ERP, RIP? Cloud financials and revenue management in 2013

ERP, RIP? Cloud financials and revenue management in 2013

Summary: ERP is being displaced by a new category of financials-plus cloud applications that make a better match for the needs of cloud-savvy enterprises

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What's the future for ERP in the cloud, if it has one at all? I heard a disarming admission last summer from the CEO of a company that aggressively markets itself as "the #1 cloud ERP software suite." NetSuite CEO Zach Nelson told a gathering of industry analysts at the company's SuiteWorld 2012 conference that ERP isn't what it offers: "The problem we solve for our customer looks nothing like ERP. But we have to speak in their language," he said.

The background to this statement is that enterprise software is changing, and the old, established categories no longer match today's enterprise needs. I first wrote about this trend more than a year ago, but this is the first time I've attempted a systematic review of what's actually happening in the market.

The biggest selling point for all of them, though, seems to be the flexibility of cloud platforms and the speed with which vendors can continue to introduce new features and functions.

This blog post is the first in a planned series covering various enterprise application categories. What follows below is an overview of the leading SaaS vendors in the category historically known as ERP. Prospective buyers may well use the term to describe what they're looking for. But in today's highly automated, ubiquitously connected business environment, they need much more than conventional ERP has ever delivered.

The simplest term for this category is financials-plus. No one seems to offer enterprise customers a product that does just financials alone. But neither does anyone offer the full gamut of traditional ERP functionality. Instead there are several combinations that crop up frequently: financials-plus-ecommerce; financials-plus-manufacturing; and financials-plus-PSA (professional services automation).

No one seems to be pursuing financials-plus-CRM, but most offer close integration with Salesforce.com. Many offer global financial consolidation, building on the global reach of cloud, and built-in or bolt-on analytics are frequently seen, with drill-down into the real-time data available from the cloud system.

The biggest selling point for all of them, though, seems to be the flexibility of cloud platforms and the speed with which vendors can continue to introduce new features and functions.

A new acronym, 'FRM'

My preferred term for this category is financials and revenue management, which can be shortened to a new acronym, 'FRM'. It's intended to cover the core requirement of managing a company's financials along with the related task of measuring and collecting its revenue, which allows me to consider conventional financials-centric vendors such as NetSuite, Workday and SAP alongside others that center their offerings on ecommerce or subscription billing, such as Zuora.

Here, then, is my commentary on what to expect in 2013 from the cloud's leading financials and revenue management (FRM) vendors. If you feel I've missed out any important players or points, please use Talkback below to add your feedback.

For reasons I'll discuss in a later post (and which you can guess from prior posts), this review is strictly cloud-only and does not include hosted versions of on-premise software. It also focuses on the enterprise market so don't expect to see SMB solutions mentioned here except in passing.

Finally, as a matter of disclosure, I must add that some of these vendors, including NetSuite, SAP and Workday, are past or present consulting clients and often fund my travel to attend their events. Others brief me over lunch or dinner from time to time, and several work with me in the EuroCloud trade association. While they all know not to expect any favors from me in my independent writing, it's inevitable that a closer relationship means I'm more aware of their business than those of other vendors I speak to less frequently.

NetSuite. Both by revenue and by size of customer base, NetSuite has every reason to claim to be the leading cloud ERP platform. It has built its business on becoming a robust platform on which an enterprise can run its financials, to the extent that it's a favored choice of recently listed, venture-funded public companies in the US. So if it's not ERP, what is it?

"This is a business enablement system," according to CEO Zach Nelson. The advantage of running on its own cloud infrastructure is that NetSuite can offer globally dispersed users a real-time view into a shared transactional core. This means it can act as a live operational platform for the entire enterprise and not merely as a system of record for the finance department. While that's true of any cloud platform, NetSuite has always offered both CRM and ecommerce functionality alongside financials, which allows it to connect the core transactional data all the way through to an enterprise's online and offline interactions with customers, suppliers and partners (it also has a significant offering in professional services automation and also recently introduced a subscription billing capability, so it is financials-plus in several directions).

During 2012, NetSuite has been rolling out a big bet on that end-to-end interaction between financials and ecommerce. For a long while, ecommerce had been the neglected component of the suite, to the extent that its database-driven pages still carried a '.nl' suffix, echoing the vendor's original name, NetLedger, which it had changed in 2003.

