The migration to recurring revenue business models coupled with recent changes in revenue recognition accounting guidance necessitates additional infrastructure for support in the back-office, prompting companies to look for modern, cloud-based revenue management solutions.
Why Should Companies Migrate the Back-Office to the Cloud?
In the past decades, it was common practice for companies to acquire an ERP system from one of the available platform vendors and host internally on their own premises. For simple and smaller companies this was all that was needed. For most others, complexity was handled via customizations done by the internal IT staff (IT), by the vendor services staff (PS), or by a systems integrator (SI).
While customizations solved challenges, and the systems worked, they soon created issues of their own. As requirements evolved, customizations were layered upon each other. The effort to migrate to newer versions of the application increased exponentially which, in turn, increased the cost, leading to freezing in time of the platform version, otherwise known as ‘vendor and version lock-in’.
Stability impacts grew as vendors could not automate regression tests against custom code and as business were not able to benefit from vendor efforts to correct defects found in the code. Things got worse as the population of companies using the customization was limited to a single company. The benefit, otherwise seen in a multi-tenant cloud, of hundreds of people stressing the same app to rapidly find (and have the vendor fix) defects, was not available.
For all these reasons, many companies are left today running outdated or homegrown software. As stated, requirements are rapidly evolving. Replacing such systems is one of the most disruptive internal projects a company can face. This has led to the use of spreadsheets and customizations to fill functionality gaps, increasing risk, and diminishing agility for the business leaving many companies inefficient.
Ironically, while all of this has occurred, there has been a massive rate of change in technology supporting the back-office. But, for the above reasons, most companies have not taken part. To take advantage, companies must either bite the bullet and ‘rip and replace’ their existing ERP system, or augment. Those companies considering either option should seriously consider migration to cloud applications.
What to Consider When Moving the Back-Office to the Cloud
There is incredible benefit to cloud solutions that cannot be ignored in a competitive environment. Businesses looking to modernize their back-office and move core systems out of their internal data centers should consider the following:
Single-Tenancy VS. Multi-Tenant Cloud
- Single-Tenancy: An architecture in which each company using the application has its own environment.
- Multi-Tenancy: A multi-tenant cloud architectures vary, but typically a set of application servers serve many companies. The Database server is typically separated with each company having its own logical database server (to ensure security and privacy).
What Are The Trade-Offs?
The single, biggest virtue of a single-tenant cloud is that it does provide the ability to customize. Because each company has a dedicated server or set of servers, customization of one company’s application will not affect others running in the same cloud.
However, this virtue may be the greatest negative in disguise for the very reasons described above. Despite being in the cloud, a single-tenant system will likely experience the same vendor and version lock-in, loss in stability, and growing cost to maintain as described above in the on-premises days.
In the case of multi-tenant cloud systems, while some customization is possible, it is significantly downplayed. It is the task of the vendor to support the necessary requirements for automated processing out of the box. If this can be done, then upgrades can occur via a ‘Continuous Release Process’.
A ‘Continuous Release Process’ involves a highly automated release of new functionality to the entire user community. The release occurs typically first to all customer test environments, and later to all customer production environments for each release. Because the release process is automated, more releases can occur, meaning that each release represents a much smaller progression of the application codebase. Also, because the release is standardized, meaning no customizations, vendors can create substantial automated regression test processes, ensuring quality and stability.
What is the Best Revenue Management Solution?
One option is to attempt to ‘rip and replace’ with an ERP application running on a multi-tenant cloud. This may work for companies where processing has remained simple. However, for larger companies, or those with complexity, existing ERP vendors have not been able to solve this problem. To quote Lincoln, they have not been able to ‘please all the people all the time’ with a single solution as broad as an ERP application. For the most part, they are instead essentially performing fork-lift migrations of on-premises ERP into a single-tenant cloud, with all the pitfalls described herein. While the application is moved out of the data center, all of the negatives in terms of business agility, stability, cost, and risk are still present.
An alternative option is to augment an existing ERP system with additional modules to handle the various aspects of revenue management in a best-of-breed approach. This entails finding modules that run in a multi-tenant cloud to take over the revenue management processes of the existing ERP system. In this way, these complex processing areas of the back office are handled without the extreme disruption of a full ‘rip and replace’ of the existing ERP system, yet with all the benefits of running these processes in a true, multi-tenant cloud environment.
It is a good solution in that it entails the use of out-of-the-box functionality, without the need to customize, and therefore enables a continuous release process.
However, there may be downsides, including data and integration challenges, particularly if the company needs to deploy multiple, cloud-based modules to handle each area of processing.
SOFTRAX provides an optimal solution to these challenges. It is a solution that has stood the test of time and is the selected approach of ERP providers themselves. The SOFTRAX Revenue Management System is a multi-tenant cloud application. It can handle all revenue management processing, from order processing to JE generation within a single, self-contained application. This includes order entry, multiple forms of billing, contract renewal management, and revenue recognition. The system establishes a single layer between CRM/CPQ and core ERP to accomplish the full revenue management task, thereby removing integration and data synchronization challenges. Alternatively, the system is designed such that each component can be deployed in isolation should a company desire. Either option provides a path to augment existing ERP to deliver enterprise-level functionality that streamlines the entire revenue management process without the need for large platform customization or replacement.
Why Companies Choose SOFTRAX for Revenue Recognition Automation & Billing Automation
When Epicor Software Corporation wanted to evolve its back-office processes and systems to ensure the highest state of automation possible, they went through the challenge of finding the best solution to help manage the renewal and billing of maintenance contracts, the billing of subscription fees, and the recognition of revenue for these billings.
Epicor is one of the world’s leading providers of industry-specific business software that gathers, stores, manages, and shares information for customers in manufacturing, distribution, retail, building supply, and automotive organizations, and is a high transaction volume business, due in large part to the quality of its offerings.
To further complicate Epicor’s challenge, they needed flexibility and adaptability in the solution to retain an effective and stable back-office during a period of rapid business growth, both organically and through M&A activity.
Today, Epicor leverages solutions from SOFTRAX to augment their internal use of Epicor’s own ERP suite. This automation infrastructure has stood the test of time. It spans the integration of multiple acquisitions, each bringing different product sets and requirements to Epicor and SOFTRAX. Data migration and update functionality tied to the solutions help to provide a seamless onboarding of these acquisitions with minimal disruption to the overall business.
Explore testimonials from more companies like Epicor who rely on SOFTRAX products to meet their billing and revenue recognition challenges in the Customer Case Study Library.
SOFTRAX is gearing up to release exciting news this spring that will interest revenue accountants, staff accountants, internal and external auditors, controllers, CFOs, and financial analysts.
Contact an expert today to learn how SOFTRAX’s modular end-to-end solutions can solve your business’s unique challenges.