Resistance is futile: how CFOs learned to love cloud

There's been plenty of resistance to cloud but, one by one, the bastions are crumbling

The last few weeks there have been a steady stream of apparently unrelated announcements that suggest to me one of the last bastions of cloud resistance is crumbling. That would be the finance office. Here are some data points. The last few weeks there have been a steady stream of apparently unrelated announcements that suggest to me that CFOs are fully ready to embrace the cloud.

The other week, Workday filed its S-1 IPO document with the SEC, noting that of its approximately $300 million billing run rate, around ten percent is going to its financials product.

That is surprisingly good going given that Workday 17, which saw a significant number of finance related enhancements including comprehensive reporting was only released a week or so ago. Up until that time, there were plenty of occasions where the lack of solid reporting would have been a deal killer or where the customer would be forced into taking a third party solution. That's not optimal for either party. I confidently predict that Workday will see a rise in demand for its finance offering, especially as it closely tied to its successful HR admin solution that already operates at massive scale, handling more than two million employees worldwide.

Earlier in the week I took a briefing from Adaptive Planning which has just acquired myDIALS. Adaptive is in the planning, forecasting and budgeting pace.

This has been something of a Cinderella segment of the market, despite the fact business faces increasing uncertainty and unpredictability. The best companies are well into rolling or continuous forecasting but it is perhaps saying something that even though Adaptive is the leader and has a multi-tenant architecture, it only has some 1,400 customers with 35,000 users. Acquiring myDIALS gives it a much needed visualisation fillip and should help it flesh out the cloud story. As a side note, Adaptive is planning on 100 percent year over year growth and last year attracted an additional $22 million in funding. That space is hot.

Again and this week, I took a briefing from NetSuite about its recurring billing module. While currently in beta, NetSuite says it hasn't needed to market the product because demand is so high.

I am not surprised. Revenue recognition in the US in particular but increasingly internationally, is a nightmare. The other year, the SEC introduced a new rule for revenue recognition. This had the effect of attempting to introduce a principles-based 'rule' into a rules based system of reporting. It's not proven easy to implement and over the last few months I have become increasingly critical of filers who interpret the rules according to their own tastes.

Nevertheless, the problem remains and there really aren't that many good answers other than third party solutions. These are of highly variable quality and introduce fresh complexity into the cloud landscape. I have been wondering which vendor would step up to the plate and provide a solution that integrates into many processes so was pleased to have that conversation with Jim McGeever, COO who has also sat in the CFO's chair. If the demo I saw delivers on what customers need, (and it certainly looks promising), then this should have automatic pull through to NetSuite's cloud finance systems.

The other week I was on a consulting engagement with a large vendor talking about the future of financials. That would not be happening if the client was not thinking hard about go to market.

Right now there is considerable debate about whether solutions should be loosely coupled as in say Salesforce and Workday or whether the suite is the way to go as in NetSuite. I see both scenarios playing out although I tend to think that for those vendors who are able to satisfy many needs, then the suite is a better play when it can be shown that it can scale. And for that suite play you absolutely must have financials at the heart of what you do.

Only yesterday, I fielded an investment analysis query from one of the big brokers talking about two of the major players. Finance functionality in the cloud was a key part of that conversation.

Join all these dots and what do you get?

All the cloud players I know, whether big or small are growing at rates we've not seen since the mid-1990s. Triple digit growth is not so unusual and solid double digit growth is expected. The promise of lowered TCO alone is enough to drive customers into the cloud players' arms.

Look at the background to this: there hasn't been a major solutions refresh among customers since the Y2K era. That means the incumbent on-premise solutions are getting long in the tooth and often showing more than enough of their pedigree to make senior executives rethink their solutions strategy. IT budgets are under pressure and CIOs have much less say in solution selection than in the past.

Departments - including HR and finance - are going to the market and finding the better bang for the buck. 

At the SMB level, all incumbent player growth has evaporated in cloud's wake. Unusually, it has been the SMB market that has led the way rather than the large enterprise market. However, in talking with colleagues, most of us are of the belief that there is pent-up demand for cloud based financial products across all industry segments and especially in the large services and public sectors.

We are already seeing that demand filtering through into the inquiries we field. The question now must be, when will the big boys truly come to the party? Or, will they be rendered irrelevant as is sometimes claimed by cloud advocates? Only time will tell. 

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