FinancialForce.com: Cloud Applications for Accounting, Professional Services Automation, and Services Resource Planning

Transcription

1 VENDOR PROFILE FinancialForce.com: Cloud Applications for Accounting, Professional Services Automation, and Services Resource Planning Christine Dover IDC OPINION Global Headquarters: 5 Speen Street Framingham, MA USA P F FinancialForce.com, based in San Francisco, California, is a cloud applications company building innovative business applications that exploit the social, mobile, and cloud computing capabilities of Force.com, salesforce.com's cloud platform. Currently, these applications include accounting, billing, professional services automation (PSA), and services resource planning (SRP); the company intends to expand this footprint. The accounting system first appeared at salesforce.com's Cloudforce Europe in 2008 as CODA 2go, the first on-demand financial system built entirely on Force.com. With its roots in CODA, a United Kingdom headquartered public company specializing in enterprise financial systems, FinancialForce.com benefits from CODA's focus on and understanding of accounting processes. FinancialForce.com also realized that it didn't need to build the platform itself as it would be better to leverage an industry-standard platform and thus chose salesforce.com's Force.com. Highlights include: Since the launch in 2008 of a billing application to create invoices, FinancialForce.com has added general ledger accounting, accounts payable, accounts receivable, sales order processing, billing for media, professional services automation, and services resource planning. The FinancialForce.com business is growing strongly, and UNIT4 (its primary investor) continues to invest in it as an important component of its own future business. In February 2013, FinancialForce.com announced that its annual revenue run rate increased in 2012 by more than 90% over the previous year. Leveraging salesforce.com's Force.com platform and ecosystem, FinancialForce.com is quickly able to build rich, socially enabled applications that complement CRM. Not only does FinancialForce.com leverage infrastructure investments in security and controls included in the Force.com platform, but it adds its own control processes, security, and more by complying with industry-standard audits such as Service Organization Control 1 (SOC 1). FinancialForce.com is well positioned to take advantage of the growing opportunity in the financial accounting and professional services automation applications market in which cloud applications are the fastest-growing area. Filing Information: March 2013, IDC #240288, Volume: 1 Enterprise Applications: Vendor Profile

2 IN THIS VENDOR PROFILE This IDC Vendor Profile describes FinancialForce.com, a cloud applications company with accounting, billing, professional services automation (PSA), and services resource planning (SRP) solutions built on the Force.com platform and a 34-year heritage of building accounting applications at UNIT4 (Agresso). FinancialForce.com's accounting solution, when it launched in 2008 as CODA 2go, was the first on-demand financial system built entirely on salesforce.com's Force.com platform. Backed by UNIT4 and salesforce.com, FinancialForce.com's applications continue to be the leading finance and professional services solutions available as native Force.com applications on the AppExchange. SITUATION OVERVIEW Company Overview FinancialForce.com, based in San Francisco, California, is a cloud applications company building innovative business applications that exploit the social, mobile, and cloud computing capabilities of Force.com, salesforce.com's cloud platform. Currently, these applications include accounting, billing, professional services automation, and services resource planning; the company intends to expand this footprint. The accounting system first appeared at salesforce.com's Cloudforce Europe in 2008 as CODA 2go, the first on-demand financial system built entirely on Force.com. With its roots in CODA, a United Kingdom headquartered public company specializing in enterprise financial systems, FinancialForce.com benefits from CODA's focus on and understanding of accounting processes. FinancialForce.com also realized that it didn't need to build the platform itself as it would be better to leverage an industry-standard platform and thus chose salesforce.com's Force.com. There's an urban legend (which is true) that Marc Benioff, CEO of salesforce.com, owned the URL. In 2009, Benioff bestowed the URL on CODA 2go, and the company became known as FinancialForce.com. Since the launch in 2008 of a billing application to create invoices, FinancialForce.com has added general ledger accounting, accounts payable, accounts receivable, sales order processing, billing for media, professional services automation, and services resource planning. The company has grown its base of satisfied customers of all sizes, including public companies, across a variety of industries, in 23 countries, with end users in 50 countries. In early 2013, the company added trust.financialforce.com, anchored by FinancialForce.com's recent completion of the Service Organization Control 1 Type II audit as well as leveraging security and certifications provided by the Force.com platform (e.g., SAS 70, ISO 27001), providing the assurance that CFOs require when considering moving financial applications to the cloud. And FinancialForce.com has moved into the coolest hightech center in Silicon Valley mid-market Street in downtown San Francisco where it is already busting down the walls to continue its impressive growth. 2 # IDC

