Intacct, until now at least, hasn’t talked much about this problem space, apparently happy to leave these larger and more complex situations to vendors like NetSuite. A conversation I had with an Intacct customer recently suggests that this strategy is changing somewhat and becoming more nuance. Intacct does provide a consolidation functionality as detailed in the video below:

Anyway – in this case the consolidation was more nuanced than is usually the case. The customer, Kith Media, was formed in 2011 to take over financial management for several operating subsidiaries that were divested from a large media conglomerate, including print phone directories and internet-based local search services. Kith Media’s particular situation meant that they needed to maintain separate books for each of its distinct business entities, while eliminating reporting work done outside of the financial system, such as using Excel for reports.

The original entity used QuickBooks, while the acquired entities had all used an Oracle system as part of their former owner. CFO of Kith Media, Jim Henderson explained to me that this situation means that the company had a real greenfields opportunity – they weren’t going to use Oracle and QuickBooks wasn’t going to scale to handle the new complexity of the combined organization. Henderson only had a few weeks to both decide on and implement a solution, so one of the key drivers was simplicity and ease of deployment. He performed a kind of quick-fire due diligence on both Intacct and NetSuite, with Intacct articulating a novel approach towards the consolidation problems the company was facing. Instead of a complex consolidation approach, Intacct suggested using the dimension functionality of their general ledger – essentially a way to tag transaction data in the system across multiple tracking categories. In this case, Kith was able to separate items by operating entity for reporting and analysis. Henderson got to 20% of due diligence with both NetSuite and Intacct and became convinced that this novel approach to consolidation would actually work. The cost savings that Intacct brought (compared to NetSuite) along with the simplicity the solution delivered convinced him to go all-in with Intacct. The video below has more information about Intacct’s dimension approach:

It’s not consolidation in the traditional sense of the word – but it brings some distinct advantages in terms of reducing the TCO of the software (since multi-entities can be run from within one instance) and also removes the need for complex cross-instance consolidation setup. Kith got up and running on Intacct in four weeks – something of an achievement given the usual timescale that these sort of projects require – the company uses Intacct for its revenue recognition and expense management processes, a boon compared to their previous approach of using manually prepared Excel spreadsheets.

As I said before – the mid market opportunity is an attractive one – customers with, in general, more of an appetite for moving to the cloud; a generally fairly complex functional requirement and not a huge number of competitors means that Intacct and the handful of other companies targeting this space have a large prospect base, and one which, as the example of Kith Media shows, don’t take a huge amount of work to get over the line.

FinancialForce.com, the cloud applications company, today announced record results for calendar year 2012.  Within one year, FinancialForce.com increased annual revenue run rate by more than 90 percent, from 9 million in 2011 to 17 million in 2012, significantly expanding their customer base in Accounting, Professional Services, Billing and Media. Additionally, the number of customers using both Accounting and Professional Services Automation (PSA) grew by 120%.  Finally, 2012 also saw the expansion of FinancialForce.com’s enterprise customer base as average contract value rose by a significant percentage. 90% of the company’s growth is due to larger deal sizes.

The company also expanded its staff globally by 60%, across the United States, United Kingdom and Spain.  As cloud spending continues to be a top priority for CFOs and CIOs, FinancialForce.com is poised for aggressive growth again in 2013 and projects more than 100 new hires across the globe to keep up with its rate of growth.

Update – apparently it was an incorrect statement in the Financial Force statement about 90% of growth coming from larger deal sizes. Something to do with misinterpreted statistics.

The mid market is one that is very underserved by cloud accounting/financial vendors – NetSuite used to play in this space but is rapidly moving up the food chain leaving FinancialForce and Intacct to scrap over the mid sized customer base. These results are indication that there is an appetite in the marketplace for midsized organization to move to the cloud It’s also interesting to see that even FinancialForce is seeing a move to larger organizations as larger deal-sizes become more prevalent.

As expected, FinancialForce is enjoying the network effects of having customers using both financial and professional services automation products – and I’d expect this trend to continue – I’d also expect the company to add additional services that further increase the network effects of discrete, but closely integrated solutions.

Given this background, it’s interesting to hear of Zuora’s announced partnership with FinancialForce, Intacct and Sage – seeing it now embedded in all the major mid-sized accounting products. It’s an interesting move and one which sees Zuora take a subtle shift to more of a best-of-breed rather than a suite approach.

