Stephan Hagelauer, product marketing director at XRT-Cerg, the King of Prussia,

Pa., treasury software company. "One vendor may have a bell, another a

whistle, but those differences are not critical. You win or lose business today

on the strength of your ability to provide links that can reach more deeply into

internal databases and into the systems of various trading partners and

suppliers, including banks. Processing functionality no longer sets you

apart."

As the tables that follow demonstrate,

competition among treasury workstation vendors remains strong, and research and

development dollars are being committed to projects that could bring major

breakthroughs in the next year or two. However, budget-conscious treasurers are

no longer willing to discard old systems quickly or upgrade for the sake of a

few new applications.

"What treasurers are asking for today is

deeper integration into the business operations of their companies, using

Web-based tools," says Lyndon J. Harvey, chief operating officer and president

of the e-commerce division of Selkirk Financial Technologies in Vancouver, B.C.

"Simple links to A/P and A/R [accounts payable and receivable] were enough in

the past, but now treasurers want more tools for managing their supply

chains."

Vendors also are talking about their plans to

deliver services as application service providers (ASPs) over the Internet and

about efforts to link treasury to the systems of banks, dealers and investment

managers in a "seamless" automated pathway that goes under the rubric

"straight-through processing."

Nice concepts, say treasury practitioners,

although to date, few vendors have much to show for their efforts.

"There is no blockbuster treasury workstation story this year," observes

David L. O'Brien, assistant treasurer of $19 billion-revenue EDS Corp. of

Plano, Texas. "What's happening are incremental gains in operating

efficiency."

Even the once-significant differences between

high-end and low-end workstations and between domestic and global systems are

shrinking as workstations become more generic, says George Rush, senior vice

president for business development at Gateway Systems Inc., of Barrington, Ill.

"Four or five years ago, an accounting

interface was a major selling point. Now all systems have them," he observes,

noting that it's too expensive to offer separate systems for large and small

companies. As a result, most vendors build one high-powered system and then turn

on as much of the functionality as a treasurer needs and will pay for, Rush

explains.

At the same time, no single vendor has been able to differentiate itself in

providing the distinctive treasury accounting tool of the moment–a module to

significantly ease compliance with the FAS 133 derivatives accounting rules.

Searching for Solutions

EDS must have looked at 30 to 40 programs for handling FAS 133, says

O'Brien. Some are better than others, but none can greatly ease the task of

helping to identify and measure the hedge effectiveness of derivatives buried in

different parts of the company's books, he says.

EDS only recently received a FAS 133 module for

beta testing from its workstation provider, XRT. It is now being evaluated by

the Texas company's foreign exchange manager. "If it will do the job,

we'll buy it," says O'Brien. But he adds, "FAS 133 just is not easy to

account for."

"What vendors could provide turned out to be

quite limited" regarding FAS 133 compliance, concedes Les Halpin, chief

executive of Integrity Treasury Solutions in Chicago. "We discovered that

corporations, not software, have to accomplish compliance." Jay

Schaefer, director of treasury at $2.2 billion-revenue Alaska Air Group, says he

is still searching for a system that can help the Seattle-based company with

mark-to-market pricing and effectiveness testing to meet FAS 133 requirements.

"We're talking with SunGard about being able

to add FAS 133 functionality [to a Resource IQ2 treasury system], and also

looking at a Bloomberg system," he says. On the other hand, software

vendors are falling all over themselves to promote their attempts to offer

straight-through processing (STP).

More than half of the 21 treasury workstation

software companies that filled out our Buyer's Guide questionnaires said they

provide STP capabilities for trading foreign exchange and interest-rate

instruments and for issuing commercial paper. We did not include these responses

in the tables, however, because when questioned closely most vendors concede

they do not yet have seamless STP capabilities.

Two of the most prominent, SunGard Treasury

Systems and Selkirk Financial Technologies, unveiled plans for STP modules last

year, but the companies say that they are still developing the technology.

Connecting All Players

"Four or five years from now, the process will be integrated from end to

end, with fully automated reconciliation and accounting, rather than using

telephones and fax machines," says Selkirk's Harvey, whose company's STP

product is called Treasury Catalyst.

Gary Bishop, chief executive of SunGard

Treasury, says that the company's eXchange software is in beta testing and by

this summer will "connect all the players in a single, secure network" and

integrate into all of the company's workstation products.

In May, SunGard announced that Deutsche Bank has

signed up as the first bank to provide its services to treasury customers using

eXchange. In the meantime, some treasury departments are trying to patch

together their own STP efforts. EDS has just begun executing FX trades on

Currenex, a Web portal that supplements dealer-based trading, says O'Brien.

The process is not exactly straight-through, however, since trades executed on

the system must be manually keyed into the company's XRT workstation.

O'Brien says he's looking forward to the day

when the workstation can take imported data from the Internet and translate it

into back-end record-keeping.

