How Much Does "Free" Actually Cost?

“Both Oracle and SAP are behind other key players, such as Leeyo, in this space…Leeyo offers a mature product supporting both current and ASC 606 requirements.”

-KPMG, Revenue Recognition Accounting Update Conference, Santa Clara, December 2015

We’ve known this for a long time, but it’s always nice to hear other industry experts extoll the virtues of our RevPro solution.

And it got us thinking…

Organizations must take a lot of factors under consideration when venturing into decision-making mode on a revenue management solution. For those with an ERP in place, or soon-to-be in place, offering revenue management functionality, the tendency might be to stick within that ERP environment over the potential for added investment and effort into another vendor relationship.

But, in reality, what are the ‘costs’ to consider? Here’s what a few revenue industry veterans shared with us when we asked:

“Regardless of the software application that is chosen to automate revenue recognition, the biggest cost is the effort required to implement the new standard into the existing ERP systems environment, not the cost of the software,” said one longtime revenue recognition expert from one of the Big Four accountancies.

More and more corporations must address such significant decisions these days, due to the massive overhaul in the revenue recognition guidance announced last year.

“For organizations that have a moderate to high impact from the new standard, there is a need to rethink and rebuild current business processes and reconfigure the ERP system to generate the proper debits and credits for each step of the contract-to-revenue and order-to-cash processes, especially since many organizations perform a substantial amount of revenue accounting in spreadsheets,” this expert noted. “While the cost of the revenue accounting software solutions ranges from free to substantially more than free, the vendors with more functionality for ASC606/IFRS15 will require less custom building than those with less functionality.”

Steve McKechnie, Managing Consultant with RGP, has had numerous discussions with clients over the years, often advising people to consider the full picture.

“Generally speaking, product maturity is one of several technical requirements considered in a software selection effort,” said McKechnie. “A mature and proven system provides a certain level of stability. Clients should expect reduced implementation timeframes (fewer testing cycles, increased user adoption, etc.), as well as reduced costs for on-going maintenance and support (e.g. – number and frequency of bug-fix patches). Ideally, technical requirements would be in support of the functional and end-user requirements which should be driving the overall selection effort.”

According to an industry veteran from another one of the Big Four firms, with years of field experience assisting companies through such transitions, organizations need to understand the full scope of impact across their existing system footprint to understand the best fit enabling technology.

“All too often, the decision to determine future state solution architecture does not contemplate the potential scope and complexity of upstream source systems and downstream reporting systems,” this expert said. “Prior to launching a vendor selection or future state design exercise, knowing and understanding the end-to-end view of impacted systems is tantamount for a successful and timely implementation.”

When asked to explain why a company might choose to remain with an existing solution rather than adopt something new, a veteran of the financial world with her fair share of in-house projects under her belt pointed to the presumption of a painful implementation and lack of trust in a new brand in comparison to something established.

She said the big ERP systems do what they do well and that is why most companies rely on them, “however, the lack of flexibility and customization creates manual processes that, in turn, end up costing a business more time and resources than they planned for.”

Big picture thinking goes beyond dollars and cents. Dare we say it should be dollars and sense?

 

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