financialforce steps out of shadow 02 · financialforce steps out of the salesforce shadow ......

June2017

FinancialForceSTEPSOUTOFTHESALESFORCESHADOW

WITHRENEWEDFOCUSANDENERGYONERPFORSERVICES

FinancialForcewasfoundedin2009whenitbrokeawayfromUnit4andpartneredwithSalesforcetobecomeoneofaveryfewcompanies(atthetime)borninthecloud.Sincethenithasleverageditsrelationshipwiththesoftwareasaservice(SaaS)pioneer,alongwiththestrengthoftheSalesforcedevelopmentplatform.Ithasrecentlysurpassed$100millioninrevenuerunrate,supportingover1350customersin34countries.ButithasalsogrownintheshadowofSalesforce,asomewhatlimitingfactorintermsofmarketawareness.Itsnamemayalsohavebeenalimitingfactor.

FinancialForceimpliessoftwareforthefinanceteam.Butitsproductextendsbeyondaccounting.Itoffersafull-fledgedenterpriseresourceplanning(ERP)solutionfortheserviceindustry.Itleavesthedomainofmanufacturinganddistributiontoothers,butthatdoesn’tmeanithaslimitedgrowthpotential.Indeed,newmanagementatFinancialForceisbettingbigonwhatisrapidlybecomingaservices-basedeconomy.

AtthesecondannualFinancialForceCommunityLiveevent(previouslyheldaspartofDreamForce),newCEOTodNielsenharkenedbacktoMarcAndreessen’sfamousexplanationintheWallStreetJournalin2011of“WhySoftwareisEatingtheWorld.”TodayMr.Nielsengoesonestepfurther,declaring,“Servicesaredevouringthegalaxy.”InordertotakefulladvantageofthevastopportunitythiscreatesforFinancialForce,itmustnowstepoutoftheshadowofSalesforce,establishitsownidentityandfocusintentlyonsatisfyingthespecificneedsoftheserviceeconomy,where“speedisthenewcurrency.”

NEWREQUIREMENTSFORERPFORSERVICES

Mr.Andreessen’s2011articlewasactuallyaharbingerofwhatmanytodayviewasthedigitaleconomy,whichisfosteringasubscriptionenonomy.Onequoteprettymuchsumsupwhatthishascometomean:potentialdisruption.

“Moreandmoremajorbusinessesandindustriesarebeingrunonsoftwareanddeliveredasonlineservices—frommoviestoagriculturetonationaldefense.ManyofthewinnersareSiliconValley-styleentrepreneurialtechnologycompaniesthatareinvadingandoverturningestablishedindustrystructures.Overthenext10years,I

Who is FinancialForce?

FinancialForceisaleadingcloudERPvendorwithapplicationsforthenewserviceseconomy,builtnativelyontheSalesforcePlatform.Foundedin2009andheadquarteredinSanFrancisco,FinancialForceisbackedbySalesforceVentures,TechnologyCrossoverVentures,AdventInternationalandUnit4.Thecompanyrecentlysurpassed$100millioninrevenuerunrate,experiencing40%growthyearoveryear.Itsupports1350+customersin34countries.

Typesofservicesbusinessestargetedinclude:ü Consultingü ITServicesü Engineeringservicesü Information

Services/FinTechü SoftwareandSaaSü EducationServices

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expectmanymoreindustriestobedisruptedbysoftware,withnewworld-beatingSiliconValleycompaniesdoingthedisruptioninmorecasesthannot.”

Wedoindeedliveindisruptivetimes.Weaskedsurveyparticipantsinour2016MintJutrasEnterpriseSolutionStudytoestimatethelevelofrisktheyfaceintheirindustry(andthereforetheirbusiness)beingdisrupted(Figure1).

Figure1:Howmuchriskdoyoufaceinyourindustrybeingdisrupted?

Source: Mint Jutras 2016 Enterprise Solution Study

Wefound88%ofcompaniesbelievetheyfacesomelevelofriskintheirbusinessesand/orindustriesbeingdisruptedbynewinnovativeproducts,newwaysofsellingorpricingexistingproductsorservices,entirelynewbusinessmodels,orsomecombinationofalloftheabove.Whileonly10%feltthatriskwashighand/orimminent,mostdounderstandtheriskisreal.Whileaboutoneinthree(34%)feeltheriskislow,wehavetoask:HowdoyouthinkthetaxiindustrymighthaveansweredthisquestionontheeveofthelaunchofUber?DoyouthinkthehotelindustryanticipatedAirbnb?DidBlockBusterforeseethedevastatingimpactNetflixwouldhaveonitsbusiness?Alloftheseexamplesreplacedassetswithservices.Whatkindofdisruptionislurkingoutthereforyou?

