Salesforce venture plants new stake in the cloud via SaaS ERP

FinancialForce's next big move may be to find a way to offer SaaS ERP services to the high-end customers that have historically been hard sells

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Any company that could raise $110 million in venture capital, as FinancialForce has done, must be offering a game-changer, right?

At first glance, FinancialForce doesn't look like anyone's idea of a groundbreaker. It's an ERP (enterprise resource planning) outfit that runs on Salesforce's cloud platform, hardly most peoples' idea of bleeding-edge tech. But you could look at it as a sign that SaaS-style ERP -- especially for high-end enterprise customers -- is finally coming of age after years of muddling along in the shadows.

As ZDNet reported, this $110 million is on top of another $50 million the company pulled together a year ago, with Salesforce Ventures as one of the investing firms. No surprise there: FinancialForce is a joint venture of Salesforce's, founded back in 2009, so it's a smart idea to bolster an outfit that makes the case for Salesforce as a platform -- especially one boasting 91 percent year-over-year growth.

Why SaaS ERP in general, and why now?

Most of the arguments for SaaS ERP echo the cases for SaaS in general. The cost of entry and overall total cost of ownership is less burdensome and unpredictable than for an on-premises ERP, the enterprise doesn't have to bother with the petty details of managing the platform, and SaaS ERPs are thought to be more flexible than their monolithic on-prem counterparts. Plus, the major SaaS ERP vendors are moving to include analytics and data visualization as part of the package rather than as a cost-plus add-on.

But the reason the biggest businesses haven't adopted such ERPs in number, aside from predictable arguments like general doubts about the cloud, is that those companies can't yet get what they really need.

A Gartner report released early last year pinned the lag to traditional, on-prem ERP catering better to companies that deal with manufacturing and finance -- Enterprises with a capital "E." Smaller firms with less demanding needs would switch sooner, but the report estimated it would take upward of a decade for most businesses to switch to cloud ERPs.

Another analysis written much earlier (2011) also named business complexity as the main issue keeping bigger outfits away from cloud ERPs. In its title, one Forrester report delivered in 2013 further hinted at the bias toward smaller businesses: "Cloud ERP: An Adaptable, Consumable, and Flexible Option for Medium-size Businesses."

In that light, interest in SaaS ERP has already started to jump. It's been happening so far in places where the threshold for acceptance is low or where two-tier deployments -- a local and a cloud-based ERP -- are a possibility. It's the bigger, higher-hanging fruit that makes up the next frontier.

That brings us back to FinancialForce, which boasts accounting and PSA (professional services automation) as two of its big draws -- backed by Salesforce and its own platform. The implication is that the composable nature of FinancialForce's (and Salesforce's) platform can provide the programmatic flexibility useful to outfits big and small.

Right now, FinancialForce is satisfying many of the same customers as other SaaS ERPs -- not big companies, but their subdivisions and subsidiaries. That sounds an awful lot like the standard scenario for a two-tier deployment, a way for FinancialForce to get its foot in the door and cater to the caliber of customer every SaaS provider dreams of having.