Previously Zuora had announced a partnership with NetSuite – since that time NetSuite has started talking about its own offerings in the subscription and billing space. It is no coincidence then that these announcements are all coming on the day before NetSuite’s global conference, SuiteWorld. No coincidence also that Zuora is not sponsoring SuiteWorld – if you sense a subtle parting of the ways there you’re probably not far from the truth. This marks a conscious shift for Zuora who is now talking about a best of breed approach and moving away from the “one suite to rule them all” message that NetSuite prefers. If there was any doubt about the significance of both the timing and the messaging of this news, Zuora clarified that by including a covering note from CEO Tien Tzuo in which he writes “…finance departments and CFOs look to retool their companies for the subscription economy, they want best of breed” – fighting words indeed.

With this move, Zuora is integrated into FinancialForce, Intacct, Sage, Workday and NetSuite – their aim is to help CFOs, no matter what financial software they use, navigate the growing importance of the subscription economy. Zuora’s net position is that financial systems cannot cope with the complexity of modern commerce, specifically the dynamic nature of;

• Pricing offering customers multiple price plans, bundles with one-time, recurring and usage fees, and pay-as-you-go pricing;
• Relationship commerce for the ongoing subscription lifecycle which includes the initial order, change orders, add-ons and renewals;
• Automated subscription billing and payments high volume for B2C businesses or more complex B2B businesses; and
• Forward-looking subscription metrics to forecast future revenues and growth.

If the messaging from Zuora itself wasn’t strong enough, the CEO of Intacct, Robert Reid, came out with the announcement with both guns blazing in NetSuite’s direction saying;

Our alliance and this new framework enable joint customers to realize  the true value of Zuora and Intacct together. This is a perfect example of how cloud
computing makes it easier for companies to select integrated best-of-breed systems like Intacct and Zuora, instead of being forced into a suite of average products from one
vendor

While there is much that goes on this space that can be simply put down to positioning and maketing, the fact that with this announcement Zuora is integrated into all the financial systems that matter is another indication that they are becoming the vendor of choice. While it is true that everyone in this space has a different focus (Vindicia for example is well ingrained in gaming), Zuora is rapidly becoming the de facto standard – a position that sets them up well for strategic moves (either an IPO or trade sale) in the short to medium term.

Update #2 – I spent time with Workday during the event to get a deeper understanding of what the force.com part of this deal actually means. Essentially Workday will use force.com for customers who wish to make advanced customizations on their Workday instance, beyond that which is possible within Workday itself. Workday intends to implement this on an “as demanded basis” that is the data types and APIs which are most requested by customers will be the first to be created.

When salesforce announced their acquisition of Heroku at last year’s DreamForce, many claimed that it would spell the end for force.com as a platform. People failed to see how two platforms, albeit one focused on common data and the other on automating DevOps, could survive under the aegis of one company. These doubts seems to have been unjustified and much discussion has ensued about what I’m calling a bifurcated PaaS landscape. Theory however is one thing, proof is another.

Well today we’re seeing the proof of continuing value for force.com with the pretty massive news that Workday has chosen to use Force.com as their own development platform – in doing so they forego the potential benefits of creating a platform themselves (as, for example, NetSuite have done) but gain from the efficiencies and integration benefits of being part of force.com.

Not only have they decided to forego their own PaaS play in favor of utilizing force.com, but they have embarked on a social strategy that sees them adopt Chatter for their two million or so end users as a collaboration and communication tool.

Through the partnership, Workday will deliver:

• Salesforce Chatter and Workday Integration: Moving traditional workday processes into a real-time stream
• Custom Force.com App Leveraging Workday Data: Workday customers, partners and developers will be able to pull workforce data residing within their Workday application into Force.com to build custom apps

While this is a pre-announcement and actual functionality isn’t due to roll out for a few months, this feels very different from major partnerships announced at previous DreamForce events (VMforce for example). Workday had an analyst summit the day before DreamForce which, due to an unfortunate communication breakdown I was unable to attend. However in talking to folks who attended the event – Workday fully realize the momentum that salesforce has built and the benefits to be gained out of leveraging a common data model and development paradigm between the two applications.

It’s a very interesting partnership and one that raises a bunch of questions for other players – notable NetSuite and FinancialForce. For NetSuite it calls into question the strategy of creating their own platform, especially given the headstart that salesforce has within the enterprise. Time will tell whether a platform based around an ERP as opposed to a CRM has sufficient extra value to see it gain momentum despite force.com’s incumbency.

In the case of FinancialForce however, a financial application also built upon the force.com platform (and partially owned by salesforce) it signals something of a threat, especially given Workday’s stated ambition to move into more fully featured financial software – arguably a robust financial package from Workday that gives businesses the ability to create custom apps on force.com, ready to be integrated with salesforce obviates the value proposition that FinancialForce has enjoyed thus far.

