Cloud Application Penetration
In December 2011, I worked with Baker Tilly Consulting to interview CIOs at a number of credit unions across the United States. One of the data points I collected involved their usage of cloud application software. What I found was that almost all surveyed credit unions had either outsourced or were using a cloud payroll HR product. A number of them had also implemented a cloud CRM solution. Office automation and other applications were often discussed as being imminent candidates for moving into cloud deployment methods. These CIOs also expressed a desire to move more and more applications to cloud environments when such solutions become available.
This summer’s interviews went beyond the credit union space. I interviewed (or received written feedback from) executives from the following firms:
- CFO, Talent Agency
- CFO, Benefits Administration Firm
- COO, Professional Services Firm
- CEO, Marketing Agency
- CFO, Software Firm
- CFO, Hospitality Business Development Firm
- Director of Finance and HR, B2B Advertising Network
- Financial Software Administrator, Software Firm
- VP Operations and COO, Systems Integrator
- Director of Financial Planning and Analysis, New Media Firm
- Director of Finance & Operations, eMedia Firm
- CEO, Cloud Financial Software Firm
- Project Director, Global Solutions Implementation, Major Brewing Firm
- EVP Asia, Major Equipment Manufacturer
- Principal, Global Strategy Consultancy
- Chief Explainer, Visual Arts Firm
- Business Owner, Consultancy
- CEO, Internet Marketing Firm
- Director of IT, Global Automotive Manufacturer
- and many more.
When I asked these executives what cloud software they used, I didn’t give them any hints or coaching. What these overwhelmingly financial/accounting executives said surprised me. They could rattle off all kinds of cloud solutions in use at their firms. These solutions ran the gamut from CRM, Marketing Automation, Sales Compensation, Financial Planning, Payroll, HR, Talent Management, Office Automation and storage to name a few. Salesforce.com was a fairly common component and appeared to be a gateway application that gets businesses comfortable with the on-premises to cloud transition.
These interviews produced other surprises, too. For one thing, integration (of cloud apps to on-premises apps or to other cloud apps) never came up as an issue. Even after I broached the subject, it wasn’t something these execs really focused on. Why? As one exec put it, “Cloud apps were designed to connect with all kinds of other software”. In comparison to most on-premises solutions, I’d have to say that he’s got a point.
Another surprise was in the level of acceptance of cloud solutions. These executives like cloud applications and like how they free up their IT people to work on more strategic (i.e., best your business) IT initiatives. But, more to the point, they like that:
- Many products possess security capabilities more robust than their own firm has.
- Vendors maintain the applications, not their IT people.
- Products scale up and down to meet changing IT and business demands.
- Applications are accessible anywhere, anytime
On this acceptance point, executives were also clear that they weren’t going to return to on-premises solutions and they’ll acquire more cloud solutions as they become available for their firm. Tom Roberts, an IT Director at Johnson Controls said: “Across the entire Johnson Controls enterprise, we are utilizing or in the process of deploying cloud based software in human resource management, procurement, supply chain, CRM, and in a number of additional areas.” I heard similar sentiments from other executives, too, and it was the tone that some of them used that indicated to me that this shift from on-premises to cloud deployed solutions was not a fad, a short-term phenomenon, or an experiment. Cloud solutions are a long-term, structural change that will profoundly affect IT organizations for many years to come.
When I asked financial/accounting executives what counsel they’d give a fellow CFO or Controller that was looking for new accounting software, the answers were all some variant of ‘go to the cloud’.
- “I just don’t see how everyone isn’t doing this” said John Petrillo of Bernstein & Andrulli a Salesforce.com and FinancialForce.com user.
- “What are they waiting for?” said Melissa Conners of Olympia Benefits
- “Go Cloud - cloud would be my solution” said Douglas Karr – CEO of DDK New Media a FreshBooks and ExactTarget customer.
To give you an idea of how interesting the content in these interviews were, let me recap some of the highlights I had in my conversation with Chad Varra, CFO of SendGrid.
- SendGrid uses Zuora for billings as well as ZenDesk, ADP for HR, NetSuite, Salesforce.com, Marketo and Box. And, this is, according to Chad, “only a portion of the cloud applications we use”.
