Best-of-breed cloud apps add up for CFOs

Summary:For the CFOs of two start-ups, cloud applications have brought a host of benefits, and established businesses could learn from following their example.

The cloud is creating new "best-of-breed" application choices for users, enabling them to avoid the cost and lock-in often associated with deploying large ERP suites. In some cases, it is also changing the way companies evaluate software.

In the case of two such Australasian organisations, start-ups of very different scale, the CFO is leading new cloud strategies.

The South Australian Health & Medical Research Institute, for instance, is not your typical business start-up. Born out of a state government review that recommended the establishment of a flagship health research institute and funded in part by a A$200 million grant from Australia's federal government, SAHMRI has the kind of resourcing and political support many start-ups can only dream about.

SAHMRI moved into a brand new, 25,000 square metre, state-of-the-art facility adjacent to the new Royal Adelaide Hospital two months ago, three years after it was first established.

But despite the differences in scale and funding, like most start-ups SAHMRI had to think carefully about how to create IT infrastructure from scratch to support its fast-growing operations.

Much of that responsibility fell to CFO Barry Porter. Luckily SAHMRI was not his first start-up business.

Porter had worked for an IT startup before joining SAHMRI and had used cloud based ERP product Netsuite there and using it at SAHMRI as well "seemed logical", he said.

But where the previous startup peaked at around 50 employees, and only had 10 when it first deployed Netsuite, SAHMRI already employs 250 staff and is growing fast. By the end of the year it will employ over 600.

"The scale is much larger," Porter said. "But that’s one of the reasons we chose Netsuite. You can start cost effectively and grow with the organisation."

Netsuite also offers a large menu of add-ons that can be plugged into the core system to help customise it for different users.

SAHMRI is actively looking at those, and Porter admits it has only just scratched the surface, but is not wedded to deploying them. Already the institute has opted for a cloud payroll system from Australia-based Micropay rather than using those offered by Netsuite.

Porter said the Micropay solution was more specialised and offered greater functionality. Micropay skills were also more readily available, he said.

"Finding people with Netsuite skills is harder."

Navigating cloud hurdles

Where many organisations worry about issues of security and data sovereignty, SAHMRI jumped those hurdles pretty easily, Porter said. The board asked lots of questions in those areas, but Netsuite is a large vendor and able to deploy security around its systems far more effectively than SAHMRI could hope to achieve on its own.

Porter said risks around sovereignty were effectively outweighed by Netsuite’s strength in security.

Porter said as a research institute, there is data that cannot be housed offshore, but for most business applications that is not an issue.

The personal and private information is housed in Australia through Micropay, but Porter said that was a relatively minor consideration in its selection.

Netsuite was deployed pretty much as it came, he said. There was a bit of customisation around workflows, but quite minor. For example, the screens for Netsuite purchasing and generating purchase orders were simplified.

SAHMRI currently uses Netsuite for purchasing and financial management, including accounts payable and receivable and the general ledger. It also looked at Netsuite asset management, but decided to deploy a non-cloud, in-house application there.

One of the biggest challenges of any system change or deployment is usually getting staff to use the new system comprehensively and well. Porter said very little user training was required to achieve that at the institute.

"They adapted very quickly," he said. "They're really happy with Netsuite."

Indeed, when a move away from Netsuite was suggested, there was an uproar.

The organisation was also looking for one very important module that Netsuite could not offer — a research management system — and fundraising modules. 

"Netsuite doesn't have anything specific enough," Porter said of the research module, while its CRM system was not focused on philanthropy and fundraising.

Porter said the great benefit of cloud computing for an organisation in its early stages is the ability to deploy IT systems as a variable rather than a capital cost, conserving capital to support the institute's core mission.

"SAHMRI is virtually a university," he said. "If we had to put in systems it would be a huge cost, and that comes off our purpose – research."

The almost pure operational cost of cloud systems spreads the cost burden over a number of years.

All up, Porter has used Netsuite for three years at SAHMRI and five years at the IT start-up before that. Over that period, updates have just arrived automatically.