May 2012 saw the launch of SuiteCommerce, a complete overhaul and updating of the platform to give it the flexibility to support modern ecommerce needs, including mobile clients and social media. It's been a careful roll-out, on early release to just 100 customers, but as each of those customers bring their new ecommerce presence online, they are becoming case studies that help NetSuite promote key features of its offering. This will build a crescendo of marketing for SuiteCommerce as it enters general availability halfway through 2013.

With ecommerce an increasingly painful problem area for many companies struggling with the pace of change in both B2B and B2C markets, Nelson believes SuiteCommerce will have wide appeal. It will certainly open up new segments of retail for NetSuite and further extend its footprint in distribution. It will also give it a further beachhead into larger enterprises, where NetSuite is promoting use of its platform in a 'two-tier' configuration alongside existing on-premise ERP systems that are less well equipped for rapid introduction of new business functionality.

Workday. There will be more to say about Workday in a later post about SaaS HRM vendors. But although Workday has led with HRM, it has been just as committed to bringing its financials offering up to speed, to a point where it can supplant rival products from established ERP market leaders SAP and Oracle. From announcements made at its Workday Rising event in November, it looks like 2013 will be the year in which Workday Financials will hit its stride, with some banner customer wins to announce.

Workday's average customer size is much bigger than NetSuite's, so although its customer base will remain smaller in number, its revenues could catch up quickly over the next few years, now that it has completed its IPO. Expect its relentless progress to continue in 2013.

In common with other cloud FRM vendors, Workday looks beyond conventional ERP to enable operational decision-making and flexibility, with a philosophy of providing transactions, governance and analysis all in the same system.

"We focus it much more on business information, not just the debits and credits of traditional systems," says Mark Nittler, VP financial product strategy. It too is extending its footprint in 2013 into related application areas, in its case adding a significant 'big data' capability to bring external data into the purlieu of its built-in analytics.

Plex Systems. Detroit is a long way, in many senses, from Silicon Valley. That may explain why Plex Systems gets a lot less attention than vendors like Workday and NetSuite. But with several hundred customers, it's still a significant cloud ERP player, and gleaned some rare Techcrunch coverage last month when it scored a $30 million VC investment from Accel Partners, who join main backer Francisco Partners, the private equity firm that bought the company last June.

In its 12-year history as a SaaS pureplay, Plex has plowed a determined furrow as a cloud ERP provider to manufacturing industry. It is strong in automotive, aerospace, electronics, general manufacturing and food & beverage, primarily thanks to a highly flexible platform that allows it to rapidly add new features requested by customers. With this latest funding under its belt, expect Plex to make further strides in 2013.

SAPBusiness By Design and Financials on Demand. Another cloud ERP player that's often overlooked is SAP. The company has made big investments in developing cloud offerings, especially in the Business By Design platform, which was conceived to go beyond conventional ERP and deliver end-to-end cloud business automation to midmarket enterprises.

Although very small as a proportion of SAP's total customer base, the global installed base of Business By Design is a similar size to that of several other vendors on this list. But the product has had a troubled history, forcefully demonstrating the truths set out in Clayton Christensen's The Innovator's Dilemma. Buffeted by corporate strategy shifts, it has suffered major technology upheavals and has struggled to win the support of the sales and partner channels alongside conventional products in the company's line-up.

In 2012, a new shift took place with the spin-out of its financials component as a separate Financials OnDemand product. At least this creates a bit more clarity in SAP's cloud line-up, so perhaps 2013 will finally prove to be the breakout year; but don't hold your breath.

Intacct. A long-standing midmarket SaaS financials provider, Intacct raised a further $13.5 million funding round in October. It has been successful in partnering with accountants to market its products, and like other cloud vendors has extended functionality into areas such as revenue management, project accounting and global consolidation.

FinancialForce.com. Having chosen to build its software on the Salesforce platform, FinancialForce.com is tied to the fortunes of Salesforce.com. That isn't necessarily a bad thing, since that gives it a big, ready-made market to target, and its customers can easily integrate its financials and professional services automation with other native apps running on the platform, including Salesforce itself.

In September, VP of product marketing Tom Brennan summed this up in his own FRM acronym: 'Financial Relationship Management' — the close integration makes it possible for users such as customer service agents to be given direct access to financial transactions from within the CRM environment and rapidly resolve issues on the spot.

