Treasury Management Systems Guide 2015/2016 by bobsguide

Treasury Management Systems Guide 2015/2016

Installed vs. Hosted TMS As technology evolves, the growth of hosted TMS offerings has given treasurers pause for thought when it comes to selecting a new solution. Ben Poole explores the pros and cons that should be considered when comparing hosted solutions with traditional installed TMS. The functionality of a treasury management system (TMS) can differ depending on whether it is installed or hosted. As a general rule, installed solutions can offer more customised options to the individual corporate users. Hosted TMS, particularly those that are pure software-as-a-service (SaaS), tend to offer a 'one size fits all' solution. When selecting a new TMS and deciding whether to opt for an installed or hosted solution, there are a number of variables that treasurers need to consider. With a SaaS solution, the functionality of the system will change incrementally over time and outside of the treasurer's control. This is clearly something to consider when selecting a new treasury management system (TMS). "There can be a mandatory upgrade at the weekend that means the functionality of the system has changed by the time you next log-in on Monday morning," says Roger Burkhardt, CTO at OpenLink. "For treasurers, if there are particular areas of functionality that relate to policies on certain accounting approaches, it is worth asking the question of whether you are going to get enough notification of change and whether the vendor might want to change something that is fundamentally important to their organisation. I think the chances of this are fairly low, but it is important to understand that typically you are signing up to a forced march that will change when the vendor wants it to change." The other side of the coin is that all treasury departments will be running the most up-to-date version of the system on SaaS, whereas with an installed solution it can be easy to end up several versions behind. Here the treasurer would need to prepare a business case to attain the budget to purchase each additional upgrade, which may or may not be available to them. They will then have to manage the upgrade project.

The subscription-based costing model for most SaaS solutions means that there is no spike in cost at the time of a new release. Treasurers will also receive a notification that something is going to change and they should have a look at it to see its implications. "The interesting part is that SaaS solutions are usually much more limited when it comes to configuration when they are compared with most installed or hosted solutions," says Carsten Jäkel, partner, Finance & Treasury Management at KPMG. "There is a certain degree that the system can be adjusted, but it is often limited, so everything that you would usually see - particularly in the high end market - of customer-specific developments is not usually available in pure SaaS TMS options. The restrictive nature of SaaS TMS does not necessarily have to be a bad thing, but it changes certain ways that treasurers view their own operations." Visibility Over Upgrades Hosted SaaS TMS solutions will also usually involve less direct work on the upgrade for the treasurer. However, it is important to have enough visibility into any significant upgrades. There may be reports that the treasurer generates from the TMS that will then go on to be used in other ways, so any changes to these must not affect the report's compatibility. "The worst case scenario is when a figure used to mean one thing, but now there is a slightly different assumption in the way that it is interpreted," says OpenLink's Burkhardt. "It may appear that nothing has changed, but in fact there has been a change of meaning. Treasurers should not be on autopilot with a SaaS-based treasury solution. Rather, they need to understand when upgrades to the solution will be happening, what the changes are and how they may affect their business." The person with responsibility over the TMS in the treasury also needs to

ensure that any benefits brought about by SaaS updates are recognised and taken advantage of by the business. If the system keeps getting better but nobody recognises that, the company ends up with cloud shelf life. Costs Cost could be a critical issue when a corporate is deciding whether to go with an installed or hosted TMS. A question to ask here is whether the organisation is willing to accept less flexibility if it comes at a much lower cost. On the plus side, the cheaper SaaS TMS solutions make automation of treasury available to smaller organisations. "There is no reason any more not to have a TMS," says KPMG's Jäkel. "Even the smallest entity with a treasury, with around €300-400m in sales for example, should have a TMS in place with the small SaaS-based offerings that are out there." While getting on the TMS ladder may not be overly expensive today, switching costs between different hosted TMS solutions can be high. "When setting expectations about a TMS project with the CEO, the treasurer should decide whether they are committing to the new system indefinitely, or whether to plan on a three-year life that includes a switching cost in the budget for if the best course of action is to change vendors further down the line," says OpenLink's Burkhardt. "Businesses change, vendors change direction, and vendors get bought. It is important to have flexibility built into a TMS project from the start. There are costs of entry and exit with a SaaS-based solution." It is also important that corporates understand the contractual terms they have with the vendor of their SaaS TMS. "One of our corporate clients decided that it wanted to leave its current SaaS vendor," says Damien McMahon, partner with PwC. "The vendor then pointed out a clause in the contract that said it could switch off the system