Financial accounting software: Cloud and other winners

Summary:A summer full of interviews with CFOs and controllers reveals that cloud financial accounting software has 'crossed the chasm'. But, this may just be part of a larger adoption story as many financial executives reported using five or more cloud solutions in their firm.

Cloud technologies are not all alike nor are they all adopted at the same time and pace. For many years, I’ve been tracking the adoption of cloud software by businesses. CRM applications were often the first cloud applications to be embraced, en masse, by businesses. HR/Talent Management and Office Automation solutions have followed in subsequent years. Are financial accounting solutions following suit? Will vertical solutions be next?

I develop ‘long form’ pieces for ZDNet and, let’s be clear, this is a long piece. So, pull up a chair, get comfortable and enjoy this lengthy but, hopefully, valuable piece on cloud financial accounting software.

For those of you with attention problems, let me give you this helpful outline:

  • Part One – Will cloud financial software follow a market acceptance path like CRM, HR and office automation? Where is financial accounting software in crossing the cloud chasm?
  • Part Two – What did CFOs and Controllers tell us? How familiar are they with their organization’s use of cloud software in general? Will they go back to on-premises?
  • Part Three – What are the broader market implications? What are the implications for the software and consulting/integrator industries?

And, let me quickly say thanks to the three dozen or so CFOs, Controllers and CEOs that shared their time and feedback with me.

 

 

Part One

The Adoption of Cloud Financial (and Other Software)

Cloud-based software applications have experienced varied adoption rates in corporate businesses. Marketplace acceptance of new technologies is often measured against the technology adoption lifecycle (TALC)[1]. The TALC concept has been around since the late 1950s[2] but was brought to significant awareness a decade or so ago by Geoffrey Moore in his book “Crossing the Chasm”[3].

In TALC terms, there are five kinds of buyers, each of which becomes more prevalent as a new product moves through the lifecycle. For example, those people or businesses that are likely to first adopt a new innovation are called innovators or early adopters while the last to adopt are called laggards. The two largest market segments, the early majority and late majority, often make up the preponderance of buyers.

TALC Buyer Classifications
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A different psychographic profile exists for each of the five segments depicted on the typical TALC bell curve. For example, innovators and early adopters are fairly risk tolerant and see new technologies as a means of achieving some sort of competitive advantage. The early and late majority buyers wait until the market leaders in a space get sorted out and buy from the biggest, most established and ‘safest’ firms. These buyers are looking to maintain competitive parity with their technology purchases. Laggards love a bargain and will wait and wait until the price point gets to some ridiculous low level. 

Geoffrey Moore[4] believes there is a ‘chasm’ between the early adopters and early majority buyers. We agree. We all know someone who had to be the first to have a new technology (e.g., laserdisc and Betamax) only to realize later that the product didn’t catch on with the larger buying public. This happens with business technology, too.  As a result, we wondered whether new cloud financial software was ready to cross the chasm. 

In 2010, I interviewed executives from a number of large firms to understand whether cloud application software solutions would be relegated simply to the SMB (small to mid-sized business) market or would they also find favor with large enterprises.[5] Those interviews produced a number of observations about the market for cloud application software in 2010.

Now Serving Large Complex Enterprises
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One of the observations I made in 2010 was that many large and small firms had already made the move to cloud application software via the CRM (customer relationship management) application space, often with salesforce.com. I also noted that a number of cloud-based human resource applications, such as talent management and performance management, were becoming mainstream applications with large and small organizations, too.

In the summer of 2013, I canvassed a number of firms and spoke to a significant number of chief financial officers, controllers, chief executive officers and other executives within a range of companies. My working hypothesis for this research was that cloud CRM applications were now well established in most segments of the TALC and that only some late majority and laggards remained to experiment with this new type of software and deployment method. Further, I hypothesized that cloud human resource applications had also crossed, in Geoffrey Moore’s vernacular, ‘the chasm’ and were now being selected by more early majority, late majority and laggard firms.

How I learned to stop worrying
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My final hypothesis was that cloud financial software may be ready to cross the chasm, too. I knew that a significant number of companies have already adopted cloud financial software. The market uptake that companies such as FinancialForce.com, Intacct, Workday and Xero have received clearly indicates that cloud financial applications were gaining popularity with businesses today. But was this a short-term fluke, market niche characteristic, or, the harbinger for a material shift in software buying?

Our Hypotheses
Copyright 2013 - TechVentive, Inc. - All Rights Reserved

 

Please continue to Part 2



[3] “Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers”, Geoffrey A.Moore and Regis McKenna, HarperBusiness

[4] “Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers”, Geoffrey A.Moore and Regis McKenna, HarperBusiness

[5]  “SaaS: Now Serving Large, Complex Enterprises”, Vital Analysis, June 11, 2010

Topics: Enterprise Software

About

Brian is in a unique position to diagnosis the winners and the losers in technology and services. He was the longest running (10 years) and most senior director of Andersen Consulting's (now Accenture's) global Software Intelligence unit - a position that required him to pick the best possible software solutions for hundreds of clients gl... Full Bio

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