Posted by Kelly Scott, Software Industry
Every year brings change to the software
industry but with a new administration, amendments to revenue recognition rules
and ongoing business model evolution, 2017 promises to be especially
challenging. Tech companies will be faced with even more unique challenges
including adapting to new accounting standards in preparation for ASC 606, embracing
hybrid business models with a myriad of billing options, and meeting the
compliance requirements associated with an IPO. While the backdrop for the
software industry is quite bright, the challenges associated with sustaining
and managing growth have never been more daunting.
Here are the five most important trends we
see impacting the software industry in 2017.
The sweeping set of new regulations
surrounding revenue recognition is the key change
confronting the software industry and requires immediate action. The move to
ASC 606 requires a start-to-finish review of financial systems. Although
taxing, the transition to the new set of standards allows companies to move
away from the archaic, legacy systems of the past and implement a comprehensive
and effective financial system.
Support for Hybrid Business Models with Billing Requirements
In 2017, software companies will continue
to confront the evolution of billing models. As businesses continue to adapt
the way they sell software, we expect to see the ongoing transition from
perpetual license plus maintenance to subscription models. Even pure
subscription providers are examining usage-based approaches that align with
customer usage. Billing software systems must now
have real-time visibility into core business transactions, a requirement that standalone
billing systems simply cannot handle. To effectively adapt to this new reality,
business management software systems must have a billing component as part of
the core infrastructure. Across the board, software companies face the
challenge of managing billing across hybrid business models.
Increasing IPO Activity
The predictions for tech IPO’s in 2017 appear very positive compared to 2016 as TechCrunch states, “the drought is over.” With companies potentially
tapping the public markets for capital, they will undoubtedly face greater
scrutiny around their financial operations and governance, compliance and risk
procedures. An IPO is a critical stepping stone in a company’s evolution and
requires significant due diligence before choosing a software vendor that can
provide the necessary reporting, controls and visibility into its business operations.
Picking where to go is as important as what to go with.
Software companies are continuing to expand into global markets, and it make
sense, with 75
percent of the world’s economic output coming from outside of the US. With
global expansion comes country or region specific requirements that companies
must consider to be successful. Choosing a back office system that can handle
multi-currencies, multi-languages, and can scale appropriately with new
emerging offices is fundamental to successful expansion. These back-office
operations must also work across the organization so that all departments are
aligned and can sync accordingly with the go-to-market strategy.
Governance, Risk Management and Compliance (GRC)
As the landscape of software companies evolves,
so has the way companies manage governance, risk management and compliance. Mandated
requirements, such as SOX, Dodd-Frank, IFRS convergence, and additional Public
Company Accounting Oversight Board comments lead to increased focus and
accountability on IT administrators to track compliance company-wide and
implement a system of suitable internal controls. With many companies looking
to go public or remain public, strategies are being put into place to reduce
risk, automate access and control business applications.
For more on trends in the software industry,
read the NetSuite blogs software section and for more
on how NetSuite is helping software companies meet the needs of today and
tomorrow, visit the NetSuite for Software/Internet page.
Posted on Thu, February 2, 2017
by NetSuite filed under