3 Financial Performance FinancialForce.com is a UNIT4 company. While UNIT4 is a publicly traded company based in the United Kingdom (and traded on the Amsterdam Stock Exchange), the financial performance of FinancialForce.com is not reported separately. However, the FinancialForce.com business is growing strongly, and UNIT4 continues to invest in it as an important component of its own future business. In 2011, the FinancialForce.com annual revenue run rate (including services) was over $9 million, and performance in 2012, as reported in February 2013, increased by more than 90% to reach $17 million. This growth is attributed to an expanding customer base but also to an increase in the average contract value and larger deal sizes. Significantly, the number of customers using both accounting and PSA applications increased by 120%, demonstrating the value customers see in using an integrated application. The growing head count at FinancialForce.com is a demonstration of UNIT4's continued investment in the company. In 2012, the head count at the company grew by 60% to a current total of about 180 employees. FinancialForce.com is expected to add more than 70 new hires in The overall team is a great mix of both youth and experience, bringing solid credentials in accounting, billing, and professional services applications with new ways of thinking about how work is done in today's mobile and social environments. Many on the staff are recognized industry specialists holding certifications such as Certified Public Accountant and Project Management Professional. With over 25% of its overall head count in research and development, FinancialForce.com is quickly bringing out new features and functionality to its expanding customer base. Another large group of employees is in customer service and support, assisting many customers to quickly deploy FinancialForce.com applications. Customers and Contracts FinancialForce.com is building an impressive customer list including, among others, Pandora, U.S. News & World Report, Blue Shield of California Foundation, All Traffic Solutions, RSI Relo, Bluewolf, Convio, Host Analytics, and NTT Centerstance. Increasingly, customers are choosing multiple solutions, driving larger average deal sizes. The largest deal thus far is a multiyear contract worth close to $1 million. About 15% of FinancialForce.com's customers are public companies, and some companies went through their initial public offering while on FinancialForce Accounting. At this time, FinancialForce.com is targeting specific customer segments for each of its primary applications: Accounting: Customers range in size from 10 employees (who are just starting a business and want to do it right the first time) to more than 1,000 employees. PSA and SRP: Customers generally have anywhere from 25 consultants to more than 10,000 consultants. Billing: Billing applications are in use at organizations of all sizes, including those with annual revenue of over $1 billion IDC #

4 This means that FinancialForce.com should not be thought of as "just" an accounting solution for small to medium-sized enterprises. The Billing applications are already in use at several very large organizations, and it is expected that the Accounting, PSA, and SRP applications will soon see adoption from larger customers as well. FinancialForce.com has customers in 23 countries and users in 50 countries. While many FinancialForce.com customers are also salesforce.com users, it is important to realize that this is not a requirement. FinancialForce.com's applications are licensed independently of salesforce.com. A number of customers start with just the Billing or PSA applications and may not use salesforce.com's CRM at all. FinancialForce.com's customers repeatedly express delight with the systems. Ease of use is frequently mentioned, as is the limited need for training of new users. The similarity of the systems with salesforce.com's Sales Cloud and Service Clouds, along with the use of Chatter, is important as use of the FinancialForce.com systems extends outside of the traditional accounting user and across the organization. Most everyone in an organization needs access to financial data to better understand his/her part of the business (e.g., the value of a customer or the true cost of an opportunity). The social aspect of using accounting (and other applications) across organizational boundaries is extremely empowering and can lead to better financial results and higher levels of customer and employee satisfaction. Company Strategy The foundation of FinancialForce.com is twofold. First is the company's strength and experience in building financial applications, a legacy from FinancialForce.com's roots in CODA. Equally important is the decision to leverage salesforce.com's Force.com platform and the continuing investment made by salesforce.com. For example, FinancialForce.com inherits the social and mobile capabilities built into Force.com, eliminating the effort required to reinvent them. For example, incorporating Chatter into the accounting process helps raise visibility on overdue invoices with the salesperson that can help get them paid. Force.com maintains the compliance certifications required by customers, such as SAS 70 Type II. This platform point of view enables FinancialForce.com's customers to build their business on a secure, social, and mobile foundation and enables them to align sales, services, and finance into a truly unified process. Product Strategy FinancialForce.com currently offers four product solutions: accounting, ordering and billing, professional services automation, and services resource planning. Accounting Accounting is part of the FinancialForce.com DNA and is a key reason that prospective customers consider FinancialForce.com as their accounting solution. Although billing was the first application in 2008, it was quickly followed by accounts receivable to complete the opportunity-to-cash process. FinancialForce Accounting includes the expected general ledger (GL), accounts payable, accounts receivable, and cash management modules plus an accounting engine that provides multicompany, multicurrency, global tax, workflow, and analytics consistently across 4 # IDC

