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Organization of the Treasury Function (2)

In reality, implementation of an ERP system is time-consuming, difficult, and expensive. Companies often compromise the integrity of the concept by using one system for some functions and other systems for specialized areas such as treasury, or by having different versions of the software on different platforms. Both situations force further internal integration of systems. Another key technology issue is that ERP systems require an interface to external sources such as electronic banking and market information systems. While banks are increasingly trying to provide so-called plug-and-play interfaces with the major systems used by their clients, the evolving nature of the technology makes full compatibility difficult. ERP systems are likely to remain a viable tool for only the largest companies.

Outsourcing

Once a function has been centralized, the treasurer is in a position to determine whether there is an opportunity to outsource noncore functions. The decision has been made easier thanks to the proliferation of application service providers (ASPs) and business service providers (BSPs) offering Internet-based applications and services. ASPs allow a company to outsource particular operations, such as netting and treasury workstation routines. BPSs will undertake entire functions, such as the back-office processing of a cash management operation.

The justification for outsourcing is that a specialized third-party provider can perform the function more cost-effectively and with greater expertise and specialized technology investment than the company. Some of the benefits that can be expected are reduced exposure to technology shifts and market changes, reduced overhead and operating costs, and the freeing of internal resources and technology dollars for investment in core businesses. Outsourcing provides a turnkey solution and the expectation that the partner will retain a high level of expertise and leading edge solutions. The major concerns with outsourcing are the relinquishing of control and information to an outside party and a potential loss of flexibility caused by being tied to the partner’s technology.

Open Architecture Electronic Banking (EB)

Companies are increasingly intolerant of proprietary formats and expensively integrated systems that tie them to a single bank’s system. Several bank-neutral platforms, such as GEIS and BankLink, have been introduced to offer the flexibility of standardized interfaces with multiple bank EB platforms. This allows companies to change or add banks when necessary, without losing integrated interfaces. In Germany, the banks cooperated in developing a single EB platform called Multicash.

Taken From : Essentials of Managing Corporate Cash

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