Can Technology Make CFO's and Controller’s Jobs More Strategic? - Part 1

While setting down the thoughts for my recent “SaaSy discussion” blog series To SaaS or Not: Is that a Question?, something else related to software as a service (SaaS) and on-demand applications crossed my mind. Namely, it is a fact that SaaS and business process outsourcing (BPO) providers have largely liberated human resource (HR) and payroll managers from the drudgery of performing menial and tactical administrative tasks time and again?

With these non-differentiating and non-value-adding routine tasks being offloaded to third-party specialists, HR managers can now work smarter and focus more on the strategic and more important tasks of managing the talent and human capital of the company. How about the liberation of chief financial officers (CFOs) and controllers from their daily grind of mindless chores?

Transitioning the Financial Personnel Job: Can SaaS + BPO Amount to a Strategic Super Role?

IT has long been described as an enabler, and mostly in a positive sense. IT is also referred to as an enabler by those who see its proven potential to streamline tasks and connect previously disconnected dots in business processes and workflows.

For example, some of my colleagues and friends shudder to think that there is probably a whole new "Generation Y" of college graduates with financial degrees entering the accounting workforce. Well, we are not cringing because these kids are entering the job market per se (best of luck to them in this economy).

It is rather because these young folks will have never experienced (they have perhaps only heard) of the times when debits and credits had to be connected to something physically tangible and in the paper form (i.e., money or checks). Otherwise, financial results could not be captured and measured at all. Thus, it goes without saying that IT in the accounting world has been an enabler; technology has changed the game, sped things up, facilitated faster counting, number-crunching, paying, filing reports, and conducting trial balances.

But some of us, with a few grey hairs perhaps (where there is any hair left), and certainly those following the IT market for more than a decade or two, still hear the howls of CFOs and controllers tied to financial management and enterprise resource planning (ERP) system installations in the many instances where things have gone terribly wrong.  And while the analysts listening to those howls often feel more like “father confessors” or “Dr. Phils” than  “problem solvers,” there are many folks on the market research side who feel compelled to tell both sides of the technology story.

And the gist of the matter is this:  technology is indeed an enabler--but it is also an enslaver. The IT vendor world is big business. How big? Says IDC in its recent "Worldwide Total and SMB (Small/Mid-Sized Businesses) Enterprise Applications License, Maintenance, and Subscription Revenue (2007-2012) Report": “…globally, companies will spend US$120 trillion in 2010 on enterprise software applications.”

That’s trillion with a “T”… the kind of staggering numbers that were bandied about lately in headlines about the US national debt. This same IDC study points out that small and mid-sized enterprises (SMEs) will spend US$64 trillion on these applications. And as for the financial applications--there is no escaping spending money on them. Also says IDC:“Not surprisingly, SMBs require financial applications to run their businesses…”

The enterprise applications vendors’ hook is indeed deep into the buyer skins of CFOs and controllers. This situation is because whether they are large or small, public or private, profit or non-profit organizations, they are all run by “the numbers” coming from financial books/ledgers.

And like most partnerships where one party needs the other more, concessions are generally made by the weaker party.  Meaning: until recently, ERP vendors have largely had the upper hand and been able to say “jump” (and in this case steep monetary jumps for escalating service & maintenance fees)… and the hooked corporate buyer could only say “how high?”

The “Other” High Cost of On-premise Technology:  Tethering the CFO/Controller

Recently, I’ve been writing about the values and benefits as well as the questions and concerns about SaaS deployments. I have largely come up with the same conclusion as IDC, whose market-sizing capabilities I do acknowledge. The firm states in the abovementioned report that "While companies, across all sizes, continue to favor on-premise solutions, hosted and on-demand solutions are starting to show real promise.”

I agree with that conclusion for all of the usual reasons such as up-front costs, efficiencies, better resource utilization, and so on. However, I would like to also offer my own opinion as to why outsourcing of both IT and people resources for routine activities is worth evaluating. The surge in financial executives’ reliance on on-premise software has carried an undesirable side effect (beyond the usual implementation issues, ongoing service and maintenance costs, and never-ending upgrade maintenance cycles).

Pets vs. Pet Peeves

By way of the most rudimentary analogy: buyers bought the cute puppy in the window, but didn’t initially think too hard and thoroughly about the ongoing costs of dog food, shots, grooming, vet bills (and occasional flea removal or carpet and furniture cleaning or renewal). And the biggest unforeseen wrinkle is the necessary dog walking--on busy days, rainy days, or slow days, it’s not an option to say you don’t have time for it (or else, you might end up with unspeakable consequences).