No matter which way these partnership rumblings lead, today’s news is a significant fillup to the credibility of force.com and should keep the naysayers quiet for a while.

FinancialForce are today showing their hand and indicating where this is going by announcing what they are terming Services Resource Planning – the provision of an end-to-end solution for service professionals. But more than a branding exercise, this release is being touted as a new focus for FinancialForce, I talked with Tom Brennan, VP Marketing from the company, and he said that this is the first of future developments that will see FinancialForce change its scope from being a financial software company, to being more of a broader application platform company.

FinancialForce told me that their own studies have found that fully 40% of services professionals use salesforce as their CRM, a statistic that undoubtedly can be questioned, but one that is indicative of the rise of salesforce in this sector. Brennan, in an approach reminiscent of NetSuite’s “hairball” campaign, talked of the inefficiencies attendant in using disconnected systems; the use of spreadsheets in place of integrations, the breaking of core processes and the siloing of data.

Brennan was quick to differentiate this offering from NetSuite’s similar play with their OpenAir product. In his words NetSuite/OpenAir is more of a combined interface, whereas the FinancialForce offering is what he calls a pure-play, deep integration.

There is little inherently new in this offering – the PSA offering from Appirio was pre-existing, and obviously both salesforce and FinancialForce go back awhile – what it does however is wrap all three up in a consistent offering, with one price ticket. $55 per user per month gets professionals access to the SRP product, with users who need full accounting access paying $175 per month.

The automation of professional service’s operations is becoming more important as firms look or a point of differentiation. This packaged offering from FinancialForce should prove to be a compelling proposition in the marketplace.

I was asked to provide a review for the book and summed up my thoughts by saying that the book captures the fundamentals of cloud computing in an engaging and entertaining way. It’s not a heavy tome, but is worth a quick read. It can be downloaded here. Anyway, enough about the book, on to some customer stories.

Recently I spent an hour or so talking to a large software house in New Zealand that is evaluating ERP options, both on-premise and cloud. The execs I spoke with admitted a real fear about moving to the cloud, largely due to some horrendously negative blog posts they’d seen. While this brings up the very real issue of bloggers influence, and an obligation to ensure we’re balanced and reasonable, it also made me inclined to write about some customer case studies – where cloud risks had been identified but a move to the cloud had still been made.

While at DreamForce I attended a FinancialForce executive briefing that, refreshingly, was dominated by discussions with two FinancialForce customers, Nimbus and DenMat. Lucy Mills from Nimbus (a process management service provider) and Jonathan Green from DenMat (a dental products company) talked about their experience with both salesforce as a CRM, force.com as a platform and FinancialForce as a financial application.

Denmat admitted, to some hilarity among those present, that it had been using 20 year old technology via an AS/400 to run its operation – as would be expected from a system built before the internet even existed, it was a completely disconnected system and meant that sales and order processes were batched and sent for processing. Sales staff would use completely manual process to enter sales orders – resulting in inefficiencies and mistakes. The launching of a new product offering led to a requirement for a full service payment gateway, able to handle 35000 transactions per month – this was enabled within 60 days on FinancialForce. Interestingly enough, and in keeping with feedback I’m hearing from customers, the salesforce package wasn’t the cheapest alternative (Denmat looked at several other systems) rather the flexibility that force.com brought was the deciding factor.

The second customer to speak was NimBus, a software house providing services and a BPM system. Lucy Mills, Product Manager for Nimbus recounted how beneficial a cloud solution had been for her, living as she does in a rural area recently hit by a major snow storm. Mills told how busy continuity was not affected by the storm, having software accessible online meant that people could just carry on with their tasks. NimBus formerly used Sage for finances but was an existing salesforce customer. When looking at their ERZP options, they were limited to retaining Sage, building something in house, of going with FinancialForce.

The deciding factors that swayed them towards FinancialForce were, in Mills words, business continuity aspects, the rapid development of new functionality and the ability to customize the roll out of new features. Mills was very complementary of the ability to map processes within FinancialForce to the systems used by NimBus and reported that one process that had previously taken 45 minutes to complete is now down to 2 minutes. Mills is still concerned about the risks of significant outages, one of the flip side of software dependent on the internet but, in a balanced decision, has decided that the benefits far outweigh the potential risks.

While DreamForce was, of course, a salesforce event and as such the customers chose to speak about FinancialForce can be expected to be very positive, it was refreshing to hear from both Denmat and Nimbus and, in particular, hear how they’d assessed and analyzed the risks and still determined that a move to the cloud was the right thing to do. While an unabashed cloud proponent, I’m also a realist, as such I’ll be the first to admit that cloud introduces its own particular risks. It’s only through open discussion and analysis of these risks that the path through this technology shift can be navigated.