5 all of the modules. This also enables compliance with Sarbanes-Oxley as processes are documented automatically, as are the transactions when they occur. Also, because the Force.com platform, FinancialForce Accounting was one of the first socially enabled accounting applications as it inherited Chatter as soon as it was available as part of Force.com in An important part of the general ledger module is ability for the customer to designate up to seven segments for posting and budgeting (per transaction line) to the GL code; however, this is not limited to seven segments in total as additional segments can be added as needed but are not available for budgeting. Instead, customers can combine the segments in multiple ways: Segment 1 company Segment 2 general ledger account code Segment 3 account (e.g., customer profitability) Segment 4 product (e.g., product profitability) Segments 5 7 as needed (e.g., region, manager, channel, project) FinancialForce.com staff, many of whom are Certified Public Accountants, often advise customers on how to set up the segments. This coding structure enables business-specific reporting that is essential across the whole organization and assists the finance organization to provide proactive service and analysis to the rest of the organization. FinancialForce Accounting was recognized as the Software Product of the Year in November at the British Accountancy Awards 2012 and again in March at the Business Finance Awards Ordering and Billing Billing was the first application launched by FinancialForce.com in 2008, followed by ordering in With FinancialForce Billing, customers can take any opportunity in salesforce.com's CRM and automatically create an invoice. Invoices can also be generated from cases in salesforce.com's service or milestones in FinancialForce Professional Services Automation. Added in late 2011, FinancialForce Media automates the booking to billing process for online advertising campaigns, closing the loop from salesforce.com's CRM, an ad server (e.g., Google's DoubleClick for Publishers), and FinancialForce Billing. Given the speed at which the publishing and advertising industries are changing, it is extremely important for publishers to optimize ad sales and provide services to clients. There are a number of one-off solutions available for media billing, but FinancialForce.com is one of the first companies to provide a solution that eliminates billing reconciliation issues between CRM, accounting, and ad servers IDC #

6 Professional Services Automation In 2011, FinancialForce.com acquired the professional services automation application developed natively on Force.com by Appirio, a professional services firm and successful salesforce.com partner. Appirio built PSA initially to meet its own needs and realized that other professional services firms needed the same capabilities in a cloud solution. Choosing to focus its energies on professional services rather than on products, Appirio picked FinancialForce.com as the right fit to acquire its asset. This history is important as FinancialForce Accounting was developed by people with deep expertise in accounting; PSA was built by professional services experts to meet the needs of a professional services organization. PSA is not a project and portfolio management application for managing the specific tasks, activities, assigned resources, and status of the project itself. PSA is designed for professional services organizations with billable resources and project contracts, focusing on the people side of the services business and ensuring that time and expenses are captured when the work is done. The services resources are managed and assigned to projects, even prebooked to specific assignments, if appropriate. This visibility into real resource availability and utilization can result in higher billable utilization and revenue per consultant both important factors in the profitability of any professional services firm. The PSA Winter '13 release in February added additional capabilities to make users more efficient, social, and mobile. Many of the features were added based on direct input from users; for example, the FinancialForce Output Builder creates automatic scheduled project status reports that can be automatically ed to customers and stakeholders. Services Resource Planning Services resource planning takes FinancialForce Accounting and FinancialForce PSA over the final chasm by aligning it completely with salesforce.com for the handoff between the sales, delivery, and financial teams. This ensures that professional services opportunities are handed off correctly from the sales to the services team, time and expenses during the project are captured correctly, services are billed for at appropriate times, and finally that payment is collected for the services rendered. When these activities are handled by disparate systems, as is often the case, professional services firms, which are generally great at selling and delivering work, fail to get paid appropriately for the work that they have delivered. By bringing together CRM, accounting, and PSA into an integrated solution, FinancialForce.com offers professional services firms of all sizes capabilities that were once available only to the largest firms. Business Strategy Go to Market and Sales FinancialForce.com goes to market primarily through its own direct sales organization, based primarily in the United States and the United Kingdom. The company partners closely with salesforce.com, for which a key philosophy is "if our partners succeed, then we also succeed." FinciancialForce.com is a great example of a successful salesforce.com partner. The company leverages salesforce.com's 6 # IDC