Zuora. At the same time as evangelising the growth of the 'subscription economy', executives at Zuora freely canvass the death of ERP. They argue that ERP has never served the revenue management needs of subscription businesses, and as more and more enterprises move away from product sales to the subscription model, they'll need to run their businesses on a platform like Zuora's Z-Business suite.

The latest version, launched in September, added a finance component alongside its existing subscription management and billing modules, providing accounting and revenue recognition data that's ready to feed into third-party financials apps. For enterprises that run their business on Zuora, financials becomes an add-on app used by the finance department rather than the core of the business operations platform.

Other financials. Other cloud ERP vendors to watch include two that have targeted the manufacturing sector, both building their products on the Salesforce platform: Kenandy, founded and led by MRP software veteran Sandy Kurtzig and Rootstock, which (intriguingly) built its app first on NetSuite's SuiteCloud platform and then switched. Brightpearl targets retail.

I have a nagging feeling there are others I've missed, so please prompt me with a Talkback post if you know of any deserving a mention. However as I said above, I don't include hosted applications such as Microsoft Dynamics, and Epicor, although Infor may get a pass for a well thought-out hybrid strategy. This is a survey of enterprise vendors so I haven't included SMB solutions such as Intuit and impressively fast-growing Xero, which landed a $49 million venture round in September to fuel its US expansion. I'm a user of Xero and like it a lot but it seems to me that smaller SMBs, as ever, get a raw deal: unable to afford the integrated financials-plus solutions offered to larger enterprises, they are left to sort out for themselves how to integrate their core bookkeeping with the rest of their business.

Other revenue management. There's a 'long tail' of billing and ecommerce vendors. Cloud billing vendors include the likes of Monexa, Metanga, Aria Systems and Chargify, down to Saasy and CheddarGetter for SMB. A big SMB player in invoicing is Freshbooks. Others will get a mention in a later post on spend management. On the cloud ecommerce front, Demandware and Venda are significant enterprise players, while Shopify is strong as an SMB player. Here again, I'm sure I've missed some notable players. Please add your nominations in Talkback below. 

Topics: Cloud, Enterprise Software

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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Talkback

19 comments
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  • Cloud Accounting Players

    Great summary Phil.

    I would add VerticaLive to this list. A new player out of the USA that is delivering an interesting PaaS plus Cloud Accounting app on MS Windows Azure.
    Being Guided
  • good article

    The term "ERP" was coined by Gartner in 1990. ERP covers a full gamut of enterprise software capabilities that transcend across the entire business value chain from Sell-Design-Make-Buy-Service-Manage. Personally I don't see any reason for ERP to be called anything else whether it is delivered via cloud or not. Customers buy software solution to solve a real business problem and creating yet another term or category will only confuse them. Even if we move in the direction of FRM (Financials and Revenue Management), the terms financials is redundant with revenues as financials encompass both top-line (revenues) and bottom line (cost). Also whole and sole focus on financials imply, you only provide ERP for administrative pruspose not inclusive of operational needs.
    sanjivkarani
  • Another Clound Accounting Player

    Interesting article Phil.

    Another cloud accounting player is Acumatica. Works in all the current browsers.

    B. Schwantz
    Bruce_Schwantz@...
    • Our flagship product- 'iWeb Enterprise Suite' - is a 100% Cloud based SaaS

      Our flagship product- 'iWeb Enterprise Suite' - is a 100% Cloud based SaaS ERP product available with a Business Process Management Suite - 'AGILEWIZ BPaaS' (Patent pending) along with a Mobility Option embedded. In addition to this comprehensive solution, iWeb also offers individual modular solutions like HR/Payroll, CRM, SFA, Finance & Accounts among others. iWeb is a certified Gold partner for Microsoft and a business partner to both Intel and IBM.

      iWeb Technology Solutions Pvt. Ltd.
      http://www.iwebtechno.com
      Channel Partners South India

      R Seshadri Iyengar
      Hand Phone : +91 9940151800

      iWeb solutions come with a built-in workflow for all individual modules that encompass all major functionalities related to a business. Our scalable solutions have enhanced compatibility with client devices such as PDA, Mobile phones, thin clients, laptops etc. and operate on multiple platforms.
      Ramabadran Iyengar
  • Another player in this mashup area

    info@hand - CRM plus financials plus project and service management, plus e-commerce.
    Michael Whitehead
  • Another player

    K-eCommerce offer cloud commerce for ERP including Microsoft Dynamics and SAP.
    lallardin
  • "FRM" is a Great Acronym!

