June 22, 2009, 09:51 AM
Finance departments must be involved in major procurement
decisions, to make sure the business case is done properly. They
need to set aside CAPEX allocations and understand the ongoing
consequences for OPEX budgets. They need to know what the new
system can do for them (if anything), and how the new system
will integrate with existing systems of record in the company.
Whether your finance department is a one-man band or a big
organization, they need to understand how SaaS applications (and
particularly Salesforce CRM) change a lot of the financial
assumptions. What issues do you need to think about? What new
decisions will you have to make? How should you measure success?
Here are some CFO guidelines for making better decisions. While
much of this article applies to any SaaS CRM system, we've
focused here on the specifics of Salesforce.com.
Making the Business Case There are two sides to every
business case: costs and benefits. While analyzing the SFDC
investment is way beyond the scope of this article, here are the
three main factors that come into play.
TCO comprises three major elements: procurement,
implementation, and operations. Let's look at them in turn:
Procurement:These are monthly fees that vary by the number
and type of users, product version, length of contractual
commitment, and willingness to prepay. Do not expect SFDC or any
other SaaS vendor to discount as aggressively as enterprise
software vendors do.
Implementation: You will almost certainly need consulting and
other services to configure the system, convert legacy data,
integrate with other systems, write custom code, test the
system, deploy it, and train users.
The biggest cost of implementation will not be system
customization: it'll be data and integration. Don't be surprised
if cleaning up data and integrating with your existing systems
costs more than your first-year license fees.
Do not neglect support fees during the implementation period.
You'll need speed of access and in-depth expertise that is
available only through premium support.
Ongoing Costs: Beyond the monthly subscription fees discussed
above, the ongoing costs for SaaS are typically one-time costs
for things like data recovery or purchase of an add-on (such as
a data deduping tool).
The most interesting ongoing costs are related to people:
follow-on implementation or expansion work, training costs for
new users or administrators, travel and fees for "power users"
attending technical conferences (a good investment), and
consulting time for cleaning up data pollution problems that are
almost inevitable in large systems.
On the benefits side, it's important to evaluate both the
hard and soft elements of cost and revenue impact. Lowered costs
should include hardware and software cost avoidance, decreases
in labor, waste avoidance, and efficiency improvements. Revenue
improvement should include the impact of: shortening the sales
cycle by 5 percent, preventing a lost sale, or achieving a
couple of more upsells per quarter. Obviously, these are "soft
revenues," but ask your sales VP what would be the impact of hot
prospects never "falling through the cracks." You'll never get
him to raise his quota, but the whole point of a CRM system is
to achieve growth more profitably.
The Goldilocks Investment: Behavior Change Needed Traditional
Enterprise software was a "bet the farm model:" make a big
investment, have a monolithic deployment, and see a monumental
payoff. All too often, though, the results were high costs,
delayed deployments, or even outright failure.
SFDC is a game-changer not because of individual features,
but because it's a "by-the-drink" model. SFDC is best
implemented using an Agile deployment style where you invest
just enough to make a business impact quickly. After you put a
minimalist system into production, you can measure its initial
results. You'll rapidly discover where some additional
functionality will make a business difference. More importantly,
you'll discover the areas where you don't need to invest
further-features that would have been part of the enterprise
software implementation but aren't of sufficient value to you.
However, this "Goldilocks investment" requires some
behavioral changes on your part:
Investment isn't a one-shot, fire-and-forget-it deal. You
need to be more attentive over time to project management and
incremental investment needs. Expect to be making little
improvements every couple of quarters throughout the life of the
system.
Traditional Enterprise Software business cases assume a
system life of 5 to 10 years, and this works for some
application categories. But it doesn't hold true for CRM: system
life (and therefore your business case horizon) is typically 3
to 5 years. This is not the fault of the software vendors-system
obsolescence is caused by the rapidity of change of your
business environment, executive policies, and the marketplace
you face.
Benefits for Finance Teams You may think of Salesforce.com as
just an SFA system, but there are hundreds of add-on products
that extend it in several ways. Many customers configure it as a
full-fledged CRM system, tightly integrated with the rest of the
business.
Since SFDC has a significant amount of data that's relevant
to finance, it's key to understand what it can do for that
department.
Forecasting: SFDC's forecasting system is focused on
bookings, and it has sophisticated access controls to prevent
unauthorized viewing and meddling. SFDC's forecast should be
used as the input for your revenue forecasting system.
The Quote to Cash cycle: SFDC already holds detailed
information about the product and services pipeline, and can be
easily extended to produce fully itemized quotes. These quotes
should be "locked down" so that the ones that aren't "automatic
yes'es" can't be printed or emailed until approved by sales
management, finance, and legal. Once the deal is closed, the
order and contract can be automatically generated from SFDC
data.
Accounting: Once the order is closed, the order and invoicing
information can be transferred from SFDC to your accounting
system. Although SFDC won't be the system of record for
accounting data, it is secure enough to be the source for
updates and triggers.
Analytics: SFDC can hold millions of records regarding
customer contact, quoting patterns, and deals-the ones you won
and the ones you lost. This data supports analysis of
profitability, product-line discounting, sales territory
performance, or marketing effectiveness. Built in the system is
an easy to use set of reports, but sophisticated analysts
quickly outgrow them. SFDC plugs into standard reporting,
analytics, and data warehousing tools.
Process controls and compliance: SFDC has role-based
privileges that can enforce access controls down to a very fine
level, and its workflows allow for locking down data depending
on the state of transactions. The system can aid in
Sarbanes-Oxley compliance, particularly regarding forecasting
and deal-close processes.
David Taber
http://www.itworld.com/saas/69571/Salesforcecom-what-your-cfo-needs-know
