For the past year, the treasury at DuPont has been working diligently to move from regional liquidity management to global, reorganizing its cash operations around two treasury centers in Wilmington and Singapore and whittling away at its banking relationships until it is essentially down to three major regional banks–Citibank, J.P. Morgan Chase and Bank of America. And that’s about as far as it plans to cut for now.

Why not simply choose one global overlay bank? Banks would line up for the job. Webber Lee, DuPont’s assistant treasurer, says there’s no need. “Cash management depends on information, and we can get that information now without depending on a bank,” Lee says. How? Through its SunGard Quantum treasury workstation, of course.

Lee is taking advantage of what has been a quiet revolution in treasury technology. During the past two years as CFOs and treasurers sat on the sidelines when it came to capital investments in technology, workstation manufacturers like SunGard have been hard at work building a new generation of more powerful and flexible products, now available at only modestly higher prices. “The value proposition is stronger today,” says Ron Chakravarti, a New York-based principal at a leading financial-management consulting firm, Treasury Strategies Inc., based in Chicago. “Features they were just talking about two years ago are now available and can bring new levels of automation and efficiency.”

According to Chakravarti, the breakthroughs have been made on three distinct fronts:

o Employing native technology that readily accommodates wide access across the whole organization, which makes it more useful by an order of magnitude. Older versions lived on a few PCs in the central treasury. Others in the company had no access or access that was a chore to rig.

o Providing better integration with other corporate systems that allows them to exchange data with A/R and A/P systems, as well as corporate planning and budgeting systems. The result is better forecasts and more flexibility to get data to wherever it is useful.

o Offering broader and stronger functionality that enable companies to dump manual processes or specialized software entirely and do everything on the workstation.

Historically, treasury systems worked in isolation from other corporate systems, notes Martin Boyd, executive vice president of SunGard Treasury Systems in Calabasas, Calif. “We’ve all learned that treasury is not an island, but part of a continent that needs to work closely with other countries. Communication within the enterprise that was impossible two or three years ago now takes place routinely,” he notes.

The timing couldn’t be sweeter from both the perspective of sellers, still parched from the bone-dry market of the past two to three years, and buyers who now are facing far more pressure from top management to be able to provide real-time snapshots of cash flow globally. “A ton of treasuries couldn’t get authorization to spend money on new technology over the past two years,” observes Lyndon Harvey, Selkirk’s senior vice president for professional services. “But treasury has become more important this year. Companies are concerned about their cash forecasts and are demanding intelligence that can make those forecasts more reliable. Those who looked but couldn’t buy several years ago will find that the workstations have improved a lot. Cash is more visible across the whole enterprise, and business units are more involved in the forecasting process.”

Les Halpin, CEO at Integrity Treasury Solutions, agrees. “There is pent-up demand for automation,” he says. And Integrity is ready with “two new generations in the past two years, including a move to n-tier technology that gives us a thin front end and a lot of flexibility to work over the Web.”

The Limitations of Spreadsheets

Even though the marketplace is highly competitive with independent software providers and ERP vendors duking it out, it is also potentially vast. Treasury Strategies’ research had showed in 2002 that not even half of companies with annual revenue over $1 billion had automated treasury operations with workstations. Today, many of those companies are beginning to realize the limitations of spreadsheets and proprietary bank software when it comes to complying with Sarbanes-Oxley and satisfying the need of anxious top executives for numbers. Even better, from the sellers’ point of view, Sarbanes-Oxley and investor pressure are also driving companies with older versions back into the market for upgrades.

Take, for instance, Midland Loan Services Inc. in Overland Park, Kansas. Its business of servicing more than $70 billion in commercial mortgages monthly means collecting 13,000 to 14,000 payments in 2,700 accounts in more than 40 banks and investing balances in money market instruments, explains Carl T. Taylor, senior vice president for treasury services. Although the subsidiary of PNC is not huge, Midland has studiously upgraded with its vendor, XRT. Each new release “gives us a little more functionality, greater speed, and easier integration,” he says. “They added a user-defined field two versions ago that helped us a lot.”

Now, Midland is adding international business and preparing to use its banks’ browser-based cash management services. For that, Midland is taking a close look at XRT’s new Enterprise Suite (XES). “We want more flexibility for our international activity, a stronger communications tool for Internet bank reporting and cleaner interfaces with the other systems we use internally. It looks like their Enterprise Suite will deliver that, but we’re still investigating,” he reports. According to XRT’s Rob Hansell, product manager for communications and ERP integration, “we needed a solution that could handle the new Internet protocols and formats banks are migrating to. Our Enterprise Suite does that.”

