Cloud-based systems were met with heavy skepticism from corporates only a few years ago. That skepticism has largely waned, though, with many organizations taking a hybrid approach to cloud solutions and, eventually, entrusting the cloud to store key information like financial data.
But that early skepticism has had some long-lasting consequences. Mainly, large enterprises that weren’t ready to implement cloud-based ERP systems instead decided to have top providers like Oracle and SAP develop customized, on-premise solutions. According to Mike Whitmire, co-founder and CEO of FloQast, the ongoing use of in-house ERP systems comes with its own set of difficulties and pain points.
FloQast launched in 2013 as a firm providing other businesses with software to help them close their books every month or quarter. When the company began, Whitmire told PYMNTS, it was during that period of distrust of the cloud.
“Within the finance and accounting world, there seemed to be general resistance to the cloud, mainly circulated around security,” he said. “Putting financial data in the cloud [could] be perceived as a major security risk.”
Since the company launched, businesses are now more open to the idea of putting financial data in the cloud, though. For up-and-coming, innovative companies, that means an easy decision to implement a cloud-based ERP.
“For companies that have been around a while and already implemented an SAP or an Oracle, they’ve just put too many resources [into] getting that in place,” Whitmire explained. “It takes a lot of time and money, and the idea of switching over to any other ERP, regardless of whether it’s [on-premise] or in the cloud, is a daunting concept. The trouble of switching over is not worth the benefits they’ll get from adopting the cloud at that point.”
The Trouble With Data
On-premise ERP systems may provide a customized solution for major corporations, but they present their own challenges if a company wants to adopt any type of technology requiring integration with existing ERP systems, said Whitmire.
“There’s a major distinction between using a cloud-based ERP versus on-premise ERP, and really, in my opinion, that circles around the ability to integrate with it,” he noted. “With the cloud-based ERP, there is a uniform API and companies are able to build integrations and sell to every client because of how consistent that integration practice is.”
Those custom, in-house ERP systems, though, demand greater involvement from IT teams to support integrations from third-party service providers, Whitmire added.
“The inherent challenge is how customized the ERP is, and how bulky the implementation is for those larger clients,” he said. “That’s a big bottleneck for them.”
FloQast specializes in helping businesses close the books, but when an enterprise is working with an in-house ERP system, there can be too many “cooks in the kitchen,” according to Whitmire.
“When you have a team of people working on different aspects of your accounts, there are a lot of moving parts,” he said. “They’re booking journal entries and making adjustments to them, and the whole team is working in siloes when they need to be working together to produce an accurate financial statement.”
One accountant may be working with revenue teams, while another is working with billing and invoicing. As each makes an adjustment to those journal entries, the rest of the finance team needs to know. Using data from in-house ERP systems makes it more difficult to keep everyone on the same page, Whitmire explained.
FloQast recently released a solution, Cloud Connect, that targets corporations using on-premise ERP systems. The tool enables finance teams to gain real-time access to the data stored in their ERPs via their existing cloud infrastructures.
Whitmire noted the tool uses robotics process automation to automate tedious, time-consuming tasks he said are “redundant” and “not difficult for a robot to figure out.”
While the tool aims to save time, the executive also explained it was designed to keep accounting and finance professionals on the same page within the enterprise, helping as they all work toward a common goal that can sometimes be obscured when on-premise ERPs are deployed.
“Each side needs to understand when balances are changing,” he explained. “You need to understand in real-time, or as close to real-time as possible, [if] those balances that [you’ve] been working on that change without my knowledge. It’s purely a function of having a lot of cooks in the kitchen because we have a lot of work to do when closing the books, and a tight deadline to hit.”
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