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The Gloves Are Off

Software vendors battle to win over treasurers.
Peter Williams and Graham Buck, CFO Europe Magazine
December 10, 2007

A few years ago, when the treasury team at Deutsche Post World Net (DPWN), a €60.5 billion Bonn-based post and logistics firm, decided to start using their ERP system for in-house banking and payments, not many other treasurers would have wanted to follow in their footsteps. While SAP, Oracle and the other big ERP vendors had some treasury modules on offer, these paled in comparison with what treasurers could get from treasury management system (TMS) vendors. What's more, most treasurers bristled at the thought of having to give up their specialist software in order to use relatively minor modules within the bigger ERP systems being managed by group IT.

But Daniel Robrechts, group treasurer of DPWN, says the business case to make the switch was strong. Since its IPO in 2000, DPWN had bold plans for growth, primarily via acquisitions. These included the takeover of DHL, which gave DPWN, among other things, an entrée into the US's huge express-delivery market. It also meant that the volume activity in treasury exploded, and created a need for central treasury to be more integrated into the group's growing global network of companies. "The platform [from SAP] enables us to manage the liquidity and cash for as many as 600 different companies, and we estimate that [the ERP] solution saves us €40m per year," he reports. "The payback is definitely there."

Since "the six-figure investment" to make the treasury-software transition, DPWN's ERP system has expanded its reach to include internal hedging activities, and now Robrecht's team is considering transferring risk management activities from the TMS to the ERP as well.

To many treasurers, DPWN's treasury switch may no longer seem as daring as it once did. In a global survey this summer of treasury professionals by Eurofinance, a sister company of CFO Europe, nearly 25% of the 150 ERP-using respondents said they have implemented the treasury modules of those systems. A further 29% said they were considering doing so. Meanwhile, 20% of the 150 TMS users in the survey said they are also looking into the treasury modules of the ERP systems.

Power Sharing
One reason for the increasing interest in ERP is that the software vendors — notably SAP — have greatly improved their treasury technology in recent years. Another is that an ERP system, rather than a standalone TMS, can help move the treasury function closer to information that resides in other parts of the company. Such a switch can also help resource-strapped treasurers, who can piggy-back on existing ERP support provided by the IT department.

Beyond those reasons, however, there's a tough fact of life for a growing number of treasurers: they might not have any choice in the matter. "If companies have a centralised IT strategy, it is very hard to argue against putting in a treasury module of an ERP. It will cover 95%-plus of a TMS," claims Damien McMahon, Brussels-based director of finance and treasury solutions at PricewaterhouseCoopers.

Yet the ERP-or-TMS decision is rarely clear-cut. While ERP offerings have been improving, so too have the integration and interfacing abilities of traditional TMSs, so many treasurers spend a lot of time trying to figure out how to get the best of both worlds.

An ERP-TMS combination is currently running at Alcatel-Lucent, a €18.3 billion Franco-US telecoms-equipment company. "There are certain things that can be done by both TMS and ERP with a treasury module — they include cash management, cash accounting and in-house banking," notes Baudouin Courau, Alcatel-Lucent's Paris-based group treasurer. "It's difficult to say whether one is better than the other in these common areas."

With room for both, Courau has central treasury running a TMS for cash management (global cash pooling, in-house banking and the like), transaction management and risk management. Meanwhile, the business units use ERP for basic treasury work, like uploading bank statements and cash accounting, handing over any complex transactions — such as foreign-exchange hedging — to central treasury to run through its TMS.

Keeping a Foothold
That's good news for TMSs. As Maggie Scarborough, corporate banking research manager of Financial Insights, a research firm owned by IDC, sees it, "SAP still remains the über system, but it's not the day-to-day tool. That's why TMSs survive and maintain their relevance."

While SAP and other software giants have been edging onto their turf, TMS vendors have been holding their own, competing not just in terms of products but also size, thanks to a flurry of M&A. In recent years, Wall Street Systems snapped up Trema (which had bought Alterna before that), Thomson bought Sellkirk and SunGard bought Integrity. More recently, SunGard announced plans in January to buy various parts of rival XRT, including its high-end product lines TWS and Globe$ and a portfolio of customers. (See "The Big Get Bigger" at the end of the article.)

This consolidation brought many of the vendors a broad range of products, for a range of budgets, that tend to be more flexible and easier to install than ERP systems. What's more, the migration of TMSs to software-as-a-service (SaaS) products — in which treasurers can rent licensed software as and when it is needed over the web — has also increased the niche software's reputation for user-friendliness, not to mention cost-effectiveness, says Scarborough of Financial Insights. She puts the five-year compound annual growth rate of packaged treasury management technology at 9.2%, reaching a forecasted $722m worldwide by 2010. Much of that growth will be driven by SaaS technology, which she predicts will grow at a rate of nearly 40%. (See "Big Time," June 2007.) "[The TMS] vendors have been smart about using licensed technology to accommodate [treasury's] budget," she notes.


Eventually the lines between TMS and ERP could blur, making it easier for treasurers to fill the gaps in their treasury technology. Indeed, SAP and SunGard's announcement in the spring that they were forming a banking-technology alliance could be "a harbinger of things to come," wrote Albert Pang, an analyst with IT research firm IDC in a report published in June. How much that could ease treasurers' technology gaps remains to be seen. For now, they should sit back and enjoy the fight.

Peter Williams and Graham Buck are freelancers based in London.






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