Much has been made of the transformational ability of SaaS, or cloud-based software, in its ability to shift CIOs' roles from focusing on IT infrastructure to higher value tasks such as innovation, business transformation and enablement. Less well known is the fact that SaaS is equally transformative for another key C-level role: the chief financial officer, or CFO.
With SaaS, in particular cloud-based enterprise resource planning (ERP) suites, CFOs are becoming empowered through access to real-time data and business information. They are also beginning to encroach on CIO turf in championing SaaS procurements due to the costs savings and efficiencies that cloud can bring.
SaaS-enabled CFOs are also muscling in on traditional CIO functions such as business-enablement through being able to supply on-demand business information and financial data, as well as better enable their organisation to connect with third party outsourcers, or to more easily expand overseas.
To get a better picture of the emerging SaaS-enabled CFO, ZDNet spoke to environmentally-friendly packaging company BioPak about how the CFO role is transforming and why CIOs should be on their guard.
Which SaaS apps are CFOs using?
While all manner of enterprise applications — logistics, financial, accounting, billing, field force, CRM, messaging, collaboration, inventory and order management — are available in SaaS form, cloud-based ERP suites are emerging as the number one SaaS application for CFOs.
That's because, in an era of fast-moving markets, business applications must support agility, rapid scalability, fast decision making, and real-time information on customers and the business. That means that, above all else, a full suite of ERP applications is needed.
While an on-premise ERP suite can also deliver much of what is needed, the imperatives of scalability and agility mean on-premise hardware is now viewed as a hindrance to growth. In light of the demand to also drive unnecessary IT costs out of business, IT infrastructure and its support and maintenance costs are now viewed as unacceptable. This is especially the case for a growing business where scarce capital is required for core business initiatives.
BioPak's joint CFO and CIO, Steve Orleow, says that he pushed for a move to NetSuite's OneWorld SaaS ERP, because as a rapidly growing medium-sized company which competes against multinationals, access to real-time business information was crucial.
"Our number one imperative was: 'how do we grow yet maintain the same level of control and customer service that comes with a one-to-one touch environment?'," he says of his move to SaaS.
"And we wanted to maintain the same level of control and visibility into the business that we had while being able to scale four times the size."
By replacing Excel spreadsheets and their previous MYOB application, Orleow says BioPak's new SaaS ERP has supported a move from a month-to-month view of the business to a real-time day-to-day view.
"[SaaS-based ERP] has given us real-time consolidated information, and our month-end reconciliation process is simply a couple of day exercise which simply finesses the data, rather than gives us the end-of-month view of how we did," he says. "It has allowed us to know how we are doing all the time."
In addition, that real-time data access has enabled the business to better manage the risks associated with foreign currency rate fluctuations, the CFO says.
Orleow enthuses about some of the key benefits: "We make decisions around margins, we are impacted by exchange rates, and we also do things like subsidise our freight heavily, so it is knowing what that impact will have in real-time, not in waiting two months to see that a decision has in fact impacted us heavily," he says. "It is knowing within days what impact a decision will have because that information is now in real-time."
Another interesting angle, Orleow explains, is the SaaS-based ERP has enabled the company to begin outsourcing parts of its business, such as technical development, to the Philippines where costs are lower. It is also free to grow globally.
"You are no longer constrained as you don't have to think about how you have to manage your infrastructure if you do move globally," he explains. "Should we decide to open in another country, we just buy some licences and open a window in a browser. [SaaS] enables you to think globally and not be tethered by the normal constraints."
The scalability and anytime, anywhere accessibility of the SaaS ERP solution suit BioPak's highly outsourced model. The suppliers who manage manufacturing and logistics also have browser-based access to the SaaS ERP, and can interface with business processes with ease, as do the auditors.
"Giving [partners] the access to whatever data they need is literally a question of 'Do you have a web browser? Yes? Here are the login details'," Orleow says. "We are also audited regularly and that is just a matter of giving them access to our systems. We don't have a physical office in New Zealand but all the ordering and admin can be done here thanks to it being accessed by a browser. We can give full access to anyone anywhere."
Capex vs. Opex
One of the major benefits of SaaS, touted by both vendors and analysts alike, is its ability to allow an organisation to move its IT investment from large, up-front capital expenses to smaller, but more regular operational expense. That can have a major impact on helping an organisations' cash flow, making its costs more predictable, and in off-setting costs over a longer period of time.
