Assumptions-as-a-Service The Dangers of Off-the-Shelf Financial Software
Published on: Sat Jun 15 2024 by Ivar Strand
Assumptions-as-a-Service: The Dangers of Off-the-Shelf Financial Software
Commercial Off-The-Shelf (COTS) software is an attractive option for organizations seeking to modernize their financial systems. It promises rapid deployment, lower initial costs compared to custom builds, and a feature set tested by a broad market. However, there is a fundamental aspect of COTS products that is often overlooked in procurement and implementation.
When an organization adopts a COTS solution, it is not just acquiring a neutral tool. It is licensing a pre-packaged set of opinions and assumptions about how a business process should function. This “Assumptions-as-a-Service” model can create significant friction and risk if the vendor’s embedded logic does not align with the specific operational reality and fiduciary duties of the organization.
The Embedded Logic of COTS Products
To be commercially viable, vendors design COTS software for a generic, archetypical customer. Their products are built around standardized conceptions of accounting, compliance, and workflow. These are not presented as configurable options but as the default, “best practice” state of the system.
This embedded logic is a normative framework. It makes implicit statements about how an organization ought to operate. For a standard commercial enterprise, these assumptions may be perfectly suitable. For international development organizations, government bodies, or programs operating in post-conflict settings, they can be deeply problematic.
Key Areas of Assumption Risk
The mismatch between a COTS system’s default assumptions and an organization’s specific needs creates a distinct category of risk. In our work, we find this assumption risk is most pronounced in four areas:
- Accounting and Reporting Standards. Most COTS financial packages are built to comply with standard frameworks like IFRS or GAAP. This can be a significant issue for entities that must report to donors on a cash or modified-accrual basis, or adhere to national public sector accounting standards that differ from the commercial norm.
- Workflow and Approval Hierarchies. The default logic for processes like procurement or expense approval often assumes a simple, centralized corporate structure. This frequently conflicts with the complex, multi-partner, and decentralized nature of international aid programs, which require more flexible and nuanced approval chains.
- Compliance and Control Logic. A system’s standard controls may be insufficient for the heightened fiduciary requirements of large grants. For example, a donor may mandate a three-way match between a purchase order, goods receipt note, and invoice. If this is not a default control in the software, it must be explicitly configured, or a critical compliance gap will exist.
- Data Structures and Taxonomies. COTS systems are designed for financial management, not necessarily for programmatic monitoring and evaluation (M&E). They often lack the specific data fields or coding structures needed to track activities against grants or link financial expenditures to results, forcing teams into inefficient workarounds with external spreadsheets.
From Assumption to Deliberate Configuration
The solution is not to avoid COTS software. The solution is to treat its implementation as a rigorous exercise in validation and configuration. The primary objective must be to systematically identify and replace the vendor’s generic assumptions with the organization’s specific, verified programmatic and fiduciary requirements.
This requires a clear-eyed assessment of the gaps between the default product and the required functionality before a contract is signed. After procurement, it demands a deliberate configuration process, overseen by a team that understands both the software and the unique context in which it will operate. Independent verification is critical here, providing assurance that the final configured system accurately reflects the organization’s true needs, not the vendor’s ideal customer profile.
Trust in a system cannot be outsourced. It must be built through a methodical process that ensures the technology serves the organization’s mission, not the other way around.
