The numbers are in, and 2011 is now officially a big year for SaaS growth here at Tensoft, with a 24% growth rate in annual billings from Cloud-based offerings.  For a year when many similar businesses lost market share and had to cut back on their investment activities, we're pretty pleased at these results.

Here's what Tensoft President and CEO Bob Scarborough had to say about this: "Having hosted applications since 2005, Tensoft made a concerted company decision to re-energize its web native software strategy on Cloud-based offerings during the trough of the recession in 2009 when it was unpopular to make tough investment choices.  As a result, we are now more than two years ahead of a number of our competitors and enjoying double digit SaaS billings growth."

In addition to achieved 24% annual recurring revenue growth, Tensoft had a number of other notable successes in 2011, including:

• Added a record number of new customers, including leaders in the software, semiconductor and technology industries.
• Tensoft Revenue Cycle Management software earns Certified for Microsoft Dynamics accreditation.
• Successfully replaced multiple competitors' customer sites with Tensoft applications.
• Tensoft earns gold level in the Microsoft Partner Network ERP competency.
• Hosted Momentum 2011, the sixth annual user conference for Tensoft Fabless Semiconductor Management's worldwide customer base.
• Tensoft High Tech Dashboard (HTD) product selected as one of the top 15 most useful add-ons worldwide for the Microsoft Dynamics GP business solution.
• Bob Scarborough, Tensoft CEO, speaks at GSA Semiconductor Ecosystem Summit.
• Sponsored eight CPE-eligible webcasts and training courses for software and high tech industry professionals.
• Added strategic partnerships with leading advisory firms for the promotion and delivery of Tensoft's revenue management applications.
• Tensoft Cloud data center operations maintained SAS 70 certification and ISO 27001 registration.
• Approved as an educational webcast and seminar provider by the National Registry of CPE Sponsors.

 During 2011 the semiconductor and high tech industries witnessed natural disasters in Japan and Thailand cripple their supply chain, starting with the disruption to supplies of parts, to the subsequent shutdown of contract assembly and test facilities.  Consequently, risk management of future natural disasters and strategies to better plan for future supply disruptions have been the subject of much discussion among industry and business thought leaders. 

Two of the key lessons learned include:

1) The criticality of implementing a geographical, multi-sourcing strategy.  While reliance on a same region subcontractor based on ease of maintenance or volume favored pricing may provide convenience, the reality of disruptions due to natural disaster warrants the assessment of alternate sourcing locations.

2) The importance of diving deep in Tier 2, 3 or 4 suppliers' sourcing relationships, confirming that they also  diversify their suppliers' geography. Otherwise, supply disruptions caused by natural disasters occurring thousands of miles away from your lower tier vendor's location may unexpectedly whipsaw product availability or suspend subcontractor services altogether.

A parallel may be drawn here to the process of qualifying of cloud computing providers. Many Software-as-a-Service (SaaS) companies maintain relationships with single location or same region data centers to host their customers' data. Take, for example, an ERP SaaS company which maintains data centers located throughout California.  In the event of a catastrophic earthquake serious disruption of services to its customers may be inevitable. Regardless of the number of data center locations utilized and possible safeguards, the fact remains that dependence on a single geographic region greatly increases risk.

Be it a semiconductor company or SaaS provider, black swan events such as those from mother nature may be greatly minimized through a multi-geographic sourcing strategy.  And, like companies who depend on the semiconductor supply chain, companies who depend on SaaS providers would do well to include some inquiry into their data center sourcing strategies as part of a thorough due diligence process.

   While there’s been plenty of hype regarding the benefits of Cloud Computing and SaaS, a commentary by Proformative’s John Kogan in Forbes – “Defining IT Differently” – provides a very reasonable argument.   Kogan argues that moving to the Cloud and/or SaaS solutions reduces the number of IT staff needed at companies who do this, but that those who are left are more strategic.

I agree that this shift changes the composition of your IT team.  How it changes the composition depends on where you are in your company history.  Smaller companies who move to the Cloud will no longer need as many system administration staffers, such as desktop support and support for your engineering team.  Subsequently, the shift to the Cloud allows smaller companies to bring in a business analyst(s) at a much earlier point than they normally could afford to – definitely a strategic IT position for most companies.  While it still desirable to have someone on staff who understands what your Cloud provider is doing, and there may be some tasks you need/want to do on your own, the move generally means a reduction to system administrators and hardware specialists.

