Trends in SaaS Treasury Management Systems

One of the most significant developments in business software adoption over the past several years has been the acceleration of corporate adoption of ‘software as a service’ (SaaS) applications. A SaaS application enables corporations to utilise hosted web-based business applications instead of the typical deployment models that were based on the applications deployed by an internal IT department within a customer’s in-house computing environment.

The SaaS deployment model is widely visible across the landscape of software applications, from email providers such as Google’s Gmail service enabling external hosting and management of corporate email to salesforce.com providing SaaS products related to customer relationship management, and corporate communication services.

What are some of the major reasons for SaaS adoption by both smaller corporations as well as larger enterprises? In many cases reduced cost and faster time to market were driving forces for customer adoption of SaaS business applications as these SaaS applications leverage web-based software and the internet as a delivery mechanism.

Some of the key benefits an organisation can derive from SaaS treasury management system (TMS) include:

  1. Eliminate software, hardware and IT personnel costs. Web-based hosted software eliminates or significantly reduces an organisation’s need for internal IT support as well as the need to purchase and maintain hardware and software or worry about constant software upgrades and security threats. Since SaaS applications are web-based no client installation is required as the web browser serves as the client.
  2. Various payment models for SaaS applications enable companies to choose options that can reduce the upfront costs of in-house licensed solutions. Pay-as-you-use models can provide an immediate return on investment whereas typical in-house licensed implementations can require upfront costs of several million dollars over a period of several years before a corporation can attempt to least recoup their investments via benefits provided by an in-house solution system.
  3. The cost for training is significantly reduced and, with some applications, eliminated, with the use of web-based videos that explain each area of the product in detail. Additionally the ubiquity of web-based applications reduces the time required to learn SaaS applications that adhere to common web usage patterns.
  4. The ability for an organisation to try a product extensively as a free trial before making a decision, compared to the classical RFI-RFP-demo approach, has resulted in organisations truly understanding the product they are adopting before making the purchase decision, thereby significantly reducing risks and eliminating surprises.

Dearth of Features and Configurability

However, now that the SaaS revolution has arrived, it also has its own set of issues and potential shortcomings. Not all of the features and functionality provided by classical software installed at customer locations (typically client server systems) were initially available as part of the new breed of SaaS systems. This was anticipated as client server-based systems had grown to allow for the accommodation of almost every software function requirement, although this was usually at a significant cost. This was especially true in the case of treasury workstations, payment systems and the larger TMS.

A couple of years ago, TMS were primarily used by larger enterprises in an internally deployed client/server configuration with the ability to customise a set of features to organisationally-specific needs. These internal deployments usually incurred a significant cost and required extended deployment times and hence limited the penetration of TMS. Typical costs would include hardware and software licenses, extensive customisation costs for numerous consultants from the vendor or other software implementation partners, training and additional significant costs associated with integrating with an enterprise’s existing systems.

Initial SaaS-based TMS provided limited features at a significantly lower price point, along with a faster time to production deployment. Functionality available to enterprise organisations from SaaS systems was limited due to TMS vendors attempting to protect their cost advantage through a common set of functions used by all customers. It was easier and more efficient for a TMS vendor to run the same software version for each customer and hence the option to customise software to meet an end customer’s specific needs were all but eliminated or if possible became a costly exercise that involved consultants and the long deployment time frames typical of in-premise deployments. SaaS vendors were either unable to provide meaningful enterprise treasury process customisation options or when they did they were not cost effective for enterprises to consider.

The above-mentioned choices – either spend a few years and a couple of million dollars in an attempt to adopt an internally customised enterprise TMS or settle for a SaaS TMS that does not support enterprise TMS requirements – has resulted in many enterprise organisations choosing not to adopt a TMS. As these organisations were unable to realise ROI with these two limited options, they have continued to operate on spreadsheets or obsolete systems, despite recognising the considerable benefits that could be achieved with the adoption of an enterprise TMS that met their business requirements.

