Software Decisions - Procurement

“My job is finance director. That’s what I do first and foremost,” says Stephen Segel, who helps run 160-strong UK recruitment business Blue Group. “And, yes, part of my portfolio of responsibilities is IT, but IT on its own isn’t going to make you any money. You have to sell more to do that.”

Many finance leaders from among the UK’s mid-size companies would agree with Segel’s comment. Although they may have internal IT resources and experience on which to draw, their main expertise lies in managing the company’s fiscal infrastructure, not the bits and bytes that help it operate on a daily basis.

Nonetheless, FDs like him still have to make crucial decisions on sourcing IT, often in the form of financial packages and accounting systems that shape how their firm fares for the years until the next major overhaul of that core package comes along.

Welcome to the FD-IT challenge: how to buy the most appropriate system without spending a fortune on advice, and how best to guarantee adequate return on investment. Andrew Carr, chief financial officer of Merlin Entertainment, a VC-backed firm behind a number of theme park brands including Sea Life Centres and The London Dungeon, says he felt no attraction for some of the top-end software on the market. “No one ever rings up IT and says, ‘it’s really great today’. They only notice it when it’s not working. It is there not to give users any more information but to manage the information they have better.”

Most big vendors of enterprise software have all customised their wares for the smaller player anyway. Indeed, Jim Browning, vice president and research area leader for small and mid-size business at IT analysts Gartner, says: “All of the big IT companies have their eyes on the mid-market. Even the 800lb gorillas have relevant mid-market strategies now.” Gartner, for instance, allegedly the purview of enterprises with the biggest pockets only, numbers some 4,000 mid-size businesses among its client base worldwide, according to Browning.

But John Wardle, FD of the Bernard Hodes Group, a 130-staff company that books advertising in UK press for blue chip clients, says: “A company like ours is a relatively small fish for the original suppliers. We wanted as much responsiveness, as much flexibility, as we could get. These guys would have had to build a module to make their systems work for us, and that’s too risky.” In the end, Wardle opted for a system called Concept from ESG, a specialist in media buying software.

“We have many relatively small, local units that have systems they’re perfectly happy with. What we wanted was a unifying layer to pull together data from multiple data sources to help more consolidated financial reporting,” explains Carr. “Something like SAP would have just been too expensive to give us that.” Instead, Merlin has recently adopted a new business intelligence solution based on Hyperion technology.

Teresa Jones, senior research analyst at UK analyst firm Butler Group, takes the position that: “The big players have indeed started to offer a cut-down version of their enterprise-class products to the smaller firms but, frankly, I just don’t believe it. These systems take a lot of time and effort to configure properly in big firms, where they provide great value. This is going to be a lot harder to do in a mid-market environment that is much less likely to have a clear strategic direction. Most organisations may be better off looking for a smaller system that will guide them on how to set it up, or they won’t get the amount of information back that they need. A poorly installed financial package is unlikely to break your company, but it won’t give you what you looked for either.”

One organisation which took this approach is UK charity DebRA, which campaigns on behalf of people with a rare genetic skin disorder known as ‘eb’. The charity’s director of finance and administration, Lynda Ponting, says: “We had outgrown our existing system, which was a good, albeit basic, Sage100 accounting system. We looked at others, such as Sage150 and the Sun Accounts offering, but we thought the OpenAccounts system would be better for us. It is more user-friendly and easier for non-finance professionals to use.”

Ponting sees the system’s analysis capability, matrix reporting structure and scalability as useful for the charity as it continues to expand, having been further boosted by a recent Channel 4 documentary on the eb syndrome. “This is going to be a key part of our three-year plan and will improve our efficiency. In the charity sector, we want every penny to focus on the cause and this upgrade did take considerable resource, but every bit of time spent not processing bits of paper is worth it as it means we can save resources elsewhere.” DebRA has managed to go from a turnover of £2m to £5m in a relatively short time.

Indeed, many FDs see the move to buy a new finance system as integral to an expansion. Beswick Paper, a bulk purchaser of paper undergoing rapid business change after a recent management buy-in, has recently moved from Sage100 to the Geac Aurora System 21 (previously marketed under the JBA name). “For our size of business, the Geac system scores well because it fits in with a distribution-heavy business,” says FD Courtney Candler. “Before we expanded from six to nine branches, we had a perfectly acceptable accounting system with lots of bespoke sales order processing built on, but we wanted much more warehousing and distribution capacity.”

Candler, like other FDs in a similar position, chose this new package because he had used it before. “I had worked with the JBA people back in 1987 for 15 years and so knew the system’s capabilities. In some ways, we had helped build them,” he says.

It’s definitely handy if you start a new finance system refresh with some prior experience. Take Mark Spoor, finance director at Clinovia, a specialist provider of high-tech home care with 300 employees and a turnover of £87m. He has recently led an upgrade of his core financial system based on the Microsoft Navision system as implemented by specialist partner Advantage. “Previous experience really helped when we got to drawing up the shortlist,” he says. “Core financial systems are pretty much all the same. What you’re looking for are the extras and the things that can help you go to new places. Other packages I’d had experience of meant I could quickly decide who was first-tier and who was second-tier, which meant we started looking at people in early June last year and had made a decision by the middle of July.”

That concept of looking beyond the central functionality is underlined by Jones, and is a useful message for all prospective system buyers. “Look for those extras and what they might bring you – not necessarily now, but in the future. For example, if there’s a multiregional capacity in case you expand abroad, or an ability to use a variety of reporting regimes, or which might be a good platform for reporting and business intelligence. Of course, you must also ask if it can integrate into other systems.”

Not everyone is going to approach a core new finance system with the benefit of having had prior exposure to a good system. How then can a company minimise investment risk? Segel outlines what must be a very common set of requirements for any FD. “We needed something that would enable us to get under the bonnet of the basic P&L. We wanted to see where we’d done well or badly, where to step on the brake and where to accelerate. We wanted to work with a relatively big player, but one which understood the ethos and approach of a company our size, and that was liquid, stable and sustainable. Really, we wanted to work with someone who wanted to partner with us.”

Segel shortlisted 42 vendors before he got to his shortlist of five for his new system, ultimately plumping for Touchstone, a UK IT services group, which is implementing the Microsoft Great Plains package for him. “I’d tell anyone in a similar position that you really must understand what you want. Do you want just to report results, or do you want to use a much more granular solution? Do you have to track a lot of stock or are you a more people-based business? All of this impacts on the size of system you’ll need. Identify what you need and make sure all your stakeholders are on board.”

Carr has something of a more algorithmic approach: “I think companies need to help themselves a lot more. If they really plan out what they need and their main business issues first, the interaction with the supplier could be a lot more productive for both sides.

“The IT solution comprises a whole gamut of things – from hardware to software to new processes – and if the provider asked to understand the whole picture from the outset it would be better for both sides.”

Segel agrees, saying: “You simply can’t get from 0 to 100 in one go, in one system implementation. You have to look at the new system as a way to create the right infrastructure to get started. I have no doubt we’re going from the Stone Age to Star Trek with this new system.”

Good luck on your own journey into the new system space. Let’s hope FDs don’t fall into any black holes along the way.