TheInternetandthedigitaleconomymadeallofthesedisruptionspossibleandnoneweredecadesinthemaking.Comparedtoslow,evolutionarychangesofthepast,theyliterallyhappenedalmostovernight.TheInternethasleveledtheplayingfield,allowinganycompany,evensmallones,toestablishaglobalpresence.Newwindowsofopportunityopeneveryday,buttheycanalsocloseasfastastheyopen.

Changeisinevitable,bringingaboutnewrequirements.Asyourbusinesschanges,alongwiththeworldaroundyou,thespeedwithwhichyoucanrespondwillclearlyimpactyourgrowthandperformance.

FinancialForcehasrespondedtothesechangingrequirementsbycreatingthreethemesthatwillcutacrossitsentireproductportfolio:

ü Businessmodelagilityü Timeandtalentoptimization

Data Source Inthisreport,MintJutrasreferencesdatacollectedfromits2016EnterpriseSolutionStudy,aswellasearlydatacollectedfromthe2017study.Bothinvestigatedgoals,challengesandstatusandalsobenchmarkedperformanceofsoftwareusedtorunabusiness.

Over525responseswerecollectedin2016andalmost600in2017fromorganizationsspanningabroadrangeofindustries,including81fromservicesrelatedbusinesses.Bothsetsincludeorganizationsofallsizes,rangingfromverysmalltoverylarge.

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ü PredictiveInsights

BUSINESSMODELAGILITYMintJutraswouldagreethatbusinessmodelagilityisimportant,butwouldfurtherstressthatalltypesofagilityarecritical.Asafollow-uptothequestionweposedaboutriskofdisruption,weaskedsurveyparticipantstoselectthesinglemostlikelycauseofpotentialdisruption(Figure2).

Figure2:Whatismostlikelytocausethisdisruption?

Source: Mint Jutras 2016 Enterprise Solution Study

Thethreatfromnew,innovativeproductsmayhavethelesserdisruptiveimpactonbusinessprocessesandbusinessmodels,butitdoesrequirecompaniestoplacemoreemphasisoninnovation.Windowsofopportunitycanopenandcloseveryquickly.OfcourseanagileERPsolutionisn’tallyouneedtoacceleratenewproductintroductions,butyoualsodon’twantittobethereasonyoucan’trespondtonewmarketdemandsortakeadvantageofnewandunprecedentedopportunities.

Newwaysofselling/pricingexistingproductsmightincludesubscriptionstoservicesoroutcomesthatreplaceoutrightsaleofproducts,makingvirtuallyanyandallcompanies“service”companies.Ratherthansellingamachine,youmightinvoiceforuptimeorhoursofproduction.Youmightshipaphysicalproductforfreeandchargeforusageand/orconsumables.ThismakesservicesubsidiariesoflargemanufacturersaviabletargetforFinancialForce.Softwarecompaniesthatusedtoofferperpetuallicensesmightnowalso(orinstead)offersubscriptionstosoftwareasaservice(SaaS).Thesetypesofchangescanhaveamajorimpactonhowyouinvoice,recognizerevenueandmanagecash.AndthesechangesmustbereflectedinyourERPsolution.

Theimpactofentirelynewbusinessmodelsisevenhardertopredictbecauseoftheinherent“newness.”Youdon’twantyourERPsolutiontobethereasonyoucan’tcapitalizeonthatbrilliantnewideathatcancreateanewrevenuestream.YourERPmustadaptasyourbusinessevolves.

MintJutraswouldagreethatbusinessmodelagilityisimportant,butwouldfurtherstressthatalltypesofagilityarecritical.

Newwaysofselling/pricingexistingproductsmightincludesubscriptionstoservicesoroutcomesthatreplaceoutrightsaleofproducts,makingvirtuallyanyandallcompanies“service”companies.

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Andifyouarelikeoneinthree(33%)ofoursurveyparticipants,youexpectchangetocomefromacombinationofthesedisruptivefactors,whichisevenhardertopredict.Youmustcontinuetosupportyourcurrentrevenuestreamsinconjunctionwiththesenewopportunities.