Dennis Howlett has already written his thoughts on the two companies. Readers of this blog (and followers of either of us on Twitter) will realize that there is very little love lost between Dennis and I, notwithstanding that however he is undisputedly an influencer and strong voice in this area and the general thrust of his post I agree with. I wanted to reflect on parts of it and give my impression through my own lens. In his post, reflecting on some comments made to us by SAP board member and former CTO Vishal SIkka, Howlett writes that;

the real differences between the two companies comes when the applications rubber hits the road in the large enterprise. During our informal lunch with Vishal Sikka… we heard about how companies internally move at different speeds… It’s a good way to represent an IT landscape where some applications – typically those at the back end like accounting – evolve slowly, while others like Heroku’s situational applications move at a much faster pace.

While the specifics of his comment are a little off the mark (Heroku is, after all, simply an application development platform that leverages the in-vogue Ruby on Rails framework) the thrust of his comments are that core apps move slowly, while edge applications, many of which are created using agile platforms such as Heroku, move much more rapidly. During one of our briefings with SAP, someone described the situation as two wheels, spinning at different speeds and remarked that software companies need to be mindful of the middle layer that allows for rapid development on one end, and more conservative approaches towards progress on the other.

While it’s attractive to put this speed differential down to innate differences in need (or for that matter appetite) for change, I discern something subtly different is going on. It seems to me that the conservatism represented by the slow moving wheel is related more to the dearth of robust tools to facilitate change, more than any innate reluctance to change. This contention was borne out somewhat during a FinancialForce briefing I attended earlier in the week. In the briefing we heard from DenMat a dental products company that has recently shifted to FinancialForce from a prehistoric AS400 system. It seems to me that the reason that DenMat took so long to change was the lack of robust and sufficiently flexible alternatives. This would seem to be borne out by the fact that post change, DenMat have gone on to use even more of the flexibility and customization that the force.com platform allows. It’s this reason that the salesforce acquisition of Heroku (see my coverage here) makes sense – I’ve already written about one development company that I’m aware of that has undertaken some cutting edge projects for large enterprise customers. I believe that many more of these projects would happen if enterprise had a robust framework, a connected platform and a trusted provider (albeit that I hate to use that term) all ready to enable this change to occur.

On another front, Howlett reflected on the common view that, as he put it;

Many people like to think that SAP represents the old, legacy way of the world. Salesforce is often portrayed as the face of the new world: brash, confident, fun loving.

While the parties and the buzz certainly justify this second point, and while SAP will always look a little pedestrian in comparison, I was staggered by some of the messaging that was coming from SAP at the briefings. In particular David Meyer, VP of SAP’s OnDemand division was a refreshing part of proceedings (someone should give that man a payrise). Meyer is the sort of guy who wouldn’t be out of place at Google or, for that matter, any bright young startup in the Valley. He gave a brief demo of some great integrations between StreamWork (StreamWork being to SAP what Chatter is to salesforce), Google Apps and core SAP products. It was a presentation that, if I hadn’t known the presenter and the core products were from SAP, I would have expected to have come from Google, NetSuite or salesforce themselves.

It’s this last point that really raises the biggest question – will this be an all-in-the-cloud or a hybrid world going forwards? As Howlett remarks;

We all know where Salesforce sits: everything is going to the cloud. SAP is far more pragmatic: it rightly sees a hybrid world where its customer may – and I stress may – move everything to the cloud. Unlikely in my lifetime. As both Dr Sikka and Mr Wookey said, there are still instances of SAP R/2 happily running some global companies.

The world is a big place and clearly there are sufficient customers in both camps to buoy both SAP and salesforce revenues for years to come. However I’m yet to hear any credible rationale why a hybrid approach is any more than a stop gap. Yes, CIO’s today are demanding that data remain in house. But, to borrow a metaphor, Blacksmiths were no doubt lobbying Henry Ford to provide some hybrid solution that saw horses towing cars behind them – for no other reason than that it allayed their short and medium term fears about survival. If a hybrid approach has some actual, rather than perceived benefits then so be it. I fear however that hybrid, at a conceptual level, is little more than the methadone intended to break enterprises on-demand habit. if that’s the case… perhaps cold turkey is a better approach.

More interesting is Appirio’s reasons or selling the product – it seems a move away from product and more firmly focused on services is the angle for them – a strategy that kind of goes against my advice to services companies to productize their offering. No doubt given he very close relationship between Appirio and salesforce and the partial ownership of FinancialForce by salesforce, there are some background arrangements that ensures Appirio maintains a good revenue stream from the deal.