Emergence of Configurable Web-based TMS

The recent advent of configurable software has considerably changed the landscape of enterprise TMS again. Configurable TMS software provides the ability to easily configure software to support an organisation’s unique treasury processes and enable an organisation to adapt their TMS as their treasury processes are refined and change. Instead of requiring long time frames and significant costs to customise a TMS to meet an organisation’s specific needs; configurable software enhances the benefits of the SaaS model (i.e. primarily the benefits of using web-based software) by enabling customers to configure the TMS to meet their specific treasury requirements. Two examples of configurability of a web-based enterprise TMS are illustrated in the boxes below.

Case study 1

An enterprise with over 10 geographically and functionally diverse subsidiaries needed a TMS that provided straight-through processing (STP) through to the backend accounting systems.

A simplified overview of the process would be: users at multiple subsidiaries would make payments or project incoming transactions. These transactions, once processed at the banks, would need to be reconciled with the forecasts and the consolidated information would need to be passed to multiple backend general ledger (GL) system utilising GL system-specific file formats.

The classical solution to this problem was via the use of a client server based TMS and extensive integration and customisation hours from consultants of a vendor or a vendors implementation partner to ensure that the TMS can integrate with the multiple GL systems. The timeline would range from 12-18 months and cost well over US$1m. The organisation chose the option of using a web-based externally hosted solution that provides configurable software. This resulting solution included an end user configurable accounting treatment that could be configured per subsidiaries GL system, a generic XML format export of GL data for all and a transformation engine that transforms the output XML into the format each GL system needs. The timeline was six months. A detailed overview of the solution is shown in Figure 1.

Figure1: Example of a TMS Solution

Source: Treasury Sciences.
Case study 2

A hedge fund needed custom payment approval processes, rule-based netting and needed their TMS to communicate with three payment banks and multiple internal systems.

Here again, they choose a configurable web-based system – they had the system hosted internally to comply with their policies (note that this indicates the flexibility of today’s web-based systems). Early web-based TMS were only available as externally hosted solutions. The configured system allows the organisation to pick the payment process they need based on rules, allows for netting of transactions, again based on rules or user selection, the ability to create and utilise payment templates across payment banks and, finally, the ability to support payment integration into two payment banks using multiple formats via transformation of a standard payment export format. The implementation timeline to production deployment was four months.

Value for Enterprise Treasuries

These two case studies illustrate the ability of a configurable solution to meet specific customer needs together with significantly faster implementation timelines. Configurability in a TMS should enable organisations to make changes to processes and integrations via simple configuration changes avoiding extensive customisation of software that is both time- and cost-intensive. A major attribute of TMS configurability is the ability of the customer to easily manage changes to their treasury processes without the involvement of the vendor or the need for consultants.

Scenarios in which a web-based configurable TMS provide enterprise organisations to the ability to configure their treasury processes include:

  • Adapt to changes in treasury management processes easily. For example, the ability to configure payment approval processes that are specific to the organisation, enable administration capability to manage rule-based processing, even switch from centralised to decentralised payment approval models or vice versa via end-user configuration and not extensive customisation of software.
  • Adapt to external system integration needs quickly, be it the additional of a new bank or change of the backend accounting system. The use of standards, such as the ISO 20022 payment standard, coupled with web-based configurable software enable changes to bank relationships via configuration instead of costly customisation.
  • Disregard the notion that all treasury management processes have to be finalised upfront before adopting a TMS. While it is good to have a set of cash management processes defined upfront before TMS implementation, it is plainly impossible to have all processes defined forever – organisational needs change and processes need to be improved continuously. A configurable web-based TMS will be able to adapt to the changing needs of an organisation.

Conclusion

Technology has changed for the better in the case of TMS. A configurable web-based TMS enables organisations to adopt a web-based TMS that provides all features and functionality provided by a classical client server-based TMS. Configurability ensures that organisation-specific needs can be readily accommodated by an externally hosted, web-based system at significantly lower costs and timeline. Note that configurable web-based systems can also be hosted internally if there is such a business requirement. The newer web-based systems that are truly flexible to an organisation’s needs are available now for adoption at lower costs, significantly shorter time periods and with the pay-as-you-use model providing immediate return on investment (ROI).

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