Kogan touches on another point that I see as one of the most significant benefits of the Cloud - the ability for companies to have access to far more – and better – hardware, technology and support in the Cloud than they could economically source for themselves.  This democratization allows smaller companies a more level playing field, and it also makes the Cloud a comparative money saver if you consider all of the costs that go into it (labor, hardware, replacements, training, etc).  This comparative cost savings is a point that is often over-sold and misunderstood – it’s a powerful benefit, but “the Cloud is cheaper” is not an accurate picture.

 A: There are a few ways to interpret this question. I will interpret it as follows: “How do you explain the lower training costs associated with running SaaS compared to conventional on-premise models?”

There is a general expectation -- especially for companies that have under $50M in revenue -- that implementation of SaaS software is lower in cost than traditional models.  We sometimes find that this expectation extends to training, and it may be assumed that training cost is not required.  However, most experienced folks expect there to be support and training for any type of system transition.

In general, this expectation is backed up by what the market offers.  There are definitely some tasks that are no longer required in a SaaS world, starting with system administration training and support.  However, there are a number of factors to consider related to this lower cost. I’ll attempt to address these below.  After that, I’ll add a few cautionary notes for executives who are looking to manage training and implementation.

Drivers for lower training and implementation costs:

1)    The general trend in ERP over the last ten years has been to move toward a best-practices implementation model.  At its most basic, this model states that there are a number of configuration options to which most companies default, based upon market and product experience – and these assumptions are built into the implementation rather than covered uniquely each time.  At its best, this model should be adapted to your specific industry (vertical) so that the best-practices are based upon comparable organizations.

2)    There is an increased “do-it-yourself” expectation that goes with SaaS modules.  This expectation is supported by online training sessions (recorded or otherwise), short remote training sessions instead of day-long commitments, and the general expectation that the customer team will roll up their sleeves and contribute heavily to the conversion effort.

3)    There is also a general expectation that software is getting easier to use – or that web-based software should be easy to use.  This is an area where I suggest extreme caution, since complex business processes or configurable options definitely require background training.  On the whole, systems have become better-understood with some convergence of transaction metaphors.

A couple of cautionary points to consider:

1)    There still are custom implementations in the world: where the project is unique to your company; where everything is configured uniquely to you; or where the software is adapted to your exact specifications.  Most people do this sort of implementation only when the uniqueness adds to your competitive advantage in the market rather than as standard practice.

2)    SaaS does tend to commoditize some types of functionality.  It is best to think about this related to training as well. Look at the areas that add the most value to your company and the areas where you expect to be business-standard.  Expand or contract the levels of training and support where you receive the most benefit.

3)    Be careful in your transition from the sales process to the implementation process.  If you need to document the expectations discussed in training for internal review within your company, do so.  Purchasing a best-practice-based system, streamlining it for do-it-yourself implementation and then managing it like a unique customized training implementation generally leads to poor results.

 Re-posted from ERP Software Blog:

I recently answered a question about the “disadvantages” of the cloud on an accounting and finance forum.  As a cloud solution provider, I’m actually very enthusiastic about cloud services – I see the benefits to our customers and the potential for even more benefits in the future.  However, I’m also in a good position to play Devil’s advocate on this topic, having heard some of what can go wrong in the cloud, and having learned a great deal from my company’s experience in this area.   Still, the benefits of the cloud delivery are strong enough that I think “trade-offs” more accurately describes what I’ve seen than “disadvantages.”    

 As there are with most things in life, there are certainly trade-offs to consider related to operating in the cloud.  If you’re interested in achieving the great benefits of the cloud, you should be fully aware of the trade-offs involved, so that you can establish an agreement that optimizes these trade-offs as best fits your company.   For example, let’s take a look at three of the major benefits of running in the cloud – simplification, availability, and ease of upgrades – and what the trade-offs may be for those benefits.

One of the primary drivers for cloud business applications is simplification.  Most system users have, at some point in their career, been told by their IT department that some seemingly simple thing can’t be done due to technology, resource availability, scheduling, or some other factor.   In these situations, who hasn’t thought, there must be an easier way to get things done?   The decision to move to the cloud may be seen as a way to focus on your company’s core competencies and to outsource non-strategic functions, or as a way to free up your internal IT staff for more high value-add tasks, or simply an acknowledgement that a good cloud provider generally has more expertise and infrastructure to leverage.  Whatever the driver is, I couldn’t agree more that the idea of turning on applications as a service and letting the cloud provider take care of the behind-the-scenes IT functions is very compelling.