7 AppExchange marketplace to good advantage, with no negative reviews (as of February 2012). Many reviewers describe their satisfaction with the applications. FinancialForce.com has also set up a Customer Success program similar to the program implemented at salesforce.com. This high-touch model seems to be a hit with customers, according to the AppExchange reviews. An interesting detail is that the executive who runs product development for FinancialForce.com also runs the Customer Success team. This organizational decision is a good one in an emerging company like FinancialForce.com and keeps the product team closely aligned with customer requirements and satisfaction. Partnerships FinancialForce.com is going to market with two types of partners those that provide FinancialForce ready apps and a set of authorized service providers. FinanicalForce ready apps are select industry-specific and specialized business applications available from AppExchange. Many of these applications already have prebuilt or configurable integrations to the FinancialForce.com Accounting and PSA applications. Leveraging AppExchange to find complementary solutions is a smart way for FinancialForce.com to work within the broader salesforce.com ecosystem to build its business as well as help customers find appropriate solutions. These partners include Coupa Software, Jobscience, Concur, Xactly, DocuSign, Rootstock Software, and ServiceMax. Authorized service providers help customers with complex implementation and/or integration requirements to deploy the FinancialForce.com solutions. Again leveraging its partnership with salesforce.com as it builds its own partner ecosystem, FinancialForce.com's authorized service providers must employ certified salesforce.com administrators, developers, implementation experts, and/or architects. This provides a solid foundation for FinancialForce.com's own partner program as the company builds its own solution-specific certification. But IDC expects that the requirement for salesforce.com certifications will, and should, remain in place for FinancialForce.com authorized service providers. As many of these companies (e.g., Bluewolf, NTT Centerstance, Baker Tilly, CLD Partners, IconATG, and CloudSense) are also salesforce.com partners and generally already employ staff with the appropriate certifications, this is a reasonable requirement. Market Positioning The target market for FinancialForce.com is clearly existing salesforce.com customers that need an integrated financial, billing, PSA, and/or SRP solution. But FinancialForce.com is also seeing success with non-salesforce.com customers. This is good news for both FinancialForce.com and salesforce.com, as it opens both companies to a broader pool of potential customers. FinancialForce.com Accounting is particularly strong with customers that have employees but serves smaller (e.g., companies with 10 employees) and larger (e.g., companies with 1,000+ employees) customers as well. Smaller customers are typically those that have outgrown a QuickBooks or homegrown accounting solution using spreadsheets. These smaller customers are usually poised for fast growth and want to start with an accounting solution that will grow with them. Target industries 2013 IDC #

8 include technology companies, professional services firms, nonprofits, and media companies. FUTURE OUTLOOK Challenges and Opportunities Challenges The primary challenge for FinancialForce.com is that it is still a young company and, while the team is adding functionality to its systems very quickly with three releases a year, there are features that customers require that are not yet available. Particular areas that customers have mentioned for improvement and more capability are additional analytics, advanced revenue recognition, more international support beyond English-speaking countries, more European localizations, and accounting for physical goods. At this stage, FinancialForce.com offers very good products, and by continuing to invest in products and customer success, as it is already doing, it is in good shape to deliver outstanding products. While FinancialForce.com has begun to build an ecosystem of application and authorized service providers, most of these partners are working primarily in the United States and the United Kingdom. To expand geographically, it is important that FinancialForce.com build an ecosystem of additional partners that can add additional functionality (e.g., country-specific localizations) or act as trusted advisors that can help open new markets by recommending solutions to their clients and providing services. The other challenge is the need to grow with its customers. Many of the accounting customers are growth companies. When these companies start to grow to 2,000+ employees, they are not going to want to change their financial accounting system just because they are now a bigger company. FinancialForce.com actively continues to add a depth and breadth of capabilities to its applications to grow with its customers. Although given FinancialForce.com's success with large organizations using the firm's billing, PSA, and SRP applications, IDC believes that FinancialForce.com will meet this challenge. Like most cloud applications companies, FinancialForce.com is not profitable yet; it is dependent on UNIT4 to continue its investment to add resources across the organization to meet customer demand worldwide and support a growing partner ecosystem. Opportunities The market opportunity for FinancialForce.com is excellent. The total market for financial accounting applications in 2011 was $15.7 billion, and IDC is forecasting this market will grow at a compound annual growth rate of 4.3% through 2016, reaching a total of $19.4 billion. Additionally, financial accounting applications have been slower to move to the cloud than CRM and collaborative applications. FinancialForce.com has been an early leader in the move to bring financial accounting to the cloud, a move that should pay off as more CFOs look to move their internal systems to the cloud. Additionally, in IDC's 2012 CloudTrack Survey, financial accounting 8 # IDC