Alaska Air's Schaefer says he has seen a

variant of STP in his capacity as cash manager and likes it. "I've seen a

demo where a SunGard workstation is linked to a group of money market mutual

funds," he says. "If you've set your cash position and have $10 million to

invest, you can click on the investment link, see the yields of the

participating funds and click on the one you want. The order is processed right

then, and the confirmation goes right into the workstation."

The Web

Closer to realization than STP is the delivery of workstation applications

through browser-based Internet access. "The big question in RFPs for the past

two years has been 'Are you Web-enabled?'" says Gateway's Rush. "That

has been a workstation's biggest selling point–or its Achilles heel if it

isn't Web-enabled."

The next big differentiator, he adds, will be

the ability to deliver workstation functionality in a hosted, ASP environment

that does not require on-site installations. "Treasurers like systems that

reduce their reliance on IT people," Rush says, adding that they also like the

price.

"If you've been looking at $140,000 to

$200,000 for license, implementation and training, and then a vendor offers you

the same tools for less than $1,500 a month, you'll find that pretty

attractive," he says. ASP providers probably will offer users the choice of a

fee-by-transaction model or a flat monthly subscription charge.

Scott Tiazkun, an analyst at IDC, the

Framingham, Mass.-based technology consultancy, believes that the development of

ASPs will create a two-tiered market. Since ASP versions frequently have lighter

functionality, they make more sense for small and middle-market companies than

for large corporations.

"There is such a thing as too much

functionality," he says. "Slimmer is better for a lot of companies."

To date, however, the ASP alternative has

generated more noise than substance, and skepticism remains.

Schaefer of Alaska Air has heard the buzz, but

he's not yet convinced that ASP hosting of workstation functions is right for

him.

"We're treasury experts, not software

experts," he says. "It took us a long time to implement this client/server

solution, and we'd like to get a good return on that investment before we move

on. If someone shows me that an Internet version is better, fine, we'll do it.

But I'd have to be convinced."

At EDS, O'Brien is similarly skeptical. "We

looked at [XRT's] Internet functionality, but frankly, it's more efficient

for us to use our own Web site and Microsoft Internet Explorer for Internet

access and then import what we do into XRT," he says.

Even if workstations are not cure-alls, the

market for them continues to grow. Workstation vendors booked about $295 million

in software licensing and maintenance revenue in 2000, up almost 27% from $233

million in 1999, says Tiazkun.

The Horse Race

SunGard surged into first place in 2000 with global workstation revenue of

$75.5 million, up 80% from 1999, when it was second to XRT-Cerg, according to

IDC data. (The gain reflects, in part, SunGard's purchase of KPMG Information

Solution, which makes the high-end Quantum product.) XRT-Cerg saw revenue drop

more than 26% to $37.7 million in 2000 from $50.5 million in 1999 for a distant

second place.

Stockholm, Sweden-based Trema Group, which

recently scaled back its push to enter the U.S., was third with $20.1 million,

largely in European sales, says Tiazkun. Selkirk ranked fourth and Alterna

fifth, according to IDC's numbers.

This year should bring "steady but not

explosive growth," says Tiazkun, noting that globalization and automation of

cash management should counterbalance the weakening economy.

Meridien Research of Newton, Mass., issued a

research brief on treasury workstations last December covering SunGard, XRT and

Selkirk.

SunGard is "definitely the leader" but

Selkirk is gaining market share and now is "more of a threat than they have

been in the past," says analyst Sarah Ablett of Meridien.

The ERP Alternative

By Richard Gamble

and Jed Horowitz

If connectivity is what the treasury data game

is all about, then enterprise resource planning (ERP) systems should be thriving

in the treasury marketplace. Collecting and connecting germane data into a

composite whole to automate business processes and help companies make smart

decisions are the raison d'etre for ERP systems.

Buying an independent workstation "is no

longer a logical choice," argues Mark Stapleton, director of treasury

solutions strategy at ERP vendor PeopleSoft, Pleasanton, Calif. "Treasurers

who buy them are looking backward. Even friendly interfaces require maintenance,

and you have to maintain several databases. Their GL [general ledger] interfaces

only do half the job, and it takes too much time and money to get them to

work."

Critics, however, assert that ERP systems have come late to the treasury world,

and are still playing catch-up in developing treasury applications. The old

complaint that ERP systems were built for human resources, customer relationship

management and accounting, not for cash management and investing, is still heard

from independent workstation vendors and some consultants.

No workstation can integrate data as well as an

ERP system, says Scott Tiazkun, an analyst at IDC, the Framingham, Mass.-based

technology consultancy, but workstation vendors still have the edge in treasury

functionality.

"If you [already] have an ERP system, you'd

be foolish not to look at their treasury application, since it may be all you

need," he says. "But if you need deep functionality, you'll probably go

for an add-on."

The ERP vendors are indeed marketing their

treasury systems almost exclusively to users of their installed core systems.

