As we discussed in our last blog, the Gartner Magic Quadrant for companies designing solutions focused on consolidation, reporting, disclosures, and more has continued to evolve in response to the market for this software—The MQ for these applications split to include both strategic and financial corporate performance management in 2016 and moved to the cloud in 2017 before making a name change to their Magic Quadrant in 2018.
Magic Quadrant for Cloud Financial Close Applications
The Magic Quadrant for Cloud Financial Close Applications is an update to last year’s Magic Quadrant for Cloud Financial Corporate Performance Management Applications, focused on the day to day budgeting and planning activities in which a finance department participates.
The 2018 report covers the same criteria as 2017; however, reconciliations/close management has been split into two functional pillars and management reporting has moved to the “Magic Quadrant for Cloud Financial Planning and Analysis Solutions.”
This represents a functional shift from on-premises applications to the cloud as finance application leaders sought improvements in FC capabilities, enhanced cost control/efficiencies, greater application flexibility and shorter time to value. According to Gartner, applications considered in this Magic Quadrant fall into one of three categories:
- Cloud-only vendors with cloud solutions that have, from the outset, been architected wholly or largely as cloud services.
- Traditional on-premises vendors with new “built for the cloud” solutions.
- Traditional on-premises vendors that have made their solutions available as a cloud service.
Financial Close Applications
When retailoring this Magic Quadrant, Gartner refocused the analysis to focus on office of finance applications designed to replace manual processes and spreadsheets. These applications are designed to accomplish the following tasks:
- Financial consolidation: This component confers the ability to bring together financial information from multiple GL sources, while providing for eliminations for intercompany accounting and booking for joint-venture and non-GL business units.
- Financial reporting: This component provides financial-accounting-based reporting to meet the demands of regulators, investors and tax authorities, and to inform the organization’s operational and strategic financial management.
- Reconciliation management: This component manages the financial accounting reconciliations between feeder systems, bank accounts, subledgers and the GL. It is not inclusive of vertically focused operational reconciliations (that is, financial services operational reconciliations).
- Close management: This component confers the ability to manage the financial close, including activities spanning accounting cycles. Capabilities include the EFCA functions of close management, close “cockpits” that span ERP and post-ERP processes, and journal entry control.
- Intercompany transactions: This component, which is also an EFCA function, confers the abilities to approve at a voucher level and to handle accounting transactions across multiple GLs and companies. This function works closely with intercompany reconciliation.
- Disclosure management: Another EFCA function, this component confers the ability to support multiple regulatory requirements for disclosure reporting, including eXtensible Business Reporting Language (XBRL) and in-line XBRL (iXBRL) tagging. It may also provide “board book” capability and form the foundation for performance reporting within financial planning and analysis (FP&A).
Trends in Financial Close Applications
In addition to discussing the market as it stands today and analyzing the vendors, Gartner looked at some of the ongoing trends in the who, what, and why in the financial close application market.
- Refocused on the End User: Most cloud FC solutions are now marketed almost exclusively to the end user. Also, the growing availability of cloud office-of-finance-focused solutions that can be administered by the end user, mostly configured by the end user, and technologically managed by the cloud service provider. These have less support for integration and technology management by the IT department.
- Extending the Product: The emergence of platform as a service (PaaS) offerings. These provide a foundation for current and future applications, scenarios and blueprints from vendors, and enable end users to develop their own applications and extend the platform, through innovation, into customized areas that can improve the office of finance. In the future, this trend will also enable vendors’ partners to offer specialized intellectual property and further applications to meet clients’ requirements.
- Hybrid Cloud: The increasing ability of cloud solutions from specialist FC vendors to integrate with both cloud and on-premises solutions in hybrid environments. We have seen this in many cases where the enterprise solution is on-premises; however, its business units leverage cloud FC solutions locally.
- Integration with Financial Management Suites and ERP: The growing convergence of financial consolidation and reporting and enhanced financial control and automation (EFCA) functions in specialist vendor suites, as well as of cloud core financial management suites, with FC offerings. Cloud core financial management suites cover general ledger (GL), accounts payable, accounts receivable and fixed assets.
- Software Stack Diversification: The postmodern selection of best-of-breed components from different vendors to address specific requirements, rather than selecting all FC components from a single vendor.
Host Analytics: A Leader in Financial Close Applications
Following some major improvements to the product over the past year, Host Analytics maintained its status as a leader in the financial close Magic Quadrant, noted for its success in providing complex customization and reporting, its constant appearance on customer shortlists, and level of experience. Gartner recognized Host Analytics for the following strengths:
- Update rollout and user adoption of updates: All of Host Analytics’ reference customers reported upgrading to new versions as soon as the version was available. Its scores here are the highest of any vendor in this study, and are an indication of a reliable cloud architecture and a well-honed version release process.
- First party updates: A testament to the company’s successful cloud business model, reference customers celebrated the ease of updates.
- Maturity in the cloud: Host Analytics spent nearly the past decade in the visionary category and was the first true cloud application on the Magic Quadrant.
The annual Magic Quadrant explores the market for a given software, and for Financial Close software, Host Analytics continues to be recognized as a leader for its ability to execute and completeness of vision. Learn more about the dual 2018 Magic Quadrants by downloading them free from Host Analytics, and get to know more about your journey to cloud budgeting, planning, forecasting, and more by downloading our guide.