The trade-off here is some loss of the control that you naturally have when everything is managed and run in-house.  For example, you may have less control related to direct data access, or the ability to extend applications through integration and optional extended analytics or reporting capabilities.  Most cloud providers simplify systems to make the solutions easier to use and support.  If you’re in a situation where strategic benefit can be gained through extending or modifying the application, you may find that – while most cloud providers do have optional services to support additional functionality – they often come at an unexpected and outrageous cost.  The solution?:  Make sure that:  1) the cloud solution that you choose is a very good fit for your industry; 2) negotiate for flexibility if needed; and, potentially, 3) budget for a private/public hybrid environment.

The second great benefit of the cloud is availability – the cloud makes remote access available and highly efficient for a cost that most internal IT organizations simply cannot beat.  If you open a remote office, your IT staff is now supporting multiple locations.  If you open an overseas office, your IT staff is now supporting multiple time zones.  If you have a single office that’s full of road warriors or remote access users, you are now supporting an extended enterprise.  The cloud is designed to be accessed from wherever you are, on multiple devices.

The trade-off is that your system performance will be more dependent on your network performance.  If you have survived on small network pipes to date, and your engineering team decides to download large design files every morning, then system performance will decrease.  If it isn’t already a priority, it soon will become a priority to actively manage networks and connectivity to the outside world.  The solution?:  If you’re moving from in-house applications to cloud-based applications, it’s important to consider the quality and quantity of your network pipes, and make the appropriate changes to update/upgrade.

Finally, the cloud offers the promise of easier upgrades.  The concept of easier, no-hassle upgrades appeals to almost everyone.  The trade-off here is the short shrift often given to user acceptance testing (UAT) – a process that is both required for Sarbanes-Oxley compliance, and a best-practice when your organization reaches a level where mission-critical systems should be reviewed as part of good change management.  Without a UAT option :  1) changes to functionality can occur before your team is trained; 2) errors could be found after you’re already live; 3) your provider may give you a UAT option that fits their schedule rather than your team’s availability; or 4) your provider may avoid significant feature enhancements in order to simplify their own upgrade cycles.  The solution?  If your cloud solution provider does not provide or offer a UAT process, negotiate one before you buy. 

If you carefully weigh the pluses and minuses of in-house applications versus cloud applications, you’ll be better equipped to avoid the possible pitfalls.  Not only will your decision to “cloud or not cloud” be easier, but it will be much more obvious which cloud providers can best support your needs.

 We hear this question often enough that I thought our readers might be interested in the answer that I recently posted on Proformative.  Here's the link to the original post, which includes some other answers with helpful information: www.proformative.com/ask/question/what-difference-between-cloud-computing-managed-services.  Here's my answer, from that same page:

"Managed services has been well explained here, and cloud computing with software as a service has been covered nicely as well. I would add that there are benefits possible with cloud computing – specifically, a public cloud environment, shared among multiple users - that leverage technology and the democratize high end computing in a way that managed services can’t. In a public cloud environment, these benefits provide high end capabilities to customers that would not otherwise be affordable to them.

While a public cloud environment requires careful attention to security, isolation, and process, it also offers significant management and cost advantages over the managed services model. For example, 100 managed service customers may require 200 or more servers to support. The same numbers of public cloud customers may only require something in the order of 20 servers with the appropriate management technology. The cost savings for a public cloud are evident, but these numbers actually translate into significantly improved security, since there are far fewer servers that need to be monitored.

Another benefit of a public cloud is 'high availability,' which basically boils down to this: there’s no single point of failure. In a managed services or an in-house, on-premise model, you would need to duplicate – at a minimum – every feature of your infrastructure to achieve high availability. In addition, a public cloud environment will include data management technology that is far beyond the average mid-market company’s budget, but can be provided cost effectively in a public cloud.

The choice of what’s right for your company depends on the type of technical service and software subscriptions you need, of course. But, there are compelling reasons for the popularity of the cloud model, chief among them being its ability to make high end computing available to companies who couldn’t afford the same level of technology in a comparable in-house system."

Tensoft provides solutions in a public cloud - rather than as managed services - because our customers want the benefits that I've outlined above.  In fact, we use the same public cloud that we provide to our customers, so feel free to ask me how we like it!  

  Since Tensoft President and CEO Bob Scarborough isn’t always great at blowing his own horn, I’ll do it for him. I’m proud to announce that this April Bob started fielding questions as an industry and subject matter expert on the Proformative website (www.proformative.com).

Proformative is an online resource and professional community that provides a new and effective way for corporate finance, accounting, treasury and finance-related professionals to find answers to their technical and operational questions, and easily find practical resources that serve their daily needs. On the site, financial professionals can search an ever growing knowledge-base of peer, expert and aggregated content to quickly find practical answers and relevant information.

