"Nobody's buying installed software anymore," said Bob Stark, vice president of strategy at Kyriba, a provider of software-as-a-service (SaaS) treasury and risk management solutions. "What people are buying today, and have been for the last five or 10 years, has all been cloud.

"For the most part, everyone is in the cloud one way or another," Stark said.

He added that the impetus for the move to software as a service is coming from outside treasury.

"It's not necessarily the treasurer putting out their hands saying, 'We want to be in the cloud,'" Stark said. "In many cases it's the [chief information officer] and [chief information security officer] who are pushing all their departments to be part of a cloud strategy."

IT departments are encouraging the use of cloud solutions by treasury and other parts of the organization because IT lacks the resources to support installed software, he said. "They're asking treasurers to go down the path of the cloud."

Paul Bramwell, a principal at EY Global Treasury Services, agreed that IT executives are promoting the move to the cloud. "We work with corporations ranging from the relatively small to very large, and what we observe is that there is an increasing push from the [chief technology officer] to outsource as much as possible in terms of cloud-based technology," he said.

"The advent of standardized controls and accreditations around security is something which has given CTOs a lot more confidence that their data is going to reside in a safe space and [has] reduced the concerns around data leakage and hacking," Bramwell said.

Cloud-based solution providers have also expanded their offerings. A few years back, SaaS treasury products tended to lack some functionality, he said, because providers "would focus on the needs that the majority of companies would have instead of complex niche areas like hedge accounting.

"But the functionality offered is growing and becoming far more holistic," Bramwell said, making cloud products "a viable alternative" for even very large and complex companies. SaaS providers' ability to integrate their software with a client's other solutions and banks has also improved, he said. "Vendors have built up incredible complexity and comprehensive coverage to ensure they were no longer an issue."

He added that software-as-a-service solutions can come in handy for treasury groups given that "they tend to get short shrift from their IT departments."

Bramwell cited a large company he spoke with recently that was contemplating moving a sizable installed treasury management system to the cloud.

"They went through all sorts of analysis around security protocols, whether they could hold data outside their firewall," he said. "Then they realized the company had outsourced its infrastructure to another large IT vendor already. Already their applications were outside their own firewall."

Mark O'Toole, vice president of treasury and commodity solutions at OpenLink, a trading, treasury, and risk management solution provider, connected companies' move to the cloud with their financial strategy.

"Certainly what we've seen is a move, particularly around corporates, looking to outsource their IT components where they are, essentially, moving [capital expenditures] over to [operating expenditures]," O'Toole said. "Because not only does it help to improve margins, but the cloud opens up a world of functional possibilities that were not always available to treasury, and allows them to focus on the heart of the business."

"What people are buying today, and have been for the last five or 10 years, has all been cloud."

—Bob Stark, Kyriba

Levels of Complexity

Craig Jeffery, managing director at Atlanta-based consultancy Strategic Treasurer, said software-as-a-service offerings have made up the majority of sales of cash-oriented treasury technology since 2006 and have dominated the sales of systems that deal with both cash and risk since 2009.

That doesn't mean there are no installed versions of those types of treasury technology purchased, he said, "but the vast majority are software as a service."

SaaS software "tends to be faster, cheaper, it tends to give you the advantage of future-proofing your treasury," he said. "If the vendor develops it, they're keeping the software current and up to date. You're being forced to stay on a modern version.

"That's a significant consideration for many, many companies," Jeffery added. "It reduces some kinds of risk."

Meanwhile, he said, the fact that cloud solutions limit companies' ability to customize them is less of a challenge than it used to be, except for very large companies that have complex financial needs.

"Risk and finance is their business, and they may find significant gaps in what's available to the general market," Jeffery said. "That's where you see people using software they can extend and configure."

But for companies whose treasury complexity is at the lower end, cloud products' capabilities continue to grow and are meeting more of treasury departments' needs, he said.

That upper end of the treasury technology market, the systems sold to central banks and corporations that do a lot of hedging, has been the slowest to move to the cloud, Jeffery said. "However, with the growth of capabilities and the desire of organizations to move this data offsite, or to make sure systems are updated on a regular basis, there's been increased pressure even at that top sector."

He cited recent announcements of moves to the cloud by OpenLink and FIS as evidence that "the movement toward SaaS has completely impacted and dominates all sectors of treasury technology."

In April, FIS, formerly SunGard, said that it was launching a cloud version of its Integrity treasury solution, named Integrity 10. And in May, OpenLink announced a cloud platform, OpenLink Cloud.

