This week has seen me brave a Hades-like Las Vegas (at least when it comes to temperatures) to attend FinancialForce’s CommunityLive event. The conference is the first time that FinancialForce invited media and analysts to their show and was something of a coming-out parade for a new regime. Newly minted CEO Tod Nielsen and high-profile (and high-octane) CMO Fred Studer took the opportunity to get front and center and articulate what the new FinancialForce would look like.
It is somewhat ironic that only a couple of months ago I was at another “coming out” event in Vegas. In that case, it was for NetSuite’s customer event and that too was the first event after a big change – in their case the acquisition of the company by Oracle. SuiteWorld showed a company that was set for significant investment by its parent company, and huge goals for global growth. And so, what did we see at CommLive from FinancialForce?
HCM is sorta, kinda, no more
The biggest piece of news was the announcement that ADP and FinancialForce have inked a deal whereby ADP will be the preferred HCM supplier in the FinancialForce ecosystem. What wasn’t answered in the press release or the keynotes, however, was what this would mean for existing customers of FinancialForce’s HCM products. Readers will remember that back in 2013 FinancialForce acquired Vana Workforce to deliver an HCM offering. Indeed, the acquisition, along with that of Less Software, saw the company finally take up the ERP moniker.
There were many questions in the analyst session with Studer and Nielsen about the reason for the about-face, and what it would mean.
It seems that the existing HCM offering will be supported through until 2022, but existing prospects will be shifted to ADP offerings. This came as a surprise to everyone – indeed there were, I believe, sales conversations happening during the show in which prospects who were looking at FinancialForce’s HCM offering were advised of the change. Not a particularly comfortable situation for the salespeople involved.
In the analyst session, Brian Sommer, one of the most well-respected EP analysts in the industry, asked whether the move was related to resource constraints and a sign that FinancialForce didn’t have the cash to actually build a fully-features HCM offering. The answer from Neilsen was emphatic:
…when I joined, our roadmap was, list every feature of every ERP product out there, and then that’s our roadmap. That’s just not realistic. We have to be great at a few things instead of average at a lot of things…
In the HCM space I had a few customers that were hopeful that I was going to give them Workday. And I’m a long ways from there. I can’t move as fast as they need to move. So instead of having disappointed customers, I wanted to focus and say, ‘Here’s what we’re going to do.’ We have a great skill and resource in talent management capabilities that we’ll be integrating into our PSA offering, but I’m not going to be able to do benefits, or leave, or payroll, or a bunch of the other things.
Sommer also wryly made the comment that in his decades’ long time in the industry, he has never seen a vendor drop out of an area – rather they always add functionality to increase the breadth of their offering. While Nielsen’s argument and rationale make sense, it still reduces the footprint that the company has, which takes us to a core thrust of their strategy going forwards.
Don’t get me wrong, the FinancialForce HCM product was, by all accounts, sub-par. This is the right decision to make, it’s just the execution of the decision that will cause some short term and, hopefully, temporary pain.
Services is the new everything
Nielsen spent a huge proportion of his keynote time (some would say too much) introducing the audience to the idea of the services economy. One would have thought that any customer or prospect at the event would be well aware of the rise of services and its importance to their future, but no matter.
In the analyst session, I questioned Studer about whether, with the end of its own HCM offering, and the prospect of the same happening with its supply chain offering, there was still enough “guts” to justify FinancialForce’s existence. Simply put, are the PSA and financials offerings enough to get the company to where it needs to go?
Both Studer and Nielsen were adamant that “services” is applicable far beyond the world of professional services. They pointed out the vast numbers of traditional industries that are now moving towards a services-based model. The traditional examples – from Uber to Airbnb, from Netflix to Adobe – all justify this position and give FinancialForce, even without its HCM offering, plenty of room to grow, they suggest.
Of course, PSA and services are two different things. A consulting shop that sells peoples’ time is different from powering the next Uber, Airbnb or Netflix – there’s a fair amount of product build out that will be needed to really fulfil the broader services opportunity.
All-in on Salesforce. But asserting independence
Nielsen had a dual story to tell when it came to talking about FinancialForce’s position as a vendor on the Salesforce platform (and, as an aside, as a company that Salesforce has invested in.) It is worth bearing in mind that his last job saw Nielsen in charge of all of Salesforce’s platform offerings – so this is a guy who knows the Salesforce platform inside and out.