Bob’s expert page can be found at http://www.proformative.com/ask/expert/bob-scarborough. He is listed as an expert in: 1) revenue recognition accounting; 2) manufacturing accounting; 3) cloud computing and SaaS software; 4) revenue recognition software and 5) Microsoft Dynamics GP implementation. Bob encourages questions and discussions on real-world financial issues, and enjoys the interchange of ideas and solutions that the site facilitates.

If you lose the link above, simply click on “Ask the Experts” and type in “Scarborough” to see the questions and comments that are currently under discussion. Or, send Bob a question and engage in open or private discussions (anonymously or with your real name) and get his perspective on issues on which you deal every day.

  Now that the train has left the building for Microsoft’s 2011 worldwide Dynamics community conference, it’s time to reflect on how this year’s announcements affect Tensoft and its customers.

All last week, the blogosphere and twitterverse lit up with discussion about Microsoft’s cloud computing announcements.  But for all its notoriety, the cloud news from Convergence is simply an extension of Microsoft’s ongoing communication and strategy execution from Convergence 2010’s “all in” cloud rally call.

So, where does this leave Tensoft and its high tech customer base?  How are we positioned within the iterative ecosystem, and do we have the agility to acclimate to continued innovation?

 The short answer is we’re  pleased by the validation that Microsoft’s massive cloud strategy gives to  Tensoft’s strategic goals, R&D investments, HR staffing objectives, product development roadmap and technology partnerships.  For example:

•  Tensoft applications have always been designed for the web.  Cloud deployment through advanced data center and virtualization technology was an easy and logical next step for Tensoft.  With the Microsoft ERP stack we have leveraged the world class database and portal technology. 
• Since 2005, Tensoft has provided ERP solutions through cloud technology.  Our Tier One, SAS 70 certified Cloud infrastructure environment brings the cost effective benefits of a public cloud to our emerging and established customers.
• Cloud deployment offers the promise of easy to use and maintain ERP solutions with a lite internal IT footprint.  Tensoft’s focus of vertical industry solutions fully integrated to the ERP stack offer more value than ever.  We are offering out of the box industry specific ERP solutions for the Technology Industry.  Software, Internet, Semiconductor, and Tech Hardware companies receive the benefit of deep industry experience from a Cloud solution delivery.

According to IDC, $17 billion was spent on cloud-related technologies, hardware and software in 2009, and this spending will grow to $45 billion by 2013. With Microsoft spending nearly $10 billion dollars alone on R&D in 2011, this means that our mutual customers will have the option to embrace technological change at a business reasonable pace.  It also represents continued commitment to enhancing the architectural platform and features of Dynamics ERP with a transparent long term roadmap, and an opportunity for even greater collaboration with other applications such as Excel or customer- facing systems.

We look forward to “the road ahead,” in the cloud.

For those who are willing and able to invest the time and effort, there are an astounding number of ERP selection guides.  Additionally, there are online and consulting services that specialize in helping you make an informed decision.  These options are intended to provide users with a "bullet- proof" Request For Proposal (RFP) - one that will "guarantee" an objective outcome.  However, many companies ultimately find these methods to be either expensive or unsatisfactory - or both - and to be designed more to validate a decision or to support company political necessity.

 Despite the use of ERP selection guides and services, anecdotal evidence often plays a significant part in ERP software selections.  It's human nature.  Colleagues in your professional associations, Board members, golf partners: anyone who's been at a company that's implemented an ERP system, or knows of a company that's implemented an ERP system is happy to pass along what they know, or what they have heard.  Most of us take anecdotal evidence with a grain of salt, of course, but how do companies make a good decision about which ERP solution to chose?

 First, look for solutions - and solution providers - with deep experience in your industry.  With a really close fit, you won't need to invest a day or more educating each candidate about your needs - they'll already know, and will have more than a few customers who look pretty much like you.   

Second, I'd recommend taking a look at the vendor rankings in The Accounting Library (www.accountinglibrary.com).  This provides an objective measure of the depth, breadth and maturity of core financials, based on a third party review.  And, if a well-known vendor is not included in the rankings, you should probably explore why they've chosen not to participate.   

Third, follow the time-tested advice in "Keep It Simple When Buying Enterprise Apps," attached below.  The basic idea is to pick 2-3 specific issues that your company needs to address, and ask your short-listed vendors to show you how they address those issues.  You'd be surprised at how often the key reasons that started your search for a better way can get lost in the most seemingly thorough RFP.   

Finally, look for a team that you're comfortable working with.  You'll be spending some time together - might as well enjoy it as much as possible!