9 applications were identified as the third most suitable applications to move to the cloud, following general business applications and CRM. The pace of the transition to cloud applications is increasing rapidly from 15.1% of the U.S. applications market in 2011 and is forecast to reach 19.6% in 2012 (worldwide percentage is expected to be 18.4%). FinancialForce.com is well positioned to take advantage of this growing opportunity. Also, as FinancialForce.com continues to listen to its customers and expand its products, the company will create more opportunity for itself. The PSA Winter '13 release focused on mobile time entry, revenue recognition enhancement, mobile expense entry, and more. FinancialForce.com may also choose to acquire new capabilities as it did previously with professional services automation from Appirio as that path has demonstrated a good return on investment and a quick way to add functionality. ESSENTIAL GUIDANCE Advice for FinancialForce.com IDC's key advice for FinancialForce.com is to continue on its current path of planned product enhancements built natively on Force.com. As was the case with PSA, adding capabilities leads to more opportunities as customers are looking for accounting and spend management, order management, and so on. Acquisitions are a good way to add additional capabilities, as long as the acquired application is also a native Force.com application. It's also important to keep up with the social and mobile capabilities inherent in Force.com as accounting personnel are eager to join the mobile workforce, and FinancialForce.com offers them, via Chatter, a proven solution to collaborate with their colleagues across the organization. IDC also advises FinancialForce.com to continue to build its partner ecosystem of FinancialForce ready applications. There are over 1,700 apps currently available on AppExchange, so there are certainly some apps that are ready to join the fine choices already in place. IDC also encourages FinancialForce.com to continue to build out the capabilities of its authorized service provider program by offering FinancialForce.comspecific education and certifications. A robust ecosystem of qualified implementation partners will help FinancialForce.com continue to grow faster than its own investment in head count as well as make resources available in more geographies. FinancialForce.com may also wish to consider adding some resellers in order to expand its sales capabilities. Aligning a reseller program with a similar program from salesforce.com would make sense and be consistent with FinancialForce.com's current practices. Advice for Buyers Salesforce.com customers that are looking for a financial accounting, billing, professional services automation, or services resource planning solution should absolutely have FinancialForce.com on their list of products to consider. The investment these companies have already made in salesforce.com is enhanced by 2013 IDC #

10 choosing to also use FinancialForce.com. The ability to streamline work processes across sales, services, and accounting is just too good to pass up. Prospective customers that are not yet using salesforce.com are also encouraged to look at FinancialForce.com if they are considering a move to the cloud. Particularly, if the prospective customer has 1,000 employees and is in the technology or professional services industries, FinancialForce.com should be on the short list. FinancialForce.com has a proven system that customers have been using since The Force.com platform is a steady foundation on which to build a business, and there are many complementary apps available from salesforce.com and the AppExchange. However, all prospective customers are advised to look closely at the current capabilities of the FinancialForce.com applications as well as the road map for the next two to three releases to ensure that what is delivered will meet the organization's business requirements. IDC also encourages customers to engage with FinancialForce.com's responsive sales and customer success teams to ensure that your business requirements are met. LEARN MORE Related Research Worldwide Financial Accounting Applications Forecast (IDC #238540, December 2012) Salesforce.com: Update on Enterprise Application Strategy (IDC #238454, December 2012) Worldwide SaaS and Cloud Software Forecast and 2011 Vendor Shares (IDC #236184, August 2012) Worldwide Financial Accounting Applications 2011 Vendor Shares: An Improving Recovery (IDC #235475, June 2012) FinancialForce.com Accelerates Growth: A Closer Look at Encouraging 1H11 Indications from Unit4 (IDC #lcdk , September 2011) 10 # IDC

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