Forallofthesescenarios,thisiswherethepowerofanopenplatformlikeSalesforceissoimportant,alongwiththeecosystemthatsurroundsit.Customersgainmorefromthevastecosystemofpartnersthananyoneofthemcanprovideonitsown.AndasvastastheSalesforceecosystemis,FinancialForcehasdevelopedanecosystemofitsown,withoneveryimportantpartnershipannouncedattheFinancialForceCommunityLiveevent.Moreonthatlater.

Ofcoursenotalldevelopmentplatformsarecreatedequal,butSalesforceisliterallya“force”intheindustry.Salesforceestimatestheplatformspeedsdevelopmentbyafactoroffive,andcutsthecostofdevelopmentinhalf.Asaresult,bothsolutionprovidersandcustomersbenefit.ForapartnerlikeFinancialForce,itmeansfewerwheelsto(re)invent,bytakingadvantageofapplicationservicesalreadybuiltintotheplatform,including:

• Supportforamulti-tenantSaaSenvironment,whichisakeyenablerindeliveringmoreinnovation,faster

• Aworkflowengine,accessandidentitymanagement• OtherrapiddeveloperservicesincludeSalesforcestandarduser

interfacetemplates,(business)objectorientationandbuilt-inmobilesupport

• Theabilitytotie“social”onlinechats(throughSalesforceChatter)directlybacktobusinessobjects.FinancialForcelikestosayyouareeveronlyoneclickawayfromfollowingaconversation.

• EmbeddedanalyticswithSalesforceWave,acloud-baseddataplatformaswellasadata-analysisfrontenddesignedtoanalyzenotjustERPdata,butalsoanythird-partyapp,desktoporpublicdatayoubringin.AndWaveisevolvingtobecomeSalesforceEinstein,whichaddstheelementofguideddiscovery.Thiswillbeatremendousassetinnotonlyprovidingvisibilitybutalsoinhelpingdecisionmakersasktherightquestions–eveniftheymightnotbeobviousorintuitive.

Forthecustomer,itmeansmoreflexibilityandmoreinnovation,faster.ERPforservicesmustbemoreflexible,configurableand(perhapsmostimportantly)moreextensible.InarecentMintJutrasreportIs“AgileERP”anOxymoron?wetalkedabouttheimportanceofcomponents-basedarchitecturesandtheabilitytoextendthefoundationalsolutionthatrunsyourbusiness.Wealsotalkedabouttheimportanceoftheunderlyingdevelopmentplatform.ThespeedofinnovationandtheeaseofconsumingitarelargelydependentontheplatformonwhichyourERPsolutionisbuilt.FinancialForce

Multi-tenant versus Single-tenant SaaS

Multi-tenantSaaS:Multiplecompaniesusethesameinstanceofhostedsoftware;configurationsettings,companyandrole-basedaccesspersonalizebusinessprocessesandprotectdatasecurity.

Single-tenant(orMulti-instance)SaaS:Eachcompanyisgivenitsowninstanceofthesoftware,butmaysharecommonservices,suchasanintegrationplatform,andsecurity.

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willcontinuetoleveragetheSalesforceplatformevenasitstrivestobetterestablishitsownidentityandbrand.

TIMEANDTALENTOPTIMIZATIONFinancialForce’sfocusonservice-centricbusinessesnaturallyplacesmoreemphasisonpeople.Ofcoursesomeservicescanbeautomated.Software(andSaaS)providesaclassicexample.ButatmanyFinancialForcecustomers,thecustomers’employeesdelivertheservices,makingtimeandtalentcriticalsuccessfactors.WhileHumanCapitalManagement(HCM)hasbeenpartoftheFinancialForceproductportfolio,arecentannouncementsignalsasubtleshiftincorporatestrategy.

OnJune20,2017FinancialForceannouncedapartnershipwithADP,aleadingglobalproviderofHCMsolutions,includingpayrollandHCMcapabilities.ThisstrategicpartnershipwillprovidecomprehensiveHCMtocustomers–manyofwhomarealreadyusingADPfortheirpayrollservices.ADPisclearlyaleaderinthisspace,especiallyinpayroll.