I know, comparing purchases of pets and ERP/accounting systems is talking about apples and oranges for two reasons. One, buying a pet is a voluntary act and labor of love (sometimes even mission-critical for a household, like ERP supposedly is for an enterprise). Second, people tend to (unconditionally) love their pets, as opposed to ERP systems.

But the point here is about thinking through all of the ongoing costs and ramifications. So CFOs and controllers would purchase happily, invest upfront, and then continue to invest, and invest… and invest. And we are not talking here about just dollars, since CFOs and controllers invest their valuable decision-making time in an ongoing “hamster wheel” cycle of technology and people to manage and use the technology.

Instead of gaining valuable new analytical time, based on streamlined business processes gleaned from their new IT gadgets, increasing amounts of time are spent on deploying systems, training staff, altering systems, testing, and then beginning the cycle anew.

A Voice From Financial Trenches

What could be done differently to help controllers and CFOs to free up the time lost to IT or staff monitoring activities?  We asked Jane Bohrer, Controller of a $1 billion US subsidiary of a European manufacturing company:
“I firmly believe that we the senior financial management can become greater strategic contributors to our companies by outsourcing standard accounting activities (i.e. the reporting and control activities), in much the same way as we have outsourced routine payroll needs. If CFOs/Controllers can get out from under the people and technology drudgery that is so time-sapping, then we can better utilize our training and experience to maximize our company's economic position.”

Bohrer says that regardless of traditional roles for senior financial executives, the current economic climate is highly charged, and it is incumbent upon effective controllers and CFOs to pursue and evaluate a myriad of ever-changing legislature and opportunities. She envisions a solution where a combination of SaaS + BPO, with the right security and depth on the outsourced bench, could in essence free the controllers from this enslavement of a sort.
“A qualified, respectable and economical third-party resource upon which financial executives can rely on to perform audit-ready accounting and reporting functions, would be a welcome beacon for us. Financial executives could then raise their intrinsic organizational value without compromising the “classic” responsibilities of preparing accurate books and first-line analysis.  The function would do what most important functions do – morph and grow into something of greater value, which in this case would be the pursuit of a greater percentage of time spent on strategic analyses and recommendations that speed the company’s growth and objectives.”

So what I am hearing here between the lines is the following analogy: We’ve given the Controllers/CFOs a “Ferrari” vehicle (i.e., neat business intelligence [BI] and business performance management [BPM] tools), but we put it in a high-maintenance, not-so-sound ERP house/framework that takes quite a bit of shoring up to keep the garage from collapsing and ruining everything. This constant high maintenance is a distraction to what the CFO really wants to do, and it’s a darn expensive distraction that is mundane and not yielding much to show for their efforts.

In other words, controllers and CFOs have got the vehicle to really drive their business, but they don’t have the time, energy, and track length to actually get behind the wheel. A colleague and friend of mine that has talked to many CFOs and controllers lately tells me that what she is gathering is a two-fold sense of desperation:

  1. “We have just got to wring costs out of routine operations!”

  2. “The company is counting on me to recommend something, and I do have the BI/BPM tools available, but I spend so much time just keeping the main financials technology framework (and the people trained up on it) going. I don’t have the time I’d like to have (or that I must have) to help make better strategic decisions (e.g., How to generate more cash? Where to invest any extra funds?, How to improve our quick ratio?).”

Biggest Potential Losers and Winners (amid Accounting Tasks)

Thus, what kinds of routine accounting tasks might be outsourced to make CFOs' and Controllers' jobs more strategic? What would these financial executives like to “lose” from their current tasks and from their current expenditures?

Conversely, what capabilities would they like to “gain?” To that end, how about being able to...

  • Lose the headaches of long and painful on-premise ERP/accounting systems deployments?

  • Lose the ongoing technology maintenance and upgrade fees?

  • Lose dealing with ongoing staff (hiring, training, and technology-enabling) issues for non-strategic, routine activities?

  • Lose paying the exorbitant Big Four consulting rates for technical expertise on complex accounting issues?

On the other hand, CFOs and controllers could...

Part 2 of this blog series will analyze one prepackaged outsourced solution and know-how for routine accounting tasks. Your comments and opinions are welcome in the meantime.

Given that your business is likely cash-strapped and budget-squeezed–and that SaaS companies like Automatic Data Processing (ADP), Concur, and have taken the anxiety out of IT outsourcing routines (for all but mission-critical business functions), one question: Would you consider completely outsourcing your routine accounting functions and department (people and technology) at significant cost savings? Please vote here.
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