By Raphael Bres, Workday’s VP for financial management.

The market for financial management software is undergoing a major transformation, and this is largely due to two big advances: in-memory database technology and multi-tenant cloud computing. Modern financial applications that leverage these approaches challenge the traditional architectures of finance systems, especially for financial reporting and analytics. Yet they also make it possible for businesses to better adapt to change and quickly absorb new innovations. Here is a closer look as to why the industry is talking so much about these technologies, and why they’re changing the landscape of finance.

In-Memory Database Technology

Financial applications across the industry have made good progress in functional and global coverage over the years, but one area has lagged considerably: the ability for users to access financial data for analysis.

The traditional approach for delivering data for financial insight to operational users and decision-makers relies on data extraction. Financial measurements are recorded on the ledger account within an ERP system, which is optimised for online transactional processing (OLTP). Then the data is fed into business intelligence software designed for online analytical processing (OLAP), where it can be mashed-up into more meaningful views, sometimes augmented with non-financial information and other reporting dimensions. The result is information that is heavily manipulated and no longer current, making it a questionable source on which to base business decisions. This approach has cost businesses a lot of time and money over the years, and a heavy reliance on their IT departments for the integrations.

The increased demand to analyse the key drivers of business performance necessitates a much greater level of data granularity across multiple business dimensions along with an expectation of faster response time. Sound contradictory? But it is possible by taking a new approach in the world of finance technology that uses in-memory queries optimised for high volume processing, allowing reporting directly from journal lines, which records the original event, within the financial transactional system. No more OLTP versus OLAP, just one high velocity system with a single source of the truth for all calculations that aggregates across multi-dimensional reporting.

True success with this approach requires that finance systems are built from the ground up to support in-memory queries and analysis. Some vendors may take the approach of porting traditional ERP systems to in-memory technology, but this actually amplifies the historical complexity for both the customer and the vendor. The only way to win with this model is to go back to the drawing board and design a modern financial system for both accounting and business performance analytics.

Multi-Tenant Cloud Applications

There is an incredible amount of discussion about cloud computing these days and for good reason. The pace of innovation of cloud-based financial applications is unprecedented—but only if such systems use a multi-tenant model.

The multi-tenant model is one where organisations have their own instances—or tenants—of the cloud applications, yet the vendor delivers new releases of the application to the entire customer community at the same time. This vendor-managed approach means new innovations are delivered in the cloud as soon as they become available, so organisations don’t have to plan for significant and often disruptive software upgrades. In the rapidly changing world of finance, this continuous innovation approach can be a significant competitive and operational advantage.

Multi-tenant cloud applications also are more flexible, allowing organizations to more easily adapt to change. Consider that laws and regulations are constantly changing both locally and globally. If a new regulation is passed, a multi-tenant cloud application delivers within a short period of time the updates to affected customers.

Another benefit of multi-tenancy cloud computing is cost savings. We often hear from organisations that they’ve achieved anywhere between 30% and 50% cost savings over a five-year period compared with on-premise software applications. The cloud’s update cycle is easier and faster, resulting in not just lower cost of training, but higher adoption of innovation. That provides companies with a competitive advantage against peers who are caught in the slow-paced legacy model. IT resources can be transitioned away from time and talent spent maintaining systems to focus on projects that generate profits for their businesses.

These two big advances in finance technology—in-memory technology and multi-tenant cloud computing—bring organizations more powerful and current financial reporting at less cost and effort, and the benefits of innovation, agility, and lower costs. They are already leading to significant changes in our industry and will continue to drive it forward.