Thejointbilateral(referral)agreementincludesintegrationplansandamigrationpathforthosecustomerscurrentlyrunningFinancialForce’sHCMsolution.Whilenocustomerwillbeforcedtomove,FinancialForcewillnotbeenhancingitsexistingproduct,excepttoaddressanyregulatorycompliancerequirements.ButitwillcontinuetosupporttheproductuntilMarch2020.Inthemeantime,thosewhowouldliketomove,willbeabletomigrateto“like”modulesatnoadditionalcharge.Thetwocompaniescurrentlyhave170jointcustomers,mostlyinNorthAmerica.SothefirstprioritywillbepayrollinNorthAmerica.Futureplansformigrationinothercountrieshasyettobeprioritized.

ThefunctionalitythatADPwillprovideisgeneral-purposeinnature,thekindsoffeaturesandfunctionsthatarequiteconsistentacrossanytypeofbusiness.ThiswillfreeupFInancialForceresourcestoworkontimeandtalentfeaturesspecifictoservices-centricbusinesses.FinancialForcewillstartwiththoserequiredbyprofessionalservicesorganizationsandwillthereforebepartofitsPSAapplication.

Thisroadmapisreflectiveofthemotivationbehindthisdecision:toprovidemoreservice-specificfocus.Fortheshortterm,muchofthedevelopmentfocusforFinancialForcewillbedirectedatmeetingcompliancerequirementstocomplywiththenewrevenuerecognitionrulesofASC606.Theseregulatorychangesresultfromthemergingofaccountingstandards(ASCandIFRS)andgointoeffectDecember15,2017forpubliccompaniesandayearlaterforprivatecompanies.ThechangesrequiredhavethepotentialofbeingdisruptiveandplaceadditionalfunctionalrequirementsonERPforaccountingthatarenotinsignificant.Dependingonyourbusiness,thesenewruleshavethepotentialofcreatingthemostsignificantchangesaccountantshavefaced

ASC 606 and IFRS 15 InMay2014,FASBissuedAccountingStandardsUpdate(ASU)2014-9,RevenuefromContractswithCustomers(Topic606).AtthesametimetheInternationalAccountingStandardsBoard(IASB)alsoissuedInternationalFinancialReportingStandards(IFRS)15,RevenuefromContractswithCustomers.Indoingso,thesetwogoverningbodieslargelyachievedconvergence.Theseconvergedstandardsforrevenuerecognitiongointoeffectthebeginningof2018forpublicentities,bringingverysignificantchangestofinancialstatementsandreportingforanycompanydoingbusinessundercustomercontracts.

OnJune20,2017FinancialForceannouncedapartnershipwithADP,aleadingglobalproviderofHCMsolutions,includingpayrollandHCMcapabilities.

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inmany,manyyears.With“servicesdevouringthegalaxy,”therearefewerandfewercompaniesthatareimmune.

ThestrategytopartnerwithADPratherthandevelopingHCM(includingvariouspayrollsystemsaroundtheworld)wouldappeartobeasounddecision,withjustoneminor“gotcha.”ADP’ssolutionsarenotdevelopedontheSalesforceplatformandsomeofFinancialForce’scustomersclearlyhaveastrongbiastowardsthisplatform.However,thefactthatitisanexclusivelycloud-basedsolutionmakesiteasierforFinancialForcecustomerstoembraceasolutionbuiltonadifferenttechnologybase.TheycanleavethecareandfeedingofADPtoADPandshouldnotberequiredtoinvestinskillstosupportanddevelop.

PREDICTIVEINSIGHTSWhilepubliclyFinancialForcewillbesteppingoutfromtheSalesforceshadow,theabilitytodeliverpredictiveinsightsisclearlyabenefitderivedfromtheclosepartnership.TodayWaveAnalyticsfromSalesforceisthevehiclebywhichthesewillbedelivered.FinancialForcehasalreadydevelopeddashboardsanddatasets;analysisiscompletedinWave,withmoreadvancedvisualizationstocome,alongwiththepotentialtoaccommodateexternaldatafeeds.

EinsteinisthenextevolutionofWaveAnalyticsandwillprovideguideddiscovery,helpingsmallerorganizationstomakebettersenseofthedatatheyhave.Of14differentdigital(andpotentiallydisruptive)technologiespresented,the2017MintJutrasEnterpriseSolutionStudyfoundthemostinterestinandfamiliaritywithpredictiveanalytics.Accordingtosourcesintheknow,Einsteinstillneedsalotofwork,butSalesforcewilldotheheavyliftingtobuildthatstack.Thereisnodoubtthatpressurewillcomefromitsownlargeenterprisecustomers.AndFinancialForcecustomerswillbenefit.

