Where FinancialForce Fits

FinancialForce held its first big time user conference in Las Vegas last week, headlined by new CEO Tod Nielsen. The company seems to be telling us that it is adjusting course in an effort to create a new category aligned with enterprise resource planning, but very much for this century.

The key concept is services, which must be explained. We’ve grown accustomed to accessing Things as a Service. This model has helped to broaden the markets for relatively expensive goods, enabling more people to access them.

We know Software as a Service is an approach that enables a startup to leverage the same software that enterprise competitors also might use, and thus to reduce in part the competitive advantage of the larger firm.

Cars vs. Earthmovers

Car leases are a way to enable consumers to drive more car for their money — again, giving people access to a product judged to be better in some ways. Today, many people also lease cars to avoid the need to perform certain maintenance tasks. Whatever it is, the Thing as a Service economy has been very successful.

However, the Thing as a Service model in some ways simply paves a cow path. When you think about it, there’s nothing fundamentally different about driving a car that you lease versus one that you buy. As the Internet of Things (IoT) comes into view, we can see the enablement of a large raft of new services by the simple availability of sensors and some good math.

For instance, Caterpillar now has a way of providing earthmoving services to customers who don’t want to buy heavy equipment. Your first reaction might be that Earthmoving as a Service shouldn’t look any different from leasing a car, but here the vagaries of the industry take over.

Car leases also come with mileage constraints, because adding excessive mileage reduces the car’s resale value, so the lessee needs to pay for the use. Generally, going over your mileage limit costs a lot at the end of the lease.

The same is true in this case for earthmoving. A bulldozer’s critical limits include not only hours run, but also tons of earth moved plus depreciation — and I don’t know what else, because this is way outside of my expertise.

Nonetheless, the central point of all this is that Caterpillar would lose money if it simply sold Products as a Service the way you sell software, without accounting for the actual work done.

So, Earthmoving as a Service typically measures tons or cubic yards of earth moved — in other words, a more meaningful metric.

Setting Itself Apart

Accounting for this kind of service is one area in which FinancialForce can establish competitive differentiation. This approach is great when the service offered is temporary, or at least unpredictable — for instance, once a hole is dug, a construction firm’s need for earthmoving might decline precipitously, so why own the equipment? Better to simply pay for value received.

Temporary and asymmetrical services delivery and accounting for it has been the stock in trade of professional services, a FinancialForce stronghold. So it appears to me that the company may be looking to expand its core function into new service areas, and that makes perfect sense.

In this light, it is fitting that one of FinancialForce’s key announcements last week was its partnership with ADP, and the consequent future wind-down of its human capital management module.

HCM has been a function of ERP since the 20th century, but ERP might not be the best place to keep it now. ADP will take over many of the HCM functions, freeing up FinancialForce to do things that are more core to its primary business of providing accounting for a growing services industry.

All this highlight’s Nielsen’s focus on being a good integration partner — both as a Salesforce platform native application set, and as one supplying a robust API set. If all goes well, you could see FinancialForce becoming a kind of subscription economy tool for services.

That’s a mouthful to say, and one of the company’s first jobs is perfecting an elevator pitch for all this. Perhaps the focus should be on accounting for services delivery.

Analytics and Metrics

FinancialForce is likely still one or two acquisitions away from critical mass as a new era ERP platform for services, and for now I am not certain what those acquisitions would be. Certainly analytics and machine learning will be critically important, but as a Salesforce partner, FinancialForce has full access to Einstein and all that it can bring to the situation.

I suspect that some form of analytics augmented by insightful metrics and an easy method of deriving them is on the critical path.

For now, this is a good start. The previous management team did a great job of bringing the company from founding to where it is now. The new team — which in addition to Nielsen includes industry veteran Fred Studer as CMO — now has to build out a company that’s capable of an initial public offering.

It’s too soon to put an IPO on a calendar, but for now FinancialForce is focusing on product and execution, and those are key building blocks.

Denis Pombriant

Denis Pombriant is a well-known CRM industry researcher, strategist, writer and speaker. His new book, You Can't Buy Customer Loyalty, But You Can Earn It, is now available on Amazon. His 2015 book, Solve for the Customer, is also available there. He can be reached at [email protected].

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