Public Cloud Offering

OpenLink's O'Toole said that while the company has made its software available via a private cloud for eight or nine years, the new offering is a public cloud, on Microsoft's Azure cloud computing platform.

OpenLink's customers are large treasuries that are complex and often have large FX, commodity and raw material exposures that require robust risk management, such as the treasury departments of financial services firms and companies that are heavy users of commodities. O'Toole noted that OpenLink can manage activity around debt and investments, including collateral management, margin and variation margin, enterprise risk and credit and said cloud solutions provide advantages for such treasuries. In particular, OpenLink's cloud offers unconstrained computational power, which means companies are no longer limited by either functional or data processing constraints.

Moving a company's data into a cloud lets the company make better use of the data, O'Toole said. "By getting your entire business outside of your ERP on a platform like ours, you can start to analyze that data in real time pretty much, and help make decisions faster, be able to be less reactive and more proactive in how you are making those decisions."

And companies that are dealing with both commodities and foreign exchange risk have a lot of data to crunch.

"A treasury may be running [a value-at-risk calculation] on their FX exposure," O'Toole said. "But in isolation, it's not really giving you an accurate risk profile. If you want to get the benefit of an enterprise risk reporting platform, you want to include all your asset classes—not just currencies, not just bonds; you want to put in everything." That way, the VAR calculation "will look at correlations and look at netting, and it could lower your overall risk profile, which gives you more working capital," he said.

He also cited the computing power involved in those calculations. A treasury that, for example, goes through a heavy end-of-day close would have to have a powerful enough IT architecture and servers to handle that, even though it might last only a couple of hours a day.

And the cloud gives companies the computing power they need without having to pay for it 24 hours a day, O'Toole said. It also gives them flexibility. "The clients have the ability to say, 'We're going to need some more power,' and as they run their reports, Azure will spin up and down servers as needed."

He emphasized, though, that OpenLink's cloud platform is not multi-tenant software, noting that "multi-tenancy doesn't work for a good portion of our clients who are looking for flexibility."

Cloud solutions can also help companies move beyond a patchwork quilt of systems. O'Toole cited a Fortune 100 food and beverage company that OpenLink works with which had been relying on eight different applications within treasury alone.

"Our solution can streamline all that into one," he said. And once the company's data is on a single platform, "you have real transparency and visibility into data and you can obfuscate the need for any integration points, where integration points exist."

"Certainly what we've seen is a move, particularly around corporates, looking to outsource their IT components where they are, essentially, moving [capital expenditures] over to [operating expenditures]."

—Mark O'Toole, OpenLink

Large vs. Small

Philip Pettinato, chief technology officer at Reval, a provider of treasury and risk management technology, argued that cloud treasury solutions offer advantages for companies of all sizes. "At Reval as an example, we have Fortune 50 companies all the way down to smaller and midsize companies," he said.

"For large corporates, cloud software provides the benefits of economies of scale," Pettinato said. "They get to focus on using the software to help to run their business, rather than focusing on the requirements of hosting and managing software. For them, it's all about bringing solutions to their business."

Smaller companies can use the cloud to access more sophisticated solutions, software they may not have been able to use before because they didn't have the infrastructure, he said. "Now they can access this software through the cloud, and they look to these solutions to be more scalable."

Cloud Advantages

Anis Rahal, CEO of treasury management software provider TreasuryXpress, said the case for cloud software goes back to the pain that companies experience when they implement installed solutions.

"This is the topic that clients really fear," Rahal said. "Implementation takes time, implementation takes a lot of the resources of the client. The cloud model was really created to reduce waste and complexity during the implementation phase.

"When you implement on the client's premises, you can always expect to have some surprises," he said. "With the cloud, everything is ready to implement. The most important thing about implementation, it must be extremely light, extremely fast. The cloud enables that."

Reval's Pettinato agreed that the ease of implementation is a plus. "In many cases, you're not spending any time worrying about hardware, software, setting up security—that's all managed by the vendors."

But he made the case that the ease of upgrades is also attractive to companies. He noted that companies which have implemented installed systems, and have either customized them or failed to upgrade them, have ended up battling to keep up with the latest version of the software.

"Companies struggle to get value from their providers because they're stuck on old versions, and the providers struggle to focus their energy and time and resources and investments on all the new opportunities because they're spending time chasing old code and supporting it for legacy systems," Pettinato said.

Internet Access

The fact that cloud solutions are accessible over the Internet is a plus for treasuries that have users spread out in different locations around the world.