"I can't remember having any problems with downtime," he said.

The cloud has also helped unite multiple sites and deliver flexibility in commissioning new sites. SAHMRI has three sites now and that could increase to six or seven.

Access from new sites is simply about plugging in a computer and creating a new user account. There is no need to worry about virtual private networks or other facilities.

"I'm obviously a fan," Porter said.

For Angus Weir, CFO at Auckland-based Vend, a developer of cloud point of sale systems, using cloud applications is very much about "eating your own dog food", but it has also been a no-brainer for many practical reasons.

Like SAHMRI, Vend has opted to use different cloud products for different functions — cloud best-of-breed, if you like. But there is a big trio of cloud applications the company relies on: Salesforce.com for sales and customer management, Xero for accounting, and Zendesk online helpdesk software.

angus-weir-3
Angus Weir, CFO at Vend

Plug-in software is used to extend the functionality of these core systems, Weir said.

Saleforce.com, for instance, is integrated with Chargify, a module that manages billing for recurring subscriptions. New customers entered into Chargify are automatically shared with Saleforce.com, delivering one version of the truth and improving the ability to service customers and boost sales.

Weir said that integration delivers a view of the overall customer experience, including revenue, and helps generate analytics that can predict and reduce customer churn.

Weir had used Xero for accounting in other businesses, but always much smaller ones than Vend is becoming.

"For it to work in what's becoming a large business is pretty cool," he said.

As with Chargify, Xero has been turbo-charged with plug-ins as the business grew and its needs changed.

Expensify, whose stated goal is "expense reports that don’t suck", is used for managing employee expenses. Receipt Bank, an invoice processing and scanning service, is also used to turn receipts into usable data.

They make Xero much more useful, Weir said.

Will there be a day when Xero will no longer meet Vend’s needs?

"That depends on whether Xero continues to grow and move up the value chain" Weir said, hinting at a different systems procurement mindset that is taking hold in the cloud.

Buying off the plan

Many cloud customers are no longer looking for a perfect fit or a fully developed system from the get-go. A surprising number are "buying off the plan". If some functionality is missing they are looking at the development roadmap and often deciding they are prepared to wait.

Weir said because you are often dealing with software that is still in development, bugs can be a challenge. However, because of the pace of cloud development, and the ease of deployment of fixes, such issues are mostly short-lived.

And the big three cloud apps that Vend depends on are now relatively mature, he added.

"They've been around for a while, and we've had no problems so far."

In fact, Vend was thinking of dumping Xero because it didn,t have the ability to associate documents with data. New Zealand-based and listed Xero delivered that functionality and more last year.

Weir said one other piece of the puzzle is still missing: consolidation of accounts from different business units. This is still performed manually.

"But that's not that different from other businesses," Weir said. "We're experimenting with an app that may allow us to do that."

For Vend, as for SAHMRI, the cloud simplifies the whole IT infrastructure problem, making it easier to grow and to open and integrate new offices around the world.

Late last month Vend raised US$20 million in funding from Valar Ventures and Square Peg Capital. The funding will enable a big lift in the company's headcount, especially in the US and Europe.

The company already has offices in Melbourne, Toronto, and San Francisco as well as its base in Auckland, but aims to open another couple of offices by the end of the year.

 "All you need is a computer with a web browser and you can do anything from anywhere," Weir said of the cloud.

"The cloud is the future, man," Weir said, and not just for start-ups.

"There are huge benefits for any sort of business, but to start-ups, where cash is a big constraint, you can get up and running without a huge capital outlay.

"For any CFO looking at a company's IT and infrastructure cost it would be a silly move not to investigate the cloud solutions out there."

Topics: Cloud

About

Rob O'Neill is a writer for CBS Interactive based in Auckland, New Zealand covering business and enterprise technology for ZDNet. He has previously worked for IDG, The Sydney Morning Herald and Melbourne's The Age as well as various business titles, most recently editing the Business Sunday section of New Zealand's weekly national news... Full Bio

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