I subscribe to the Harvard Business Review and constantly find fascinating articles about business, marketing, accounting system software, human resources, and human nature. They are often great to share with your boss and co-workers as you collaborate to improve your business or your company culture. Sometimes you might want to share them, but end up hesitating and reconsidering (see Your Late-Night Emails are Hurting Your Team). Good advice, but better kept to yourself?
This was an informative article by Willy C. Shih entitled Breaking the Death Grip of Legacy Technologies. Since we're often in the business of replacing legacy financial management software, it piqued my interest. Shih imparts some valuable wisdom about how companies can be dragged down by their investments in legacy technology and their inability to adapt and move past the cost of transformation to see the benefits. Many of Shih's examples and analogies are in the manufacturing space, but his main points still apply for CFOs and Finance Directors looking to innovate.
While Shih's article attempts to help companies break the "death grip" these legacy systems and approaches have on their businesses, I think his article indirectly makes a case for why, in the finance and accounting space, there should be a much lower barrier to innovation and the adoption of cloud technology, particularly SaaS accounting software.
Here are the 6 Reasons why your legacy accounting system DOESN'T have a death grip on you:
#1 - Moving to the cloud reduces, and in some ways, eliminates the barrier of "equipment."
When moving to a SaaS model, you're not having to absorb the cost of changing older equipment for newer equipment. You are, in fact, eliminating at least some of the hardware and the costs associated with maintaining that hardware. So what should you do with the equipment you have? Can it be sold or repurposed? Or can you plan your move to the cloud to coincide with the life-cycle of your current hardware and the legacy software it runs. According to TechTarget's Brien Posey:
"No matter how good it is, any server hardware eventually becomes obsolete. Enterprise-class organizations have traditionally coped with this expected obsolescence by adopting a hardware lifecycle policy. An organization, for example, might choose to retire servers after five years. That being said, an organization could integrate a cloud services roadmap into its hardware lifecycle policy. Doing so allows IT teams to migrate on-premises resources to the cloud instead of moving them to newer hardware."
Shih uses the example of how difficult it was for General Motors to learn from what Toyota was doing with lean production methods at their shared NUMMI plant. It took GM decades to change their culture and thus their approach, even though there was clearly a better way. With start-ups and companies in the middle market, company culture is either in the early development process or, at least, it should be easier to move a smaller group to a different way of thinking. The finance and accounting team in smaller organizations is looking for leadership and engagement, and that should be what a move to a SaaS model will give them.
#3 - The change is "competency-enhancing," NOT "competency-destroying."
Shih refers to a way of viewing technology shifts as either competency-enhancing or competency-destroying:
"The latter are troublesome because the knowledge base and skills required to operate in the new realm are so fundamentally different. From the perspective of how the resources in an organization are deployed and how its processes are organized, this makes sense. The more fundamental the break from the previous technology, the greater the switching costs."
We're not suggesting such a drastic shift in technology, just a different delivery model, and with it, an increase in flexibility, accuracy, insight, and functionality. Better automation will allow for team members to focus on more high value, strategic tasks. The CIO can move from being a technology gatekeeper mired down in maintaining SLAs to being a leader when it comes the business' technology strategy. The CFO can stop spending so much time building reports, and more time analyzing the data and providing real strategic value to the company leadership.
#4 - We’ve moved beyond early adoption – this new technology works.
SaaS has worked with HR and CRM and it’s now working in finance and accounting. On-premises and hosted solutions need to be connected to the internet these days with our growing access and mobility requirements. For midmarket companies, it’s at best highly unlikely that their financial data is in better hands with what is often a part-time IT staff maintaining on-premises hardware. You’ll find better uptime, performance and security with today’s SaaS providers than you can expect to provide on your own.
We're not talking about the early-adoption phase Shih refers to, where the new technology is "not good enough for mainstream customers." This is now a proven model for providing financial management solutions to businesses of all sizes with many entities and massive numbers of transactions. It's secure, reliable, and the functionality gets better and better as providers like Intacct listen to customer needs and add functionality. Using Shih's example of steel mills, we're not talking scrap metal here. This is strong shiny steel.
#5 - The Return on Investment (ROI) is real and measurable.
Shih writes about "functional" and "economic" obsolescence. He advises "not to let residual book values of equipment get in the way of having the most competitive capabilities." In other words, don't let the perceived economic value of old servers and old software get in the way of moving to better and more functional solutions. Look at the ROI of moving to the cloud. Make sure you're comparing apples to apples. When engaging with consultants, make sure they are comparing apples to apples. You'll find that the value of SaaS is very real and quantifiable. Focus on what your company provides for its customers, not on maintaining hardware to support the contextual activities of your business.
#6 - With SaaS, keeping the technology fresh and competitive is built into the delivery model.
When it comes to keeping ahead of new technology, Shih advises that companies keep abreast of the innovation roadmaps of their vendors, making sure they can take advantage of the benefits of that innovation, and that they're prepared to adopt it and use it to compete in the marketplace. With cloud products, particularly multi-tenant SaaS products, that innovation comes as part of the product and how it's delivered. Intacct pushes out four full functional upgrades each year, each one providing customers with new capabilities that would take years, tens of thousands of dollars, and multiple upgrades to achieve in the world of legacy software.
The "death grip" of your legacy accounting software is much weaker than you think.