"For multinational companies, it gives you a much easier platform to roll out and support your treasury globally," Pettinato said.

Many companies have been working with disparate treasury systems in different geographic regions, systems that "either didn't communicate with each other or by the time they communicated with each other, the data was out of date," he said.

A cloud system that can be used in all of a company's locations is "a big advantage for a company that's trying to get that global visibility into what their cash positions are, what their risk exposures are," Pettinato said. "It switches you from a world where you're just processing data to a world where you can make effective decisions on the data being processed."

Pettinato also noted that companies using cloud software no longer need to worry about forging connections between their treasury software and other systems they use or get data from.

"As a cloud provider, we connect our systems directly to all the other systems where the data needs to flow," he said. "So clients don't have to spend their time worrying about the data flow between the platforms."

He cited the example of a Reval customer that is shifting from an installed Oracle ERP system to a cloud version of Oracle's ERP. "We can connect from our cloud to [Oracle's] cloud," he said. "We're a certified partner of theirs that connects our systems together in that way.

"As everyone moves toward the cloud, it creates connectivities that are much more efficient," Pettinato added.

Kyriba's Stark emphasized the fact that treasurers can access cloud solutions on any device.

"They don't want to be having to look at their laptop all the time," he said. "They're in a meeting, they're walking around the office, and they just want to be able to approve payments or look at reports."

Easy access to software is especially important for CFOs, Stark said, because "they're in the office way less than a treasurer."

People have grown accustomed to being able to use their smartphones wherever they happen to be, and they're starting to demand the same thing in a business context, he said. "The way people consume technology has changed, and as a result the way you have to deliver treasury technology has to change. The cloud does enable that."

 "You're not spending any time worrying about hardware, software, setting up security—that's all managed by the vendors."

—Philip Pettinato, Reval

Treasury as Collaborator

Stark said cloud treasury solutions can also facilitate projects that involve treasury teams collaborating with other parts of the company. He cited the example of supply chain finance, an effort that involves a company's procurement, accounts payable, and credit management organizations as well as treasury.

While treasury is dealing with the banks that might be involved in providing supply chain finance and assessing the company's liquidity to see whether it is willing to make early payments with its own funds, A/P is identifying the candidates for early payment and remitting the payments, and the procurement and credit management groups are involved in assessing which suppliers qualify for early payment.

"If you have installed software or software limited to only a part of the organization, it makes it nearly impossible to support a program like this," Stark said.

Another example is a company that uses its treasury software to operate a payment factory, Stark said, since people outside treasury would use the treasury software housing the factory to initiate or approve payments or check workflows.

Treasury teams gathering information from all parts of the company to feed into their cash forecasts might also give other staffers access to the treasury system for that purpose, he said. Treasury "needs those folks to provide input, but also to see the results, so you have a positive feedback loop."

Stark pointed out that Kyriba has 1,600 customers and 45,000 users. "On average, a lot more people than just treasury are accessing the system," he said. "It's yet another argument for cloud—you really couldn't administer those types of users in a non-cloud scenario."

Single Tenant vs. Multi-tenant

EY's Bramwell argued that the "true meaning" of cloud is a multi-tenant SaaS solution, "where you have one single instance of an application in use by all clients.

"If you're on true SaaS, you are only ever on the latest version of the product," he said. "You never get the chance to become out-of-date or obsolete."

And from a software vendor's perspective, there's just one version of the product to develop and test, he said. "That translates into a lower price point and better-quality software.

"As a software-as-a-service vendor, you are significantly more focused on the quality of the software," Bramwell added.

But from the corporate client's point of view, the distinction between multi-tenant and single-tenant may not matter. "Having your system deployed on the cloud, whether it's multi-tenant or not, means you're no longer going to have to be beholden to your IT department to get time for an upgrade," Bramwell said. "It frees you from internal constraints."

Stark emphasized that the visibility that a multi-tenant cloud environment affords the provider of the solution results in a better experience for users.

Problems connecting to their banks, such as files arriving late, are "by far the biggest issue" that companies experience with treasury systems, Stark said. But if a cloud treasury provider has 500 corporate customers that use the same bank, "if there's an issue with that bank, you're able to diagnose what's going on immediately," he said.

"If it's just company ABC, you know that immediately," Stark said. "If it's something to do with Bank 123, you know immediately that you need to be contacting that bank and solving that because it involves a large variety of customers. Maybe it's regional—maybe customers in Texas have some sort of issue, whereas other parts of the U.S. don't see that.

