2006 has been a busy year, marked by a continuing rise in regulatory demands, structural changes in the outsourcing industry, consolidation of suppliers in enterprise financials and renewed vigour in the ERP mid-market and performance management space. But the year is also noteworthy for the spreading influence and contribution of Microsoft. Whether it is mid-market ERP, databases, technology and operating systems, office productivity tools, workflow or performance management applications, Microsoft has made a strong play. Along the way, it has helped to reshape thinking about the way we work and stirred market interest.
THE FSN REVIEW 2006
At the beginning of 2006 everyone heaved a sigh of relief that the first year of IFRS had passed without a hitch. By and large, financial reporting systems proved flexible enough to cope with multi-GAAP reporting and complex segmental analysis. Nevertheless companies on both sides of the Atlantic questioned the cost of regulation and resented the time that they had to devote to its implementation. Many expressed concern that IFRS financial statements were impenetrable, even to seasoned finance professionals and doubted whether the standards would lead to greater comparability in reporting. Those companies with dual listings complained about the need to report in IFRS , US -GAAP and local GAAP where necessary and despite soothing political comment, the convergence of US-GAAP to IFRS seems as distant as ever. The burden of dual reporting standards allied to the seemingly excessive demands of Sarbanes Oxley even caused companies to consider de-listing from stock exchanges and certainly discouraged foreign companies from listing on US exchanges. Infact private equity companies trumpeted their success in taking public companies back into private ownership.
In Europe , the trend to even more regulation was unstoppable. The chancellor may have abandoned the OFR (Operating and Financial Review) but businesses quickly realised that most of its provisions would be implemented as part of the EU Accounts Modernisation Directive . Narrative Reporting, is here to stay and companies have had to come to terms with the brave new world of environmental reporting, Corporate Social Reporting and employee reporting. FSN was pleased to welcome Niki Leahy, as a specialist writer on environmental issues.
MarkDye, another new comer to FSN has driven our coverage of hardware issues, particularly mobile computing in the finance function.
In an attempt to shave administrative costs many finance departments turned their attention to outsourcing. It's a highly competitive market and 2006 confirmed a number of structural changes, for example, an increase in the number of new and more specialised suppliers, (particularly offshore) and the trend to smaller more manageable outsourcing arrangements over a shorter contract period. Whilst suppliers sought "strategic relationships" companies were more interested in saving costs. Several articles in 2006 highlighted the perils of simply managing outsourcing arrangements to a contract and service level agreement. A study by Warwick Business School concluded that a less combative management style is necessary if companies are to derive all of the benefits of an outsourcing arrangement and FSN looked at the broader issues of resourcing business transformation projects with our recruitment partner Systems Accountants.
Lesley Meall, another contributing editor to FSN followed a more contrarian line and wrote about the rise of insourcing.
Structural change was also happening in the enterprise financial market. The large scale ERP market was saturated and traditional ERP vendors turned their attention to the mid-market. SAP and Microsoft slogged it out in the mid-market, looking to take market share from large National vendors. Both organisations raced to build their re-seller network which is seen as key to success in the mid-market.
But Microsoft hasn't been just a market participant. In many respects it has been a market maker – driving innovation in financial applications software and promoting a roles based approach to ERP design, leveraging its strong presence in office systems and the underlying technology. Microsoft's impact on the market is enormous at all levels, from operating systems such as Vista through to applications such as Microsoft Dynamics Nav 5.0 . "Turning the tables on ERP" A review of Microsoft Dynamics NAV version 5.0 Moreover, it has deep enough pockets and a commitment to the longer term which allows it to see through many of the innovations it is implementing. The good news is that most of the technologies it uses are widely available so that many suppliers and customers that use a Microsoft platform can benefit from its innovations. Access Accounting is a good example of a thriving mid-market financial software house that fully exploits the Microsoft platform.
Infor a relatively young company snapped up ERP vendors and other software houses like they were going out of fashion. Backed by considerable equity finance they acquired some of the best known brands in the market such as SSA Global, Extensity and Systems Union and assembled a portfolio of companies with a combined turnover of $2.1 billion. The long expected shakeout of the ERP market was underway. Nevertheless, players such as Agresso , and CODA remained independent and thrived in a market which appreciated their differentiated position.
2006 was the year in which BPM solutions reached maturity. Most of the leading software houses ( Hyperion , Cartesis , SAS and Cognos ) have made their strategic acquisitions and assembled tightly integrated performance management suites. Now their attention is focussed on the user experience, 'democratising' information and making it available to a broader user base. This transition is timely, since companies face a bewildering range of information demands based on an ever widening set of data sources. Marshalling and presenting information for a growing band of internal and external stakeholders is going to be one of the biggest business challenges of the next decade as we hurtle towards an age of digital and real time reporting.
Thankfully, 2006 was also a year in which smaller software vendors with a particular niche capability could shine through. Cluster Seven has changed our thinking around the way we manage business critical spreadsheets and pioneered a unique approach to spreadsheet management. Version One has dominated thought leadership around document management in the finance function whilst leading by example on environmental issues. Later in the year, Clarity Systems a successful Canadian BPM vendor made its entry in the European market with a flourish, bringing a uniquely consultative approach to the application of performance management.
There is every sign that 2007 is going to be a very interesting and testing year for a number of market segments. In the enterprise market, Infor is expected to make more acquisitions but how well will it be able to integrate its acquisitions and how successfully will it realise additional value for customers and shareholders? Microsoft and SAP's advance on the mid-market should start to bear fruit. How much market share will they take from the large National vendors and which suppliers will fall by the wayside? The BPM market is poised for considerable success as the pure BI market disappears and organisations begin to appreciate fully the wide capabilities of these specialised vendors. But could the BPM market be a victim of its own success? Will one of the ERP vendors swallow up a BPM provider to steal a march on competitors?
Whatever happens in 2007, you can be sure that FSN will bring you the best free news and analysis to your desk!
