What can a company do when its financial systems stop meeting its needs? For modern businesses, such technology is crucial in day-to-day operations, providing automation, security and controls. But M&A activity, changing business models, and evolving accounting regulations can create an environment where this infrastructure no longer keeps pace. At the same time, replacing an entire system usually means substantial cost, risk, and disruption.
This session looks at how companies can augment existing enterprise systems to address new billing and revenue recognition needs without the pain of a full rip-and-replace. A practical example is provided by State Street - Princeton Financial Solutions business unit CFO Kenneth Riley, who successfully implemented an ERP augmentation strategy that allowed PFS to continue meeting GAAP billing and revenue recognition requirements, improving reporting and efficiencies while working within the context of its parent company’s systems.
Speakers: Ken Riley, VP of Finance/Division CFO, State Street
Graham Hulme, Director of Product Management, SOFTRAX
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Track: Finance Technology Landscape | Session: 1
36. Thank You For Attending
Managing
Financial
Technology
Through Times of
Change
Hinweis der Redaktion
Two key questions/considerations when addressing topic of change: what is going on in the environment? How is this manifesting itself?
Drive automation, controls, and securityOriginally intended for manufacturing; now prevalent in all major industriesAberdeen Group, May 2012 - A Guide for a Successful ERP Strategy in the Midmarket: Selection, Services, and Integration / Bingi, Sharma & Godla, 1999
Migration to new business models such as SaaS and subscription offeringsNot all of these changes can be anticipated or planned
Moves transactions from a one-time to recurring basisAllows flexibility in product & service offeringsThis flexible model can create accounting complexitySpecific challenges relating to subscription migration that go beyond the capabilities of typical ERP system? Consider chopping.
This joint Revenue Recognition project has been under development since 2002 with the new standard recently finalized New Revenue Recognition Standard prescribes a five-step model for revenue recognitionEffective dates are 12/15/16 (public entities) and 12/15/17 (private entities)http://www.fasb.org/revenue_recognition_more_information.shtml
IT integration is one key factor in ultimate success or failure of M&AsErnst & Young study: 26% of respondents said IT issues “often” blocked post-transition objectivesParticular pain point: mismatches in ERP systemsMajority of M&A deals involve integrationof systemsERP needs vary from company to companyAcquisitions can also create new accounting requirements one or both partiesEmphasize that we’ll be looking at this in more detail with Ken’s case study. Ernst & Young: “IT as a Driver of M&A Success”, 2011 - http://www.ey.com/Publication/vwLUAssets/IT_as_a_driver_of_M_and_A_success_GL/$FILE/EY_IT_as_driver_for_M&A.pdf
50% figure from Forrester Research; 7 years from Aberdeen ResearchInside ERP: http://it.toolbox.com/blogs/inside-erp/custom-erp-code-over-whose-dead-body-54989
Live with it: Migrate work back to spreadsheetsCustomize existing ERP systemsRip and Replace:Pull out entire existing ERP and replace with a new systemERP AugmentationModular solutions that fill technology gaps while maintaining value of existing ERP
Advantages:Preserves existing ERP/financial infrastructureCan be implemented comparatively quicklyMinimal trainingDisadvantages:Lack of cohesive business intelligenceMigrating data across systems becomes difficult/time-consumingCannot be easily automatedError-prone; can create larger issues further down the line
Spreadsheet functional limitations:Data-driven, not process-drivenVersion control and security become difficultMagnifies the risk of human errorDifficult to scale – not feasible for large organizations
Ads:Preserves existing ERP investment in near termAllows platform to specific needs as of a point in timeDisadvantages:Time-consuming implementationIncreased maintenance cost / effortTransfers responsibility from vendor to customer for maintenanceRisk of “version lock-in” – platform updates may make your code obsolete
Ads:Provides a “fresh start”Addresses gaps that existed in old systemNew vendor responsible for addressing business issuesSignificant scope can cause disruptionsNew system may not address all requirementsNeed to retrain staff on new systemPotential for both cost and schedule overruns
Ansell (2012)Consolidated 25 legacy systems into single platform, but ‘design issues’ led to up to $15M in lost sales and customer churnOverstock.com (2008)Had to restate 5 and a half years of revenue due to problems with manual fixes to an ERP upgradeLevi Strauss (2008)Botched implementation of ERP system led to 98% drop in second-quarter results and one-week-long system shutdownAmerican LaFrance (2007)Botched implementation “crippled” company’s business, ultimately forcing bankruptcyhttp://www.computerworld.com/s/article/9236984/ERP_software_project_woes_continue_to_mount_survey_says
Advantages:Proven and tested solutions created by specialistsStrategically improve individual aspects of ERP systemThird-party vendor takes responsibility for ERP issuesFuture proof: modules can be upgraded or replaced independent of main ERPDisadvantages:Only address certain issues – with significant ERP problems, “rip and replace” may be only optionIntegration concerns –addressed by enhanced integration technologiesMultiple data sources for reporting – abundance of BI tools have addressed this concern