When companies replace Excel with automated, cloud planning and analysis tools, CFOs can extract more value from the FP&A function and become the strategic advisors the CEO expects them to be.
So it’s no surprise that many organizations are choosing software-as-a-service (SaaS) solutions over traditional on-site applications, including single-user spreadsheets. More than $1 trillion in IT spending will be affected by the shift to cloud by 2020, reported Gartner. Moreover, according to Bessemer Venture Partners’ Cloud Index, there are 30 publicly traded companies in the cloud computing market worth $1 billion each.
Here’s why SaaS makes sense, both for the finance team and the company as a whole.
- Stronger customer investment: SaaS companies don’t make money unless their customers are successful, which can often take several years. That means the company must keep earning customer loyalty year after year to avoid financial and reputational harm. Because your success is contingent on ensuring your customers become successful and renew the product, SaaS creates a very different relationship than the one created by a traditional perpetual license. With SaaS, the more successful the customer, the more profitable the sale will ultimately be for you. That’s a better situation for everyone than the old licensing relationship in which a salesperson gets the deal at the end of the quarter and is never heard from again.
- More strategic IT teams: A lot of companies’ movement to SaaS is for specific, purpose-built applications that optimize a particular function and integrate that function with others. This cloud-based system, which is mostly managed outside the company and does not have customization, replaces the old model, where IT departments typically managed large applications of on-premises, enterprise software. As a result, the IT role morphs to address the new integration, architecture, and security philosophy around the SaaS environment.
In this way, SaaS transforms not just the business, but the relationship between the CFO and chief information officer (CIO). “The CIO has in the past hid behind technological magic,” said Steve Orleow, who oversees both finance and IT functions for Sydney, Australia-based Biopak, an environmentally friendly food container company. “Now the cloud makes things more transparent, (which) puts more power in the CFO’s hands.”
- Richer team engagement: By mentally expanding your planning process past a spreadsheet, you also physically expand a discussion beyond your laptop in a way that gets more people involved. A cloud-based SaaS application frees your department from the constraints of physical locations and offices. Because everyone can access the dashboard and data, SaaS applications allow other department heads, teammates, and business partners to participate in their module of the application. And better engagement means better results for everyone.
The many benefits of SaaS can ripple out far beyond the finance function, but those perks also boomerang back with higher engagement and buy-in from department heads and budget managers. And savvy CFOs know that’s a win-win.