As part of the deal, Todd Bursey, VP of PSAS at Appirio will be joining FinancialForce, he’s understandably bullish bout the combined product saying “PS Enterprise has been very successful as a standalone solution, but combined with FinancialForce.com and its domain experience, it will be even more compelling to a wider range of customers”

Both solution sets will continue to be sold and supported separately. PS Enterprise will continue to integrate with customers’ existing finance systems, both cloud-based or on-premise.

I’ve said before that PSA is the sleeping giant of enterprise software – this deal gives it some more deserved attention and will be a win for service organizations.

there is one area where SaaS providers still lag behind: functional parity. For full-suite ERP, there are still precious few SaaS providers. And those that do attempt “full suite replacement” still have major gaps in their functional footprint.

There are two issues that Scavo’s post raises – firstly the availability or otherwise of “out of the box” vertical solutions. Second is the ability for partners or customers to create their own customized offerings built on top of the ERP solution.

The first issue is rapidly being solved. NetSuite in particular were eager to show off the manufacturing specific application that they’ve built on top of NetSuite – having taken a quick look t the offering it seems to offer manufacturing businesses an incredibly high level of functionality that should see all but the most complex of operations satisfied. And for those who don’t.. there’s always the platform as we shall see later in this post.

Not to be outdone, Plex also offer a specific product for manufacturers – Scavo tells of one win for Plex where a business operating in 15 countries, with 22 separate manufacturing sites,  couple of distribution centers and multiple engineering centers are consolidating all of their MRP/ERP functionality onto Plex.

Similarly in the professional services automation space –I’ve written previously about OpenAir, the company that NetSuite bought and that offers comprehensive PSA functionality.

Finally, and perhaps most importantly given that almost every business has particular nuances in terms of functional requirements, come the platform plays. I’ve spent time recently talking with a number of vendors about their product offering – NetSuite took the opportunity at SuiteCloud APAC to show off the flexibility of their platform. Intacct used their Advantage2010 conference to tell partners of their platform intentions, while FinancialForce, SAP and Acumatica all offer customers and partners the ability to create customized offerings within their products.

So – where does this leave us in terms of functional parity? As I said in a comment to Scavo’s post:

As a SaaS evangelist since early on, I’ve battled barriers to adoption, steep onramps and general lethargy frequently.

I generally agree with your contention however I do think there is more to this than just the functional parity discussion. As an example, professional services automation (PSA) has been pretty much at feature parity (as an example, NetSuite ERP/CRM plus OpenAir) for quite some time now, yet still adoption is good… but not stellar.

I’d class the functional gap as step one in the due diligence process – it’s the traditional feature comparison and until recently the traditional vendors have been able to rely on this to “win the deals”. However functional parity is now the norm in a number of verticals and the traditional vendors are resorting to other means to slow adoption – concerns round jurisdiction, security, vendor viability etc

In other words – functional parity is either a reality or exceptionally close to it for many cloud solutions. As such we’re seeing a dual approach from the traditional vendors – firstly many are cloudwashing and attempting to convince customers that their traditional on-premise products give the same benefits that cloud solutions do. The second approach is one of FUD, trying to convince customers that the risks involved in choosing an “unproven, inflexible and risky” cloud solution are simply not worth it.

Either way the tide is turning and over the next 12-24 months I expect to see a huge increase in the adoption of enterprise level cloud solutions.

Keeping up the momentum, Acumatica announced recently integrations with Adaptive Planning, Avalara, Pacejet, and SIPD. The integrations will create an aggregated application that includes financial forecasting and budgeting, tax calculation and filing, sales and invoicing, and EDI for distribution and shipping.

I get excited when vendors contact me with tales of vertical integrations, it’s an example of a realization that, despite rich APIs, a pre-configured integration will always make life easier for businesses. The 60 or so VARs that Acumatica has worldwide will now be able to offer more compelling propositions.

Already Acumatica has over 60 VARs worldwide, who have embraced the cloud by selling solutions provided by the Company and its partners.  The latest ISV partnerships really underscore the opportunity to reach global companies with complex requirements. That these companies can also have an on-prem to cloud solution is an added bonus.

These integrations highlight that, while ERP vendors can provide basic functionality for things like shipping, tax and budgeting, many mid-sized businesses still need best-of-breed apps that are integrated tightly with their financials. The fact that ISVs can take a pre-integrated host of solutions, and customize them further, is an endorsement of this approach.

Obviously these integrations are easy or other vendors to emulate, be it NetSuite, FinancialForce or Intacct. The question here is how attractive the option of being able to move backwards and forwards between on-prem and cloud based will be for customers – that’s Acumatica’s main differentiating feature and one they’ll hope is desired by businesses.