For Orleow, being able to avoid the up-front cost of on-premise software is indeed attractive. However, the CFO views the opex vs. capex proposition of SaaS as more of an accounting game and a product of organisational politics than a financial imperative. That said, he does caution fellow CFOs not to fall into the trap of thinking that SaaS is always cheaper than on-premise — especially over the longer term.
"There is a danger in thinking that the cloud is cheaper because it is an online environment," he says. "If you take a short-term view it absolutely is, but if you take a longer term view, it may not be.
"Based on the fact that a lot of ERP systems have a five-year lifespan — you can grow out of them in five years, or you need a significant re-investment after five years ... a cloud solution was very close to an on-premise solution [in cost]."
Echoing Orleow, Telsyte senior analyst, Rodney Gedda, advises it's important for CFOs to remember that capex may actually be preferable despite the attraction of shifting SaaS to opex. That's because, for larger organisations, SaaS can be a large expense over a long time.
"Some organisations won't feel the hit of SaaS compared to on-premise because they may only have a small user base," he says. "But when you get to large organisations with hundreds or thousands of users then the SaaS model may not scale as well as the on-premise model.
"SaaS may be good in years one, two and three, but in years four, five and six it starts to look worse because you have passed the point where [on-premise] would have been cheaper."
That said, Gedda says that it's still important to remember on-premise software can also attract ongoing cost in maintenance and support.
Shifting the CIO-CFO dynamic
Not only is SaaS a catalyst for change within the business, it is also transformative for both the CFO, and for CFOs relationships with CIOs, Orleow says.
"The CIO, while always being an enabler, has in the past hid behind technological magic; whereas now cloud makes things more transparent," he says. "The cloud puts more power in the CFO's hands. They become less constrained by physical location and being office-bound."
"With the cloud I can focus on my business requirements with the technology allowing me to manage that myself, then I can I defer the really complex technical stuff — the scripting and programing — to more technical people. I find that a lot easier now because it is a global world and I can go anywhere to get that help.
"In a medium-sized business there is absolutely the ability to merge the CFO and CIO roles."
Telsyte's Gedda has a differing view, and cautions organisations against reducing the technical contributions CIOs continue to make. He says CIOs still have a wealth of knowledge on which applications are available and what value they can bring, as well as technical nous.
"A vendor's dream is the ability to sell to people who don't know how to compare their value against everyone else's," he advises. "The CIO still has relevance in the technical merit of decisions being made and in avoiding problems which may occur in the future — for example in application integration.
"I'd caution companies against going down the path of thinking that a particular type of delivery model [SaaS] is going to solve the information management challenges they have. The CIO still needs to be empowered to solve the technical challenges they might have. It is bad enough that some CIOs need to report into the CFO to begin with."
SaaS Learnings and Challenges
Orleow reflects that while SaaS has significantly benefited the company, and improved his ability to carry out his role as CFO, the roll-out of the ERP suite could have been handled better.
"We went big-bang approach and from day one wanted all our critical systems live and up and running," Orleow says. "That came with a high level of stress and business risk.
"I think possibly a staged approach would have been better. With SaaS you can switch it on and be running within hours, but in reality there is some set up. Going for the minimum set up, then gradually beginning to use it [and] then moving across more systems would have been something to consider."
Change management was also challenging due to the requirement to move the entire business across to the new ERP in a short period of time. While stressful, it was manageable, Orleow says.
"Because we were a smaller business then it was easier, but the size of business we are today we would not have been able to manage it so easily — it would have been far more complex," he says. "A gradual approach is better. We are gradually adding more complexity and sophistication to the system now and that is far better."
Migrating the company's data across to the new system was also relatively straight forward, Orleow says. "You choose an acceptable level of data cleanliness then you work towards it; there are no shortcuts in that.
"Migrating to the cloud is a great opportunity to get better quality data, but it is a question of how much time you have to dedicate to it. If you have the time, do everything. Otherwise you do what you can. We made the decision to migrate the minimum amount of data we needed to operate without having to go back to the old systems continuously."
Lastly, Orleow cautions that fellow CFOs need to be aware SaaS-based deployments can have implications for privacy, and open up a new area of risk for companies based on where their customer data is stored.
"There are some interesting aspects in data privacy in the Australian context," he explains. "Because your data resides on servers overseas, there are some legal requirements you need to include in your terms and conditions of service.
"But the reality is that a lot of data resides all over the world and it is just a matter of educating and disclosing. I don't think that is something radical or new; your data doesn't just reside in Australia very much anymore."