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TMS: Channel for Innovation The growth of cloud-based computing is a positive development in treasury, in that we are seeing significant innovation that is facilitating treasurers’ expanding role; however, it is important not to get lost in the hyperbole surrounding ‘the cloud’ and focus instead on what each treasury needs to fulfil its strategic and operational role.

TMS: Channel for Innovation

by Helen Sanders, Editor

Every year, we feature a cover story in TMI on the subject of treasury management technology and every year it becomes more difficult. In some years, speaking frankly, there has not been much that is new to say. This is by no means the case this year. One of the challenges this year is to distinguish between what technology is used for (i.e. the functionality it provides) and how it is deployed, particularly the use of cloud-based solutions. The growth of cloud-based computing is a positive development in treasury, in that we are seeing significant innovation that is facilitating treasurers’ expanding role; however, it is important not to get lost in the hyperbole surrounding ‘the cloud’ and focus instead on what each treasury needs to fulfil its strategic and operational role in a secure and efficient way.

Managed and SaaS-based solutions

So what is cloud-based computing (in a treasury context) and why has it become such a talking point? Essentially, cloud computing refers to web-based applications (in this case treasury management systems or TMS) that are hosted on a remote server, with storage, management and processing of data typically undertaken by a specialist third party. Cloud computing is not synonymous with web access: a system could be hosted within the organisation, but users can access the system via the internet or an intranet.

There are two types of cloud-based TMS. The first is a hosted or managed solution, which may also be referred to as an ASP (application service provider) solution. This is hosted and managed by the vendor or a third party, but treasury has its own dedicated technical environment and database. The system and interfaces to other internal and external systems are typically configured according to the needs of the individual treasury, with full control over the timing of upgrades and other system changes. Managed solutions reduce the amount of IT resource that is required compared to hosting and maintaining the hardware and software in-house, therefore making it more feasible for treasuries that require sophisticated systems but that wish to avoid the need for significant IT costs and resourcing.

A SaaS model takes the concept of a hosted environment further. The TMS is hosted in a common environment with a shared database, with each company having access to its own data. Upgrades are undertaken by the vendor, without considerable disruption, so users have consistent access to the most current version of the software. Links to other commonly used systems such as electronic banking, rates providers and confirmation matching are managed centrally, providing users with access to a range of ancillary tools without the inconvenience of managing multiple systems. SaaS solutions offer particular advantage to those for whom a TMS has appeared an unrealistic option in the past, or who may not be able to justify the cost and resource requirement to implement a system with the degree of efficiency, automation and sophisticated reporting and decision support that they require. As with hosted solutions, SaaS solutions are often considered favourably by both IT and treasury as the need for internal hosting and management is eliminated. Justin Brimfield, EVP, Corporate Development, Reval outlines,

“The relationship with IT and treasury is more aligned now than I have ever seen them on the best way to serve treasury’s needs, whereas in the past there has been some friction. SaaS technology meets the needs of both IT and treasury whilst supporting and facilitating treasurers’ expanding role and greater impact within the company.”

Furthermore, SaaS solutions are typically offered on a rental basis as opposed to a license fee, avoiding large upfront costs. Marcus Hughes, Director, Business Development of Bottomline Technologies emphasises,

“All of the functional developments we anticipate will take place in the cloud as this increasingly becomes corporates’ preferred deployment method. While banks have been a little slower to adopt cloud-based technology, corporates see the benefit of outsourcing systems management, hosting and data transformation to a reliable, stable vendor. Subscription based pricing models are also becoming more popular, removing up-front fees.”

Mainstream adoption

The benefits of cloud computing are now emphasised by most TMS vendors. As Paul Bramwell, SVP, Treasury Solutions, SunGard Corporate Liquidity explains,

“Treasurers rarely have the time or inclination to focus on treasury technology, resulting in considerably more interest in cloud-based solutions, whether hosted or SaaS. This is a positive trend for many reasons, not least as treasurers can make their technology decisions based on the functionality they require and the level of service provided by the vendor, as opposed to the technical fit within their organisation.”

Vendors are distinguished, however, between the exclusive use of SaaS (e.g. Reval and Kyriba) and a choice of installed, hosted and SaaS solutions (e.g. SunGard). Put like this, readers will perhaps wonder why SaaS deployment remains such an emphasis amongst vendors, and I am inclined to agree. Paul Bramwell explains SunGard’s strategic decision to continue to offer customers a choice of deployment methods,

“While SaaS solutions offer considerable benefits, they do not suit every organisation, particularly if it is important to keep data within the company’s firewall. Consequently, at SunGard we enable customers to install our solutions if they wish, we can host and manage it on their behalf, or we offer SaaS- based solution. Users still benefit from web-based access to our solutions, whatever deployment option is preferred, but a choice of deployment methods offers far greater long-term flexibility than SaaS alone. An example here is a company that is acquired.  Maybe they currently have SaaS-based software.  Now they are acquired by a company that has strict policies on keeping certain data within their firewalls.  This company would need to have the flexibility to pull that data in, or redeploy software that would be located on-premise.  This is just one example of why we feel that flexible deployment options are so important.”

Vendors such as Reval that are pursuing an exclusively SaaS-based strategy argue that SaaS offers associated advantages that installed or managed solutions cannot, such as the development of a community, as Justin Brimfield, Reval details,

Justin Brimfield“Technology is a vital enabler of the major trends we are seeing in treasury: the expanding role of treasury, internal relationships e.g. with business units and procurement and the growing demands of regulation. The push towards SaaS-based technology is key to this, not only from a cost-effectiveness standpoint, but also from the perspective that companies stand to gain a lot of value in being part of a community of users that operates off the same, one-to-many model. New developments benefit all users, and as these are delivered promptly, rather than slowly, client by client. Treasurers don’t have to wait for major upgrades, but can take advantage of new opportunities quickly.”

Personally, I will be relieved when discussions about the value or otherwise of SaaS vs. hosted vs. managed solutions disappear. Bearing in mind that most vendors now offer a SaaS-based solution (either exclusively or as an option), it is becoming far less of a differentiator, and for treasurers for whom a SaaS-based model is not feasible or desirable, it is not relevant at all. Enrico Camerinelli, Aite Group explains,

“Cloud-based technology [referring to SaaS] has moved beyond the domain of early adopters to mainstream adoption; this is an intrinsic part of the TiMS (treasury intelligence management system) concept that Aite Group has coined. By accessing services in a cloud-based environment, treasury can add components as its needs evolve without displacing existing functionality and that it might not otherwise be able to afford.” 

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