Nielsen spoke of a deeper look at the way FinancialForce is architected and an intention to leverage Heroku, Salesforce’s second platform, for some particular functional requirements. He also strongly articulated the view that FinancialForce has a huge opportunity to continue aligning itself with his Alma Mater. He also opined on Salesforce’s deepening relationship with FinancialForce:
I think that Salesforce’s view of FinancialForce has changed since I came on board. They now look at, ‘Hey we can lean in and really partner with these folks.’
When you look at the momentum inside the business, we are the largest ERP vendor on the Salesforce platform and most successful — and growth-oriented. That’s where they are — if someone’s going to work well and partner with them they’re great.
If you were Sage or if you were Kenandy or some of the other folks on the ERP space [on the Salesforce platform], they’re probably a little disappointed that I came over and that Salesforce is leaning in and we’re getting customer momentum here, but speed is the new currency, so we’ve got to move fast and take advantage of that.
At the same time, however, Nielsen articulated a desire for FinancialForce to stand on its own two feet. While Salesforce is a great story to tell, and the company will certainly go after Salesforce prospects, he also wants FinancialForce to enjoy success outside of the Salesforce ecosystem – the product has value to customers regardless of whether or not they’re Salesforce users.
Conference content – subtractive rather than additive
Most vendor conferences are full of product announcements. After two days at CommLive, however, the general consensus from the analysts there was that this show was fairly light. The biggest announcement was the moving away from HCM and the partnership with ADP. There were no acquisitions, little in the way of product announcements, and not even huge new customers wins to crow about.
Of course, this was all about the new regime stamping its mark on the company and hence there was probably a desire to tell a story more about their priorities, strategies, and intentions than shorter term news. This was about scene-setting and next year will, one assumes, be more about product and momentum news.
The competitive landscape
With unfortunate timing, the same week that CommLive was happening was the one chosen by Gartner to publish their latest Magic Quadrant (see below). While the MQ isn’t perfect (it is reliant on large referenceable customer case studies), the relatively poor showing of FinancialForce, especially when compared to Intacct, another mid-market cloud ERP vendor, surprised many. Intacct has always been less well resourced, and hasn’t had the benefit of the attention that the Salesforce connection brings – it was a surprise to many (and, likely, to the FinancialForce execs) to see how well they fared in comparison.
One thing the execs will be pleased with is their relative position on the visionary axis compared to NetSuite. While NetSuite is rated more highly for its ability to actually execute upon its opportunity, the fact that NetSuite came out as having more vision than the new Oracle subsidiary, will be well received.
Update, it was pointed out to me that there is a huge difference in the length of time that Intacct and FinancialForce have been around (Intacct founded in 1999 and FinancialForce in 2009) and that this might be the reason for some of the different findings. While this is a valid comment, and I accept that it takes time to design, build and realize a product and market, the MQ is based on where a company is today and hence should be taken at face value.
Vertical opportunities
The obvious move for FinancialForce would be to start moving strongly into vertical-specific areas where they can add specific value. Their narrowing away from on-platform HCM and SCM means that they need to deliver some verticalization to broaden the franchise. Studer was asked about a potential vertical strategy and he seemed bullish on the opportunity. He articulated that, in his view, Government, healthcare, hi-tech and non-profit are examples of vertical areas that the company could move into.
That said, there was nothing to announce at the show, and no obvious case of deep thinking or resourcing of vertical specialization going on – FinancialForce is full of smart people who understand accounting and professional services deeply, but it strikes me that, beyond their own area of software, there is limited vertical skill within the organization – potentially an area that the new executive team will want to look to from a hiring perspective?
MyPOV
The jury is out. While it would be easy to articulate disappointment at the lack of substantive news from the show, given the context of the new management team, it is fair to give them this event to state their position.
I suspect that the commentators will not be so lenient, however, if within 12 months we don’t start to see significant traction from the change in strategy. FinancialForce has a huge opportunity – the move to the cloud, the growth of services businesses and the Salesforce connection all make the time right for this company to shine. I’ll be watching their progress closely.