    Thanks for the analysis and use of FRM as an acronym Phil. I had also forgotten that Tom Brennan at FinancialForce used the term FRM in September as "Financial Relationship Management." Like most things in the accounting world, it will probably be slow to catch on (!!), but is really a much more accurate descriptor of what is going on with cloud solutions for finance and accounting. I've long said that apps like FinancialForce extend the Salesforce force.com platform to allow it to be an ERP-type solution for businesses, but will begin using "FRM"more often now in my comments and posts :-)

    On another note - and particularly with respect to your comments and use of Xero (an app I love as well for our SMB clients) - I did see Trineo's DIME app presentation at Dreamforce in September 2012 and was really impressed with the tight integration it creates for Xero SMB companies that are also Salesforce customers. SF Group and Professional edition customers are especially well suited to use this integration tool for Xero and can leverage it to get results similar to the financials-plus solutions available for larger companies.

    Thanks again for writing about cloud financials and cloud accounting though Phil. It's a topic that still gets "short shrift" in cloud computing analyses. As a CPA that is a Salesforce "evangelist" I am increasingly seeing SFDC customers who have matured in their use of the force.com platform and are now breaking through that final barrier to never having to leave the app - their legacy "back end" accounting systems. It's a move that - for many of them - is long overdue, but accountants tend to move at glacier speed! Nevertheless, I predict that we'll be seeing that glacier melting quickly for at least the next 3-5 years . . .
    SoCalCloudCPA
    • re: 'FRM' is a great acronym

      Thanks for the positive feedback, and for all your efforts persuading accountants to cross over to the cloud side!
      philwainewright
  • Another one is ServiceSource

    Thanks Kristy for the tweet suggesting ServiceSource for its recurring revenue management platform, well worth including on the revenue management list.
    philwainewright
  • ERP is a discipline as well as packages

    So, here is the point. While the term MRP is descriptive of a logical discipline (closed loop planning system), ERP for some reason seems to have morfed into something used to describe the IT application packages that are used to implement it. As a discipline of studying, designing, implementing and using integrated business systems, however, ERP remains a description of a class of software that provides an integrated business platform that resolves many of the logical issues of business design and execution. While adopting various methods or products to lace this together and improve support for any particular business design surely shows that the days of a single comprehensive and pervasive ERP package solution to all problems is disappearing, the use of ERP platforms is only enhanced by the addition or migration to these products. This is an important distinction to make and one that is demonstrated in our book "Maximizing Return on Investment Using ERP Applications" from John Wiley & Sons, September 2012. We need to make a clear distinction between the move away from single ERP package solutions while emphasizing that the understanding of cross-functional business logic that ERP creates remains the need for business transformation today.
    Art Worster
  • More revenue management ...

    I just had an email pointing me to Revstream, which provides revenue recognition management from the cloud for the likes of Dropbox, Twitter, VMware, Facebook.
    philwainewright
  • ERP - Long live the King

    FRM? What a load of rubbish!

    ERP is far from dead, it's not even limping. And as for the cloud - ERP works there just fine. I have a number of manufacturing customers who run their entire operation in the cloud, including all production reporting and SFDC. The cloud is just an alternative infrastructure in which to run your systems.

    And as for FRM, just what the industry does not need - another meaningless TLA
    Michael Owden
  • Revenue Management - Finally Getting some lime light!...

    Phil - good article. good to see some coverage on Rev Rec. I like the FRM acronym. Good to see you list Revstream. Probably I can provide more details in your next analysis and happy to talk. we have been silent leaders for some time and believe we have created a new "category" on Enterprise Rev Rec mgmt. we were covered by Techcrunch and Venturebeat in November 2012 as well...
    Rajiv Chopra
  • eCommerce+subscription billing, extending to touch point management

    Great analysis on the state of ERP. Working across thousands of our customers, we've literally seen how the cloud has impacted all areas of a business—impacting, if not remaking conventional processes and systems. We're seeing more hybrids and combinations of different features, as stated in the article—such as ecommerce + financials – to begin to match the speed of what is increasingly a digital economy.

