For many years, corporations had to decide if they should purchase an all-in-one or best-of-breed treasury workstation.
Much like the enterprise resource planning (ERP) space of the 1990s, there were a few large end-to-end treasury workstations and many smaller best-of-breed competitors (BoB). In the 90s, All-in-one (AiO) vendors had the advantage. They provided an end-to-end solution in an environment where there was no internet or cloud-based computing and few cost effective ways to integrate systems.
Today, with the advent of the cloud and other advanced technological solutions, BoB workstations have become more popular, due to their modular or app-like nature that provides much quicker ROI and cost effective integration.
There are several reasons why a BoB treasury technology strategy is more desirable over an AiO solution for treasury organizations.
All-in-One Treasury Workstations: Disadvantages
With a large, AiO, end-to-end workstation, you get what you get. Some modules might be fantastic, like cash positioning or debt management, while other modules might be very weak, such as special hedge accounting or exposure management.
With the AiO solution, there’s no cost effective or easy way to upgrade modules that may be weaker than their BoB counterparts. Truth be told, AiOs tie companies to a single vendor that could someday leave the market or create larger than desired switching costs.
Implementing a workstation has been known to take 12 months or more to be fully deployed, and we’ve seen implementation costs grow as implementation time increases. Some treasuries even stop the implementation of certain modules after realizing the time and effort needed to get them up and running.
This is why many treasury organizations are skipping the AiO workstations altogether and moving to a flexible, nimble technology strategy with niche BoB solutions.
Best-of-Breed Treasury Workstations: Advantages
Best-of-breed can be characterized as a tool designed for a specific purpose.
Think of a juicer versus a blender. A juicer is made for juicing. It performs one function really well. A blender blends, purees, crushes and mixes, but none of those functions perform as well as the juicer for juicing.
Treasury technology has gone the same way. It has become a modular business that can connect different high performing products together through the use of APIs.
A trading portal, exposure management module and special hedge accounting software can be integrated together, resulting in the best tool for each specialized treasury function. Integration is frequently quicker, the system has more relevant features and capabilities, and it is often more cost effective to implement and maintain.
BoB solutions allow companies to add or subtract modules as needed. Switching costs are much lower and implementation time is much faster, because each product is smaller and designed to create ROI as fast as possible. Software upgrades are quicker and don’t impact the other modules within the chain. This provides control over upgrades and typically allows the user to always be on the latest version.
AiO or homegrown solutions frequently require customizations that complicate implementation and upgrades to newer versions. In contrast, BoB is flexible and can easily expand (such as adding a debt management module) or contract (such as eliminating an inter-company loan module) if a module is no longer needed. This flexibility reduces maintenance costs over time.
Best-of-Breed Technology: Secret to Success
Best-of-breed has taken the place of the AiO solution due to its flexible nature and ability to have the best, focused solution for each treasury process. Implementation time is significantly less for this modular strategy than a full treasury workstation, and integration hurdles of the past have been solved by cloud-based computing. New functionality can be added when needed, and obsolete products can be purged from the company’s digital treasury ecosystem.
Building a best-of-breed treasury workstation for your digital treasury ecosystem? Include Capella FX in your technology stack to streamline your foreign exchange derivative accounting functions.