When it comes to buying financial applications, the recession is having the opposite effect of what one might expect – encouraging companies to invest more in essential systems like accounting, financial reporting, treasury, collections, and budgeting and forecasting.
These replacements or add-ons are driven by compliance initiatives and a desire to optimize cash flows and profit, as well as to gain greater efficiency, according to a recent Forrester Research TechRadar report on financial management applications. Financial management software that continues to see widespread adoption includes budgeting and forecasting, cost and profitability management, account reconciliation, receivables and collections management, and expense reporting. Most of these tools are sold separately from the typical SAP ERP FI package.
One of SAP's most popular products now is a financial supply chain management package, according to Philip Say, SAP's vice president of ERP solution marketing. It comes with a tool that analyzes customer creditworthiness, a collections management facility, a dispute management engine, and electronic invoicing. It all sits on top of an existing SAP ERP FI implementation.
"This seems to be an area [customers have a] keen interest in improving," Say said. "They need to have good operational systems in place, generating data in a consistent and reliable way, and strong BI tools and an intuitive reporting environment."
Companies are focused on building up their core accounting systems because of integration concerns – they have a number of different systems in different areas of the business that can't talk to one another, according to Paul Hamerman, vice president and principal analyst at Cambridge, Mass.-based Forrester Research. This makes for a rather complex closing and reporting process.
"I think that's an area of significant investment in a lot of companies," Hamerman said.
Budgeting and forecasting software, which sits on top of an ERP system, is used for annual budget developments, rolling forecasts, and revenue and expense forecasts. Large companies spend more than $1 million per installment on these products, but smaller companies can implement them for under $100,000, he said. ROI is realized by automating a process typically completed through spreadsheets, which reduces errors and results in more agile and transparent forecasting processes.
Based on the OutlookSoft product acquired by SAP in 2007, the SAP BusinessObjects Planning and Consolidation product is among the leaders in this area. Its primary competitor is Oracle's Hyperion Planning software, Hamerman said. Other competitive vendors include Adaptive Planning, Clarity Systems, Host Analytics, IBM Cognos, Infor, Lawson, Longview, Microsoft, SAS, and Tagetik.
Cost and profitability management software is less widespread, simply because many companies aren't aware of the software and are still using homegrown methods, Hamerman said. It's used to determine which customers are the most profitable and should be maintained through loyalty programs, as well as to assess product profitability to determine which lines should be discontinued.
"Just about everybody uses some kind of budgeting and planning solution," Hamerman said. "As far as cost and profitability management, adoption levels are lower. Only certain types of companies need it -- ones with lots of products and customers."
Competitive vendors include Acorn Systems, Board International, macs Controlling, Oracle, SAP, SAS and Tagetik. SAP sells SAP BusinessObjects Profitability and Cost Management. These systems typically cost less than $1 million and take between four and eight months to implement, according to the report.
As for expense reporting, SAP now includes this functionality under the "travel management" module in its ERP 6.0 package. It includes expense reporting and a travel booking component. Other competitive systems include Concur, CyberShift, DATABASICS, ExpenseWire, IBM, Infor, KDS, and Oracle. The software can typically be implemented for less than $1 million.
Popular financial management applications that SAP is weaker on include receivables and collections management, and account reconciliation.
SAP ERP FI has a solid core receivables component, but its credit and collections capabilities have lagged a little bit behind, Hamerman said. It's a more specialized area and has tended to be an area for which companies choose best-of-breed. This software is used to manage and automate the receivables process, such as managing risk in granting credit to customers.
"I think SunGuard has some of the leading capabilities around treasury management and credit collections," Hamerman said.
Other vendors include CGI, Comtronic Systems, Cortera, DAKCS Software Systems, Dun & Bradstreet, Emagia, Fair Isaac, and Oracle.
In turn, SAP doesn't sell account reconciliation software. This software is used to reconcile sub-ledgers (such as accounts receivable) to the general ledger, to reconcile bank statements against cash accounts, or to match high-volume transactions to account detail, such as credit card transactions.
While a lot of companies do this with spreadsheets, the handful of vendors that provide software in this area are seeing a lot of adoption, because it is a labor-intensive task. They include Trintech, Blackline Systems, Chesapeake System Solutions, and Fiserv. But, according to the report, clear ROI for companies has been demonstrated only in high-volume situations and for companies with complex accounting processes.