New Models in Financial Operations
Session Moderator: Welcome everyone, and thank you for joining us today!
Our guests are Steven Siegel and Chris Murphy, from FiNetrics, Inc.
Financial services veteran Steven P. Siegel is vice president of CPA channel development for FiNetrics, Inc., a new Internet company developing an online Financial EcoCenter for emerging and high-growth businesses. In this position, Siegel serves as liaison to the Certified Public Accountants community, exploring and initiating alliances with accounting firms and educating members of the accounting profession about FiNetrics' application hosting business model.
Chris Murphy is the Vice President of Operations Finance / Business Development for FiNetrics. Murphy's goal is to help FiNetrics penetrate the $58 billion small- to medium-sized business market by identifying and initiating channel partner relationships. Additionally, Murphy works with FiNetrics' partners and numerous technology and Internet start-ups to recommend and implement non-traditional financial and accounting infrastructures. Murphy helps these small to medium-sized businesses employ web-based and outsourced financial solutions to help their management teams focus on their core competencies and grow their businesses.
Steven and Chris are both logged on at Steven's machine, so you will only see one name for them.
Gentlemen, the floor is yours!
Steven Siegel: First know that Steve and Chris are sitting at the same computer, so that even though only Steve's name is showing, both of us are responsible for the content of this session: good or bad.
In order to give you a better idea of what we are discussing today we thought we would like to provide several quotes from noted individuals as to what is happening technologically in the Small and Emerging Business Marketplace and how it relates to the finance and accounting functions of a company. But before that we first want to provide a couple of definitions for those of you who may not be totally conversant with the buzzwords so the quotes are more meaningful:
Does everyone understand these, if not please let us know.
Some of the quotes we thought would be interesting for you to think about are:
Small businesses have remained largely untouched by the ERP and process automation revolution. According to IDC, there are 7.5 million businesses in the U.S. with less than 100 employees each, and they collectively employ over 70 million people. In addition, there are 23 million income-generating home offices that employ ad additional 44 million people. IDC estimates that these two groups, together called 'small business', will spend over $107 billion online in 2002. Despite the size of the small business markets, enterprise software vendors have ignored small businesses for several reasons. First, the cost of selling and implementing enterprise software in a small business is too high relative to the revenue potential of small business accounts. Second, small businesses lack IT resources and infrastructure to maintain and operate enterprise software. Third ERP software is designed with the assumption that it will be deployed in a large and complex enterprise with several special
Just a little more background information, all of which is from Mohanbir Sawhney. Two waves of change are sweeping through the small business marketplace. The first is the Application Service Provider ('ASP') wave. ASP's are delivering web-based applications to small businesses to manage their business operations. Many of these applications were not available to small business in the licensed software world. Some other things to consider when we are looking at the ASP and Outsourcing arenas are highlighted in some of the major financial publications. "Sites that allow businesses to manage all aspects of their financial needs, will likely dominate the eFinance space."
Robertson Stephens 1/18/00 eBanking report: "The Internet is shrinking the finance department to a one-person outpost monitoring legions of outsourcers."
CFO Magazine, 1/00: “The value proposition of outsourcing is not simply about reducing cost--rather it is focused on delivering improved information for future decision making.”
There are numerous items that combine to add the value including:
Improved business performance:
Additionally Improved delivery of information for decision making which includes:
Kevin Stevens: What is the best way to evaluate an outsourced accounting vendor?
Paul Malen: Hmmm...ASP's sound like the time sharing mainframe systems about 10-15 years ago.
Steven Siegel: Similar, but this is internet based which results in real time access to financial information from anywhere you have internet connection. Further it allows you to share information and to collaborate with others defined users in remote locations.
Betty Harrison: Why should a small business consider outsourcing its finance and accounting function?
Steven Siegel: These critical needs can be translated into a Service Level agreement so that you ensure that you get everything that you need from the vendor. Next step is to understand and evaluate scalable systems and processes of the vendor. Look to work with a vendor that not only meets your for today, but can scale with your needs as your grow. Next is to understand the history of your vendor so that you build a high level of comfort trust and control with the vendor.