Eventually, almost all large companies will automate treasury operations, says Dave Potterton, a vice president in JPMorgan Treasury Services. “It’s a question of when, not if. Spreadsheets are familiar and cheap. So it’s up to the vendors to find the right balance of functionality and price to present a better value.”

Not everyone is convinced that adoption is inevitable when the price is right. Scott Tiazkun, research manager for the enterprise applications group at technology consultants IDC, insists that workstation developers have not entirely overcome silo mentality. “The real demand is for automating profit management,” he explains. “Treasury is just a subset. They need to add applications that provide decision support and profit maximization. Then, they’ll have a compelling proposition. But so far, only SunGard has the capital and is actually doing this.”

Tiazkun is referring to SunGard’s move toward broader profit management when it linked its services with Pittsburgh-based Wisdom Technologies last year. “Besides showing a cash position, it helps the user make optimal borrowing or investment decisions to increase profits. That makes the system more useful,” he insists.

SunGard is also working closely with customers to develop profit management functionality. For Detroit-based Lear Corp., it is building a database that sucks information out of its Quantum treasury system and a variety of ERP systems across the organization to produce one “dashboard” for Lear’s top management. “We needed something that could go well beyond what has been traditionally considered treasury data,” says Brian Casey, Lear’s vice president for global financial systems. Before the end of the year, SunGard promises Lear will have it.

Other vendors have ventured beyond cash as well. “We’ve upgraded everything to handle larger volumes–not just financial cash flows, but commercial flows as well, and there are a lot more of them,” notes Philip Lake, director of the corporate segment for Trema Americas. “And bandwidth issues that plagued us in the past are now largely gone.” After some years of chasing best-of-breed solutions, treasury staffs in general now are looking for integration, he adds.

This new quest could give a slight edge to ERP treasury modules. Many of the ERP vendors sold systems to companies pre-Y2K, but most customers tended to use accounting applications and not treasury modules initially and are now just beginning to move treasury work onto the systems. Three leading vendors–SAP, PeopleSoft and Oracle–all have introduced treasury modules that do much the same thing as independent workstations. Going head to head with SunGard in recent competitive RFPs, PeopleSoft won business from Marsh & McLennan, Geico and Quest Diagnostics.

ERP Makes the Top 10

Evidence of ERP’s successful transmogrification, both SAP and PeopleSoft made it onto IDC’s Top 10 Providers list this year. SunGard will remain in first place “by a country mile,” Tiazkun reveals. But the best- of-breed independents are fighting the integration battle too and lines of differentiation are clearly blurring as the independents add more and more integration capability and the ERP modules keep beefing up functionality, Treasury Strategies’ Chakravarti concludes.

Just how innovative individual vendors have been and how dramatically they have differentiated themselves from competitors is a matter of opinion. Chakravarti commends XRT for its new architecture with stronger functionality. XRT and others have caught up with SunGard and can now take direct feeds of data from banks’ Internet platforms, he notes. “The approaches are different, but the net effect is the same,” he says.

For multinationals with cash flow in many currencies, Integrity, XRT and SunGard have the strongest offerings, Tiazkun says. But he adds that SimCorp is profitable and staffed with treasury experts. “They’re marshalling resources and getting ready to attack the North American market,” he suggests.

Since SimCorp bought IT/2 from Bank of America, it has rebuilt a web-based front end that gives users secure access through a browser wherever they may be located. What was initially built as a European system is now being used by a few companies with purely domestic U.S. operations. “It supports decentralized operations with a centralized treasury,” explains Peter Falck, vice president for corporate treasury solutions.

Another relatively new name in the marketplace, Wall Street Systems (WSS), has scored some serious wins in recent months. Long known as a high-end system preferred by financial trading operations at large commercial and investment banks, WSS now includes among its clients BP, Ford, Hewlett Packard, Procter & Gamble, AIG and Dow Chemical, says Tom Hills, director of the corporate channel and a former assistant treasurer at P&G. He worked through the implementation at the consumer products giant before moving to WSS.

Many WSS clients use the system to run various models of in-house banks, Hills says. “It can rely on simple cash pools fed by zero-balance or target-balance accounts. Or, at the sophisticated end, it can support a legally chartered bank owned by the corporation.”

In-house banking is a hot topic, confirms Philip Say, global marketing manager for SAP, which recently developed a model for Colgate-Palmolive. “It’s popular at Colgate, and many of our prospects are looking at that application for in-house banks they expect to organize.”

Yet, no matter how many bells and whistles a vendor adds, there is no such thing as a best system, just a best fit, cautions treasury technology consultant Dan Carmody, president of Chicago-based TreaSolution Inc. “Self-evaluation is the foundation. You have to establish what you need. Then, it’s easy to find the vendor that meets the greatest number of needs at the best price.”