"You have a huge advantage in a cloud system because you can see everything," he added. "You're able to manage everything centrally and take action centrally."

TreasuryXpress' Rahal agreed that a public cloud allows for stronger oversight by the solution's provider.

"When you are a part of a SaaS cloud system, you will be managing much better the monitoring of the system; you can be in full control of the network," he said. "When you are on a private cloud, each time you need to check the health of the server, you need to ask for a remote connection from the company."

"Implementation takes time, implementation takes a lot of the resources of the client. The cloud model was really created to reduce waste and complexity during the implementation phase."

—Anis Rahal, TreasuryXpress

Cost Considerations

Cloud solutions can save treasuries money, a welcome feature in the current environment. The return on investment for technology projects "is more critical these days than it ever has been," Stark said. "It's not like budgets are increasing. Treasury is more and more squeezed."

Cloud software usually is paid for using a subscription model, instead of the upfront software license and maintenance fees common with installed solutions.

"In general, what we've seen is that the price for the same level of functionality has been cheaper for a cloud solution than an installed solution for an initial five-year period," Stark said. "Over 20 years, you probably paid more for the cloud than your software license."

Comparing total costs—not just what is paid to the vendor, but the internal costs the company incurs in supporting the system—"the cloud is immensely cheaper compared [with] an installed option," he said.

"The price of the cloud is incorporating variables a software license doesn't include: managing upgrades, backup, etc.," Stark said, although he noted that such internal costs often are split among different expense items on the budget, making them less visible.

Rahal pointed to the extent of the investments companies must make when it comes to installed software. "If a client wants to implement locally, he has to buy servers," he said. "You have to hire people to monitor the servers, you need a space to hold the servers, air conditioning, you have to buy all the licenses.

"When you are on the cloud, the client is only paying for the system," he said. "Everything is covered."

EY's Bramwell said companies now get considerably more functionality for their money than they did five years ago.

"The price of technology has fallen, and the entry-level introduction to treasury technology is much more attainable and achievable, even for companies on a relatively small budget," he said.

A recent Association for Financial Professionals (AFP) survey showed that more than half of treasuries in North America still rely on spreadsheets and banking portals, he noted.

"There's no reason from a pricing perspective they shouldn't go out and consider using some sort of solution," Bramwell said. "I'd be surprised if even the smallest company couldn't see some return on investment for putting a treasury solution in place."

Security Concerns

Companies used to be wary of trusting their financial data to the cloud, but those concerns have largely dissipated.

"In the early days of cloud, one of the reasons people were worried was because of security," said Ed Page, a managing director at the consulting firm Protiviti and leader of the firm's national financial services IT consulting practice. "They were worried because you were putting your data in the hands of someone else—it was one of the barriers to adoption."

Cloud providers and solution providers "have aggressively addressed" those security concerns, Page said, and "in many cases, the capabilities in the cloud are as good as the capabilities in on-premises solutions."

He cautioned, though, that companies using cloud solutions have to be careful to implement security measures correctly. "The cloud providers, Azure or [Amazon Web Services], have really, really good security capabilities that you can avail yourself of, but you have to make sure you use them properly," Page said, comparing the situation to on-premises security: "If you don't lock the doors, somebody can get in, even if you have dead bolts and all kinds of security systems."

He cited a company that put its data in the cloud but "then basically left their keys to the data completely unsecured.

"Not surprisingly, they had their Internet property stolen because they left their keys open and in the clear," Page said. "Even though they put the security on, they didn't use it and paid the price."

Some providers of cloud solutions say the situation has reversed to the point where the cloud is arguably more secure than installed solutions.

TreasuryXpress' Rahal said cloud providers can roll out any type of security a corporate customer could desire.

"If you're using Google or Microsoft Azure, they have all the certifications," he said. "Any firewall you want or security policy you want to apply, it's already there. Just check the box."

Reval's Pettinato pointed out that the centralized nature of cloud technology lets providers respond quickly to cyber threats.

"When there's something that happens and we have to make a change or an adjustment, or even an evaluation [of] 'Is my environment secure?' we can do it immediately; it's a one-to-many model," he said. "If I was responding to that client by client, it could take me weeks or months, and by the time I was through we'd be on to the next cyberattack."

Cloud providers also have an advantage because they're dealing with security not just at the infrastructure level but for software as well. "Having the provider think about it holistically, both from infrastructure and software, where the technologies are married together to secure clients' data and prevent intrusions, is very, very important, and having a cloud solution like this is the only way to really do that," Pettinato said