LookfornextstepsbeyondWaveAnalyticstoincludemachinelearningandartificialintelligence(AI)tohelpanswerrisk-relatedquestionssuchas:

ü Aremyprojectsatrisk?ü DoIhaveriskoftalentattrition?ü Whichcustomersareatriskintermsofretention?

“Customer”isahugefocusforFinancialForceandthegoalisforitsowncustomerstoinheritthisfocus.Theobjective:EveryonewhointeractswiththesystemshoulddoitthroughthelensofAIandanalytics

KEYTAKEAWAYSANDRECOMMENDATIONS

Areservicesreallydevouringthegalaxy?Whethertheyareornot,thetrendiscertainlymovingawayfromasset-basedtransactions,eitherreplacedbyorsupplementedbyservices.Whetheryouviewitasservices-based,

Digital Technologies The2017MintJutrasEnterpriseSolutionStudy,investigatedtheleveloffamiliaritywiththefollowingdigitaltechnologies:

ü PredictiveAnalyticsüMachineLearningüArtificalIntelligenceü Blockchainü SmartRobotsüVirtualcustomerassistants

üVirtualpersonalassistantsforemployees

ü InternetofThingsüAugmentedRealityü BeaconsüDronesüDigitalTwinsüNaturalLanguageUserInterface

ü 3DPrinting

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subscriptionsorsimplythedigitaleconomy,theworldischanging.Andthespeedofchangecontinuestoaccelerateevenbeyondourwildestimaginationsjustafewshortyearsago.

Thevastmajority(88%)ofcompaniestodayunderstandtheyfacesomeriskofbeingdisrupted.Andyetmanyofthesolutionsinstalledtodayremainrigidandunresponsivetochangingneedsingeneralandthespecificneedsintroducedbythenewserviceseconomy.FinancialForcecustomersareatadistinctadvantage.Notonlyaretheyrunningonadynamicandadaptiveplatform,butalsotheirsolutionproviderunderstandsthisserviceeconomyandtheneedforspeedandfocus.

Forthosethatarerunningothersolutions:Ifyouareinapurelyservices-basedbusinessnow,orheadinginthatdirection,areyoufullypreparedtotakeadvantageofthevastopportunitythiscreates?Foryou,wehavesomerecommendations.

RECOMMENDATION:Don’tletchangebeyourenemy.Makeyourabilitytomanagechangeacompetitivedifferentiator.Considerthefollowing:

• Ifyourfocusisnotonbusinessmodelagility…itneedstobe.• Ifyoucannotoptimizetimeandtalent…youneedto.• Ifyourcurrentsolutionsimplyreportsthefactsinhindsightand

doesn’tprovidepredictiveinsights,youneedtobetterprepareforthefuture.

• Ifyourcurrentsolutionisrigidandmonolithic,movingforwardatasnail’space…youneedanewone.

• Ifyourcurrentsolutionisnotsupportedbyaplatformorarchitecturethatallowsyoutoeasilyconnectnewservicesorcomponents…youneedanewone.

• Ifyourcurrentsolutiondoesnotallowyoutoadapttobusinesschange,includingmeetingchangingregulatoryrequirements(likenewrevenuerecognitionrules),orrespondtonewbusinessornewbusinessmodels…youneedanewone.

Ifyoufindyourselfinanyofthesecircumstances,FinancialForceiscertainlyworthalook.WeapplaudFinancialForceindefiningitsownidentityandfocustobettermeetthespecificneedsoftheserviceeconomy,wherespeedisindeedthenewcurrency.

Abouttheauthor:CindyJutrasisawidelyrecognizedexpertinanalyzingtheimpactofenterpriseapplicationsonbusinessperformance.Utilizingover40yearsofcorporateexperienceandspecificexpertiseinmanufacturing,supplychain,customerserviceandbusinessperformancemanagement,Cindyhasspentthepast11+yearsbenchmarkingtheperformanceofsoftwaresolutionsinthecontextofthebusinessbenefitsoftechnology.In2011CindyfoundedMintJutrasLLC(www.mintjutras.com),specializinginanalyzingandcommunicatingthebusinessvalueenterpriseapplicationsbringtotheenterprise.