During 2015, I have advised nine different companies on their application/back-office strategy. These companies included small not-for-profits to large multibillion-dollar organizations. The most common reasons they are looking for new solutions include:
Reason No. 1: A desire to simplify IT operations. Many of these companies are spending a large amount of time and money on supporting their back office applications. They have a strong desire to simplify their infrastructure to focus on more strategic initiatives.
Reason No. 2: Their current on-premise solution is at end of life/ support unless they upgrade. On-premise ERP solutions are only supported for so long. Companies that are being forced to do an expensive upgrade are asking “is there a better way?”
Reason No. 3: Their current solutions no longer meet their needs. The irony is that most of my customers engage my team because of reason #1 or reason #2, but when we talk to them, we often find that they don’t even like what they have. They tolerate it and work around it to meet broader organizational goals. We work with them to show them the art of the “possible” with more modern solutions.
Once they have identified that they need to make a change, we often talk about three different classes of cloud solutions. Different vendors have different strategies on how they go to market with their products. This provides the market with a massive amount of choice to find a solution that meets their needs. The three broad categories include:
Solution set No. 1: The cobble. The vendors in this solution set tend to focus on one domain. They build out their solutions to meet a specific need – such as finance and accounting, spend management, or budgeting and planning. They tend to partner with other “cobble” vendors to build connectors between the applications to provide an integrated solution.
Some of the benefits of the cobble solution include picking the “best” solution to meet your need in each area, the ability to “phase” in solutions over time, and vendor focus on their domain area. Some of the downsides of this approach include having to rely on or build extensive integrations, having to learn and support multiple systems, and having different upgrade timelines and paths.
Solution set No. 2: One vendor, different products. The vendors in this solution set offer many different products for the back office including HR, Finance, Spend Management and FP&A. They offer prebuilt integrations between their products and sell each “separately.”
Some of the benefits of this solution set include getting support from one vendor and a common user experience between applications. The downside of these applications is the data is integrated and not unified. Even though the vendor is building the integration points, it is still different data maintained, updated and managed in different applications. This can lead to multiple versions of the truth and/ or timing issues for reporting.
Solution set No. 3: One vendor, one solution. These vendors build one unified application for many of your back office needs including finance, accounting, FP&A and HR. The benefits of this unified solution is that there is only one version of the truth. All of the data is “real time” and available. Your FP&A solution is no longer reliant on a feed for actual financial information or had count from finance and HR. Your company hierarchy (and approval structure) is shared between HR and Finance. There are no interfaces for these functions.
The other benefit is that all of your applications have the same user experience, support is with one vendor and the applications all upgrade at the same time. The downside of the unified solution is that there may be other point solutions that might meet your needs better, however companies will need to weigh the delta uplift of slightly better functionality vs. the many benefits of a unified solution.
So what option is best for your company? It depends. All three options can work, but each company will need to evaluate the solutions through their prism of their organizational goals, pain points, potential benefits, and future growth plans.