First step in evaluating a financial outsourcing vendor is to correctly plan and understand your company's needs. This is the most important point to evaluate when choosing the outsourcer and if you are going to trust someone outside of your company to manage your financials you must be confident that they will not only be able to meet your needs today, but will be around in the future when you need them. Evaluating an ASP is very similar in terms of evaluating the accounting package when you look at the functionality issues, however, the cost component around licensing, maintenance and overall IT support is significantly less within the ASP model
Brenda Richter: Sounds like evaluating an ASP is just like evaluating any other accounting package
Paul Malen: I like the idea of access or use of high powered software for operations that cannot afford their own copy, but my concern is reliability of connections. Our retail operation was affected by Hurricane Fred in Florida last year and we are in Washington State! Credit card processing was delayed several days. My financial information needs are now, not when some internet backbone get back on line. In the hurricane case, some key telephone switch was underwater.
Steven Siegel: Paul, your points around reliability and security are valid concerns. These are some thoughts on the issue that may make you feel somewhat more secure though:
Top tier ASPs and Outsourcing vendors provide more data security than you are able to on your own. From the ASP side, the systems reside in secure, data centers with redundant power sources, backup systems, physical and technological security. ASP has protocols that they utilize that do.
From the Outsourcing side, the businesses are set up to manage data and establish best practices in order to allow you to fully control and implement financial controls to both operate your business and control the protection of data. The line starting ASP has protocols that they utilize that should end nightly backups, disaster control that is more cost efficient.
Paul Malen: Are we going to see the software vendor become the ASP, or will they stay out of the equation? This seems like a logical path for software vendors.
Steven Siegel: Yes, some will, but the smaller market will now also have access to more powerful top tier software providers that they did not before, such as SAP.
When looking at NetLedger or any other ASP you need to evaluate all the other product offerings of the vendor, not solely a point product application. This is especially important, and also may be a problem with some of the shrink-wrapped products, in that you need to consider both the scalability of the solution and the ability to integrate other financial information into the product.
Premier ASPs will provide their customers with migration paths to fit their growth needs while minimizing the need for significant incremental integration and implementation costs.
Some other quotes that we hope will make you think about the growth of outsourcing are:
Growth of outsourcing: 'The CFO will no longer measure influence by the number of direct reports, but by the number of strategic decisions made' PricewaterhouseCoopers' Donniel Schuman, co-author of Shared Services: Adding Value to the Business Units as quoted in CFO magazine
"The Internet is shrinking the finance department to a one-person outpost monitoring legions of outsourcers."
Bryan Freshcorn: Who owns the data file in case a contract with an ASP is terminated?
Steven Siegel: The customer will always own their data.
Session Moderator: Steven and Chris, why don't you tell us a little about how FiNetrics came to be, and what type of clients you are serving?
Steven Siegel: FiNetrics combines the ASP and outsourcing functions for the emerging and medium size business market.
Session Moderator: Do CPAs bring their clients to you, or do business owners use your services?
Steven Siegel: We have built and continue to enhance an internet accounting application that in fact provides the smaller business to utilize the power of SAP in a much-simplified format.
Session Moderator: Do you provide a full range of accounting services, including fixed asset management, inventory control, etc.?
Chris Murphy: We've also become a full Business Service Provider, enabling small businesses to outsource their entire back office to us. We have secure key partnerships with Arthur Andersen, Ariba, and Microsoft to bring suites of best of breed products and services to our customers.
Additionally, we have launched a CPA channel program, which allows smaller CPA firms to form a positive alliance with a Big 5 firm.
Brenda Richter: What is the typical size of a business using your services?
Chris Murphy: Brenda, we work with companies at the very beginning stages of their businesses up to and including mid-sized companies with revenues in the range of $100,000,000.
Paul Malen: What happens when we decide to switch to a different vendor or ASP?
Chris Murphy: Switching vendors is very similar to switching vendors in any other software relationship. There would need to be a data migration into a new software product-- same as it would be traditionally.
Steven Siegel: Thank you for your time and attention. If you have any more questions or would like to discuss FiNetrics in further detail please visit our site at www.finetrics.com, or contact Chris or myself at 630-799-9700
Session Moderator: If there aren't any other questions, please let me thank all of you, on behalf of AccountingWEB, for joining us today. And thank you very much to Steven and Chris for presenting this informative workshop!