Ok, so my Innovation and Finance series was supposed to have two parts. But I thought of a third, and potentially a fourth!
In the previous parts, I’ve spoken about how Finance should be supportive of business innovation that benefits the customer and brings competitive advantage. And I’ve spoken about how Finance should be cautious in applying innovation within its internal processes, making sure there’s a good business case.
But when I thought about the latter, I reflected on the number of beneficial technologies that are available for the Finance function. And yet, my experience has been that vendor pricing and marketing can be a barrier to implementation in many businesses. That’s led me to be a little cynical at times. Sometimes it seems like these technologies are like luxury items, only affordable by the largest companies.
My view is that the software companies that are innovating need to be clearer on the benefits, and more transparent and helpful with the costs. They need to be more visionary if we are to be less cynical and more positive about technology innovation.
When I say that Finance software companies need to be more visionary, I mean that they should structure their pricing so that it doesn’t restrict their clients in maximizing the benefits. I’ll give you two examples I’ve seen in real life…
First, bank reconciliation software. A company I worked with had implemented a piece of software to automate their bank recs and some other transaction recs. It was pretty good, and we were happy with it. It saved a load of time. In fact, I don’t think we could have done those recs without it, as they had thousands of transactions going through them each week.
In doing some remedial work on one of the reconciliations, I identified a need to allow access to more people, to allow collaboration and cross training. However, we found out that we needed to buy more licences. When we contacted the software vendor, we were told that not only would we need to purchase new licences, but we’d also need to upgrade (because our version was out of support). The total incremental cost (over and above our original implementation years before) was well into six figures (£) up front, plus 20% maintenance cost per year.
Even with the transaction volume we had, there was no way that we could justify that cost. And we certainly weren’t then going to automate more reconciliations!
We eventually ditched that package in favour of a similar package developed by a small software company. The complete implementation and migration cost us a fraction of what the upgrade of the existing software would have cost, and additional licences for growth were very cost effective. And we were equally happy with usability and functionality.
Second, I worked with a group that implemented one of the big CPM (Corporate Performance Management) products. The Finance team loved the software. However, one of the things that would have been good to implement was the distributed self-service budgeting/forecasting functionality. That would have allowed us to create templates that cost centre managers could submit automatically, with version control, without the need for creating and emailing and consolidating spreadsheets. The problem was that when it came to looking at implementation, the licence costs were too much….
Mature software vendors are often greedy and lacking in vision
And similar things could be said about Business Intelligence tools, dashboards, and the like. It sounds great to have self-service dashboards at the fingertips of managers, to cut out the process of producing something in Excel and then emailing it round or printing it out. But often the reality is that when the business sees the licence and maintenance cost of implementing that, we quickly retreat to the cheaper spreadsheet method!
(Oh, and I could also mention the technologically advanced Accounts Payable Automation system I was involved with implementing once… which failed to pay for itself because of unexpected software costs.)
Software companies can stifle innovation in the process of trying to sell it.
That’s where I get my perception that innovation is not a panacea, and my perception that big software vendors are being greedy and lack vision. Have you seen the annual profits of Oracle, IBM and SAP?! Billions! And that’s after their spending on R&D, which in theory should benefit their customers… except that they then charge so much for the benefit that the only way customers move is when they’re forced by the software vendor when they put their existing product out of support!
And what of the smaller innovators (like the one we found with the reconciliation software I mentioned above)? They’re great, but they get gobbled up by the giants. That’s the answer to competition for the big 4 software companies – buy them, and then bury them… or make sure the infrastructure and operating system software doesn’t work well for them…
By now my cynicism must be transparent!
Less cloud, more clarity please
I come back to the example I mentioned in Part 2. After a major ERP upgrade implementation, I was talking with someone at the software company. I was saying that, having now got an up-to-date ERP version, we were aware that all we’d done is pretty much a like for like upgrade. We were keen to make sure we made use of the new functionality that the new version gave us, and keep progressing. He said that, to be honest, they were really interested in us “moving into the cloud”.
My advice, in our brief conversation, was to keep talking to us about the benefits of doing that, otherwise they’d never get our attention.
Why does the big software vendor want us to move to the cloud? Without describing how it benefits us, it makes me question what’s in it for them. Well, of course there are benefits for them. It makes their lives a lot easier, and a lot less risky. But how does it benefit us?
A plea to Finance software vendors
So, my plea, in summary, is for Finance/ERP/CPM/BI vendors to get back to being customer focused… and all customers, not just the big global ones. When you tell us about new innovative solutions, don’t just describe what it can do. Tell us what the benefit will be. What benefits is it designed to give us? And structure your pricing in such a way that your customers keep most of the benefit, and don’t end up paying most of it back to you in licence and maintenance or SaaS fees!