    Phil brings up a good point about not really seeing the combination of financials and CRM in one cloud system--not surprisingly, given these were traditionally two different buyers with different IT procurement cycles. Now, with customers expecting, if not demanding, pay-as-you-go models and self-service require companies to expose what was once back-end billing information, pro-rated pricing and guided choices for amending subscription contracts. Accordingly, Gartner has ecommerce now as one of the key legs along with SFA, call center/support and marketing. With new revenue models and implied new business models, more and more business functions are being integrated to get visibility to what is going on in the business, if not just to answer a customer inquiry.

    It's great validation to see ecommerce getting more attention among these SaaS vendors; however, one to add to your list is Avangate , a commerce platform that brings together eCommerce + subscription billing, extending subscription to the touch points and channels (empowering them with end-to-end customer, order and revenue management). Businesses need a flexible platform that manages revenue across models, channels and global markets—it's more than just about subscriptions. In fact, you need to go beyond subscriptions as a revenue model, and look at the implications to your total business model to get that big picture view of who your customers are, how you interact with them, and how to manage your revenue streams with the right tools that enable improved customer insights, acquisition, retention and management.

    So back to ERP, RIP?--The cloud does make it faster and flexible on the vendor's side, as noted above in the article. Let's also keep in mind about the other side of things—the customers now expect instant gratification and frictionless self-service transactions. The way to bridge the two sides is through a total, integrated ecommerce platform that not only provides insight into customer buying patterns but also empowers the business to act on them in real time.
    Michael Ni - CMO/SVP, Marketing and Products, Avangate
  • SaaS ERP is not a push button solution

    SaaS ERP is the latest effort in the ERP industry to provide a rapid, cost-effective solution for customers who want an enterprise solution. A SaaS deployment model does provide the potential for greater value realization; however, the value proposition is dependent upon appropriate expectations and implementation approach. The purpose of the following article is to provide insight to ensure customers make realistic and informed decisions.

    http://gbeaubouef.wordpress.com/2013/07/10/saas-erp-is-not-push-button/
    beaubouef@...
  • ERP is not dead yet

    I am of the firm belief ERP is not dead; it just continues to evolve. You make a mistake by lumping Epicor in the category of "hosted." Another vendor you seem to be missing entirely is UNIT4.
    cindyjutras
  • Online Accounting Apps

    Great summary - very informative. I own a small business, so the evolution towards Cloud software (in particular accounting and invoicing) really helps me. It may be less technical, but I find with daily tasks it's better to have a bigger tool kit than one huge hammer. My company uses Nutcache, which covers the basic business needs of lots of SBUs (http://www.nutcache.com/features/invoicing.html). What's your opinion of apps that claim to tackle a businesses ENTIRE accounting needs? Katie.
    KatiePrince
  • Deserving a mention: Exact

    Fits the bill: Exact (http://www.exactonline.co.uk/) FRM flavours like finacials plus wholesale distribution, financials plus manufacturing, financials plus psa. Currently expanding into Europe and the US
    PieterHamans
  • ERP integration with Cloud Accounting (Xero)

    We are about to release our new ERP SaaS (with CRM) that integrates with Xero for Payroll and Accounting, it’s called BMS (http://www.bmserp.com/).

    Our point of difference with other ERP providers is that customers can continue to use their familiar cloud accounting software, as we will integrate it into a full ERP suite.

    BMS is an ERP solution for growing businesses looking to upgrade from using just cloud accounting software.

    The next step might currently be add-ons for CRM, support desk or possibly inventory software... but as businesses implement multiple cloud-based applications they also tend to isolate business components, creating separate silos of customers, products and suppliers within each app. This creates data quality issues that can require constant syncing and de-duplication.

    We believe that BMS makes for a better ‘next step’ by adding all the extra functionality they were lacking, without having to deal with costly migrations and retraining for new accounting software.

    It’s also a good option for accountants looking to recommend an ERP solution, as clients can continue using the cloud accounting software in which the accountant is a partner.

    Pricing, though not free, is alot more affordable than most ERP solutions (like Netsuite), as the licenses include access to all applications (CRM, Sales, Billing, Stock, Service) for no additional cost. http://www.bmserp.com/pricing
    Michael Mulligan