampler, Oracle vice president of financials product strategy, agreed with Bland that innovation in ERP financials is not dead. "Things like legal requirements, how accounting filings have to be done, those are business law and those things aren't going to change. You're not going to see disruption in specific business processes. But what you are going to change is how people interact with the systems or how they interact with each other to get that stuff done."

Vinnie Mirchandani, an analyst at Deal Architect Inc., a technology advisory firm in Tampa, Fla., also isn't ready to put the final nail in ERP financial innovation's coffin. "I wouldn't say it's dead but compared to the rate of change that's happening in other areas such as product engineering, for example, there could be much more progress," he said. "That's because people are not allowed to challenge basic processes. How can you innovate if the expectations are still that [finance managers] will provide [the business] with compliance, and the cost efficiency it needs."

However, as the use of analytical tools has increased, financial functions such as revenue recognition, forecasting and planning have evolved and become much more intuitive, Mirchandani said. "Accounts payable has also evolved to some extent, because people are digitizing their invoices more and payments are more digital. But the core accounting modules, general ledger, accounts receivable and all that have not changed dramatically."

Innovation is happening, Mirchandani said, because people are moving processes to the cloud, which makes upgrading and maintenance more efficient than in the past with on-premises systems. Despite signs of innovation, though, Brian Sommer, founder of TechVentive Inc., a technology advisory firm in Batavia, Ill., said old ERP is "dead, gone, kaput, irrelevant."

In a recent blog post, Sommer compared the state of ERP financial systems to Monty Python's Norwegian Blue Parrot sketch. "No amount of talking or nailing the poor thing to its perch is going to make it come back to life," he wrote. "Call the funeral home and write the obituary. I'm already out shopping for the tombstone."

Digital economy drives innovation for ERP financial systems

According to Thack Brown, general manager and global head of line-of-business finance at SAP SE, based in Walldorf, Germany, innovation in ERP financial systems -- and ERP in general -- is driven by a move to the digital economy and digital business.

"We recognized early on that if we did not introduce key innovation and new capabilities into ERP and in particular ERP financials, that those systems would not be able to keep up with the demands of digital," he said.

That meant SAP had to rethink the way it used the data in the system, Brown said. The story of how SAP began transforming its ERP system starts with SAP HANA, its in-memory platform for processing high volumes of data in real time. "This opens up a very wide world of new capabilities for finance," he said. "It means you do get very detailed, real-time analytical capabilities off your transactional information and it means that you're operating in as real time as you want to be -- having all the information there and the ability to report on it and transact on it."

By taking its traditional ERP system and putting it on HANA, its real-time data platform, SAP has been able to drive innovation, Brown said. "But we know there's more to be done in driving innovation into this space."

One stumbling block: Inertia of existing ERP users

But it doesn't matter how elegant an old on-premises vendor can make its new in-memory, cloud-powered ERP system. As elegant as those systems might become, the problem is inertia among customers, who may not move because of the massive amount of disruption and the work required to make changes happen, Sommer said.

"Today's ERP vendors are trying to bolt on big data and other changes to the periphery of a tired solution," Sommer said. "Like before, they're trying to give their old products a facelift but the underlying technology is really dated."

But there is hope, he said. In addition to vendors trying to transition existing customers to newer architectures, Sommer said, cloud-based vendors -- like Workday, in particular -- were built on in-memory databases from the beginning so they can process vast amounts of information almost instantly.

"And NetSuite, which has a set of products that covers the basics, has staked out the scalable omni-channel/digital retail space better than anyone I've seen so far," Sommer said. "The company has redefined how billing operates in a digital economy with a solution that is up there with the best in terms of flexibility, utility and reporting".

As the role of finance evolves, risk-averse finance leaders are considering the cloud to help them be more strategic and drive growth. And, according to Bland, with cloud-based financial systems, finance teams are able to access data in real time for more accurate reporting and decision making.

"CFOs are putting data and tools in the hands of managers, empowering them to make more data-driven decisions," she said. And cloud-based financial systems unified with HR data also provide valuable insights into talent and costs, giving executives a greater understanding of the business and helping to inform business strategy."

The need is for an easy-to-use service

Oracle's Wampler noted that "a modern system for us is about making [the technology] a service, about making it easy to use and about making it collaborative." The system has to be what Wampler described as intelligent -- it has to let users enter transactions or report them as well as guide them as to what’s happening in the business by bringing information together. And it needs to drive collaboration in a secure environment.

Although historically financial leaders have been risk-averse, they now understand the opportunity for a data-driven organization and how real-time financial and workforce insights, as well as modern reporting and analytics capabilities can help inform critical business decisions, Workday's Bland said.

"As the finance organization's role continues to evolve and become more data-driven with new technologies like the cloud, innovation in ERP financials is only just coming to life," she said.

Next Steps

SAP tightens ERP financials.

Promising innovations in ERP technology

Ready why more ERP systems are put in the cloud.

This was first published in November 2015

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