But Gary Bishop, the president of SunGard Treasury Systems, the biggest

distributor of self-contained treasury workstations, says treasurers who depend

on their companies' ERP systems to speed up their work are disadvantaged.

That's because ERP treasury applications are

part of bigger enterprise systems, and modifications can't be made to the

treasury components when they are needed. They are captive to upgrades

systemwide.

"Treasury has its own pace and its own

regulations to comply with" but can't control its destiny–or its leverage

over its IT department–with ERP systems, Bishop asserts.

Juergen Klingbeil, product manager for corporate

finance management at SAP–which along with PeopleSoft is the major ERP vendor

with treasury applications–concedes that enterprise upgrades have been a

problem in the past. But he says that today treasury applications of ERP systems

can be installed on a separate server to ensure full upgrade flexibility.

"A dependency on the enterprise upgrade

strategy had been a major deterrent," he explains. "But the trend is clearly

to go with a multiple-box scenario these days." The Walldorf, Germany-based

company continues to market its cash-management system as part of its core ERP

product. But over the past 18 months, it has been adding corporate finance

components that can be customized and upgraded independently of the larger

system. These include components for managing trade functions throughout a

deal's life cycle, credit risk and market risk analyzers and an intercompany

banking module.

This year, SAP plans to add a liquidity-planning

component to track accounts payable, accounts receivable and other liquidity

data, as well as an investment portfolio analyzer to track performance against

benchmarks. On the cash-management front, SAP claims to be negotiating with more

than 40 banks in the area of e-business, and to date has a relationship with

Citibank for balance reporting, funds transfer and forex trading (through

CrossMar, an affiliate of Citi).

"Our customers do not have a need for going

with a third-party treasury workstation," Klingbeil asserts.

PeopleSoft, which like SAP has targeted the

treasury market for several years, has similar "box" solutions. Oracle began

marketing a treasury application to its installed base within the last 12

months.

Cheers for Accounts

Payable

While most treasury experts are still weighing ERP vendors' efforts to

expand into cash forecasting, bank reconciliation, deal capture and other

functions, most say that the systems have proven their worth in accounts-payable

processing.

"ERP systems can be fantastic," says

Jennifer Ceran, director of treasury at Cisco Systems, which uses an Oracle

system and has been building an end-to-end automated payment processing and

reconciliation function. "It checks invoices against purchase orders, which

are electronically approved, and then creates the files of payments for

distribution to the bank."

The core A/P function "increases financial

control, lowers administrative costs and saves time for accounting," she says.

David L. O'Brien, assistant treasurer of EDS

Corp. in Plano, Texas, agrees that the systems are good at payment-processing

but says he hasn't seen one that "can manage debt, investment and foreign

exchange like our XRT workstation can."

He's not counting the ERP vendors out,

however. "Things could change, so we'll keep watching," he says.

"We're not committed to any system or vendor."

J.D. Edwards has not created a treasury system

because too many treasury professionals are skeptical about ERP, or unwilling to

pay the high costs of a system, says Tony Kay, product manager for financial

services at the Denver-based ERP software company.

Instead, Edwards has an alliance with

independent workstation vendor XRT-Cerg that allows its customers to integrate

data from their ERP general ledger database into the cash and treasury

management functions of the workstation.

"The demand [for integrating treasury into ERP]

is small," says Kay, who notes that only about 75 of Edwards' 1,200

customers worldwide have sought the XRT-Cerg link.

Edwards also is not keen on investing heavily to

meet the treasury market's needs. "My guess is that those [ERP vendors] that

have designed treasury systems are not very successful," he says.

"Internally, it is difficult to develop a core of personnel who have very

specific knowledge of the treasury area to support it well."

Some workstation vendors, on the other hand, say

that the ERP applications gap is narrowing along with workstations'

connectivity gap. "They are getting better, but so are we," says Les Halpin,

chief executive of Integrity Treasury Solutions, which is based in Chicago.

"We still have more functionality, and the barriers to integrating different

systems are coming down."

Meanwhile, some vendors are traveling both sides

of the street. XRT-Cerg, which competes with ERP vendors for treasury customers,

not only supplies its bank polling and parsing capabilities to Edwards but also

to PeopleSoft and SAP. Companies initiate their payments through XRT and pull in

approved invoices and payment requests to verify them and to automatically alert

them when payments are due.

At the beginning of the year, Texaco connected

its XRT workstation 7.0 into its SAP system. "It's working just fine,"

says Skip Weverberg, cash management manager of corporate treasury at the White

Plains, N.Y.-based oil company. "We use the SAP system to verify that the

rules we modeled for payments and collection are being followed. If there are

payments going through the XRT system that result in disbursement of more money

than anticipated, the SAP system will alert you."

Weverberg says he does not know whether the SAP-XRT

connection will continue once Chevron's purchase of Texaco is completed.