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

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June 2017 FinancialForce STEPS OUT OF THE SALESFORCE SHADOW WITH RENEWED FOCUS AND ENERGY ON ERP FOR SERVICES FinancialForce was founded in 2009 when it broke away from Unit4 and partnered with Salesforce to become one of a very few companies (at the time) born in the cloud. Since then it has leveraged its relationship with the software as a service (SaaS) pioneer, along with the strength of the Salesforce development platform. It has recently surpassed $100 million in revenue run rate, supporting over 1350 customers in 34 countries. But it has also grown in the shadow of Salesforce, a somewhat limiting factor in terms of market awareness. Its name may also have been a limiting factor. FinancialForce implies software for the finance team. But its product extends beyond accounting. It offers a full-fledged enterprise resource planning (ERP) solution for the service industry. It leaves the domain of manufacturing and distribution to others, but that doesn’t mean it has limited growth potential. Indeed, new management at FinancialForce is betting big on what is rapidly becoming a services-based economy. At the second annual FinancialForce Community Live event (previously held as part of DreamForce), new CEO Tod Nielsen harkened back to Marc Andreessen’s famous explanation in the Wall Street Journal in 2011 of “Why Software is Eating the World.” Today Mr. Nielsen goes one step further, declaring, “Services are devouring the galaxy.” In order to take full advantage of the vast opportunity this creates for FinancialForce, it must now step out of the shadow of Salesforce, establish its own identity and focus intently on satisfying the specific needs of the service economy, where “speed is the new currency.” NEW REQUIREMENTS FOR ERP FOR SERVICES Mr. Andreessen’s 2011 article was actually a harbinger of what many today view as the digital economy, which is fostering a subscription enonomy. One quote pretty much sums up what this has come to mean: potential disruption. “More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I Who is FinancialForce? FinancialForce is a leading cloud ERP vendor with applications for the new services economy, built natively on the Salesforce Platform. Founded in 2009 and headquartered in San Francisco, FinancialForce is backed by Salesforce Ventures, Technology Crossover Ventures, Advent International and Unit4. The company recently surpassed $100 million in revenue run rate, experiencing 40% growth year over year. It supports 1350+ customers in 34 countries. Types of services businesses targeted include: ü Consulting ü IT Services ü Engineering services ü Information Services/ FinTech ü Software and SaaS ü Education Services

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Page 1: FinancialForce Steps Out of Shadow 02 · FinancialForce STEPS OUT OF THE SALESFORCE SHADOW ... Ventures, Advent International and Unit4. The company recently surpassed $100 million

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.