- Chad is a CFO that also used a cloud accounting solution at his prior employer, too. That company uses NetSuite. It’s interesting to see a CFO with 2 different cloud solution/employer combinations already.
- Chad also didn’t think the public accounting firms are as current with cloud technology as they should be but they’re adapting.
Or, how about this interview with Nate Peterson, COO and VP-Operations of Aasonn? Their firm implements cloud solutions and they practice what they preach to clients. He said:
- “100% of our applications are in the cloud. (Our) direction from Day 1 was to be in the cloud”
- “We don’t have a single server”
- "We want our people to be analytic not data-entry centric”
- They use Salesforce.com, SAP SuccessFactor’s Employee Central, etc.
Jared Waterman, Director of Financial Planning and Analysis for Pandora made a couple of interesting points, too. When he spoke of on-premises software, he said he was “always two versions behind” with his vendor’s solution. Multi-tenant solutions are always current or as Jared stated “the systems you’re using are state of the art”. Pandora is using an impressive number of cloud applications that include: Coupa, FinancialForce.com, Anaplan, Xactly, Paylocity and Salesforce.com to name some.
And finally, let’s review what Kevin Ronson, Director of Finance and Operations at Voices.com said:
- “Wouldn’t want to” – what Kevin said about ever moving back to on-premises applications
- “Cloud is how I think now – everything else seems old now”
- “Cloud is the future – no, it’s the present”
These interviews confirmed a number of the original hypotheses. First, virtually everyone we spoke with had a cloud CRM and cloud HR (or Payroll or Talent Management) solution. I was pleasantly surprised as to the number of firms using cloud financial planning tools (e.g., Adaptive Planning) and other cloud solutions for office automation and document storage. Other pleasant surprises included the number of interviewees using Marketing Automation software (e.g., Eloqua, Marketo) and sales compensation systems (e.g., Xactly). The numbers and niches that cloud solutions are filling in businesses is absolutely noteworthy and indicative of something more than an emerging trend. Once companies start embracing cloud solutions, the uptake of additional cloud applications is expedited.
Cloud application sales are having an adverse impact on traditional on-premises firms. In describing the disappointing earnings that an older, on-premises vendor recently reported, UK technology analyst publication TechMarketView noted: “This is another in a series of signs that the rate of growth in established vendors’ traditional software businesses is slowing, making it all the more important that disruptor technologies make a breakthrough.” This impact is not some cyclical or economy-driven downturn in revenues. Cloud software deals are signaling a marked change in buyer intentions and market share changes will be seen soon.
Cloud software buyers are not just early adopters and innovators. It’s clearly being embraced by more early and late majority buyers. It’s going mainstream. When other accountants are recommending these solutions, enthusiastically, to their peers, cloud financial software is now mainstream and not something that only the most daring buyers will touch.
Financial accounting software appears to be crossing the chasm today and for the SMB (small to medium business) market, it absolutely appears to be crossed. I spoke with customer after customer of NetSuite, FinancialForce.com, SAP, Intacct and other solutions. They’ve successfully implemented these solutions, are vigorously recommended to others and are delighted to be free of support, maintenance and other issues associated with on-premises solutions. They’re not going back to on-premises.
For the large enterprise cloud financials space, I still need to do more homework. At present, Workday’s multi-tenant solution and some hosted/private cloud solutions are picking up steam. I’ll reserve judgment as to whether these have crossed the chasm once I get access to additional CFOs who are replacing large enterprise financial software.
Cloud applications overall, not just financial accounting apps, are absolutely mainstream now and buyers aren’t afraid of them anymore. In fact, they want more and more of them. The day and age of being a cloud solution naysayer is over.
Firms that pioneered the sale of cloud applications years ago (e.g., salesforce.com) probably had significant marketing and sales challenges as they had to convince buyers on the benefits and features of their product as well as convince them that a cloud deployment was acceptable for businesses. The need to educate and convince potential software buyers re: cloud deployed solutions is now markedly lessened from previous years. This lowered sales hurdle should help other financial accounting and other cloud solution categories expand in the marketplace.
Please continue to Part 3
 TechMarketView, 6/21/2013