Budgeting and forecasting. The shaky economy has boosted this one too, especially by pushing mid-market companies to transition from spreadsheet-based processes. The mid-market segment will drive strong growth for these applications for a few more years, depending on the development of more affordable solutions, Forrester says. Added growth is coming from large companies, which typically own those solutions and are often inclined to replace them with newer products. The business value-add is high, driven currently by more agile and transparent forecasting processes in the software.
Account reconciliation. The outlook is much more modest for this technology, which matches and compares figures from accounting records against external sources and reconciles internal account balances to subledgers. It’s been available for more than a decade, and adoption increased after Sarbanes-Oxley was passed. But while adoption is still growing, account reconciliation software overall provides by far the least value among the five in the growth phase. Its main selling point is efficiency, in that it automates a labor-intensive process, and most companies are addressing that with applications not built expressly for that purpose.
Expense reporting. This technology could add more value if it were better integrated with spending and travel management processes, according to Forrester. “Greater benefits are available to users that seek reduction of travel expenditures via policy adherence and integration with travel booking solutions,” the report says. But growth prospects are solid, because while adoption and integration levels are high among large companies, many smaller ones are still using rudimentary, internally developed expense reporting processes.
Cost and profitability management. Homegrown solutions are common for this purpose as well. In fact, Forrester says, many companies aren’t even aware of this product category, which analyzes development, production, and operating costs against revenues for specific customers, products, and business lines. That means the growth potential is high, though interest is less in service industries with lower customer or product complexity. Forrester says customers can realize 10 times or higher ROI on this software in one or two years by recognizing unprofitable products or customers. But the research firm still only pegs the software’s value-add as medium. “Effort levels to realize benefits are substantial in terms of modeling effort and data integration,” the report says.
Finally, four product categories are identified as being in the “equilibrium” phase, with high, steady adoption levels:
Treasury and cash management. The market for this kind of software has gone through significant consolidation, leaving a small number of players. In fact, demand for solutions may fall within the next 10 years as companies outsource treasury functions, and this product category may be the first to change from the “equilibrium” phase to the “decline” phase. At present, payback from an implementation can be fast, particularly where large asset values are at stake. ROI is based on maximizing portfolio returns while minimizing risks of exposure to market fluctuations. “Solutions are mature but continue to evolve to take advantage of open standards for integration,” Forrester writes.
Financial reporting and consolidation. This is mainly a product-replacement market. Compliance changes in some industries drive some of the churn. Companies with many subsidiaries, numerous legal entities, and overseas operations often need a consolidation package to meet financial reporting requirements. This category is very mature and limited to a small number of key vendors, but regulatory imperatives such as International Financial Reporting Standards keep the business needs evolving.
Tax planning and compliance. Consolidation has been occurring here too, and some types of tax software are moving toward becoming commodities. Applications that calculate tax and prepare returns are more mature than those that automate tax provision and planning.
Accounting. “How would you run a business without an accounting system?” Hamerman asks rhetorically. Adoption is universal, and a transition to the decline phase is not envisioned. “The accounting paradigm is unlikely to change significantly for the foreseeable future,” the report states.