The Tech Office of the CFO is Coming … Finally A

Yes, it is.

And while The Prophet thinks the naysayers will call him a fool, all the doctor can say is, join the club! There’s lots of room … only a few of us have been correctly calling the future for almost two decades, and all of us who have been have also been called foolish, crazy, and worse. I’d rather be right than popular. At least I’ll be ready for what’s coming …

COVID started a big push into “FinTech” investments as everyone realized that no-travel, and even no offices, meant you needed online/SaaS payment systems, contract systems, financing systems (as you couldn’t walk into a bank), etc. The CFO slowly realized there was more to modern Finance Tech (FinTech) than online spreadsheets. Plus, as they realized they needed visibility into Legal and Procurement, they wanted companion contract, risk, and P2P systems and/or customized interfaces for them.

As a result, we will start to see the rise of Finance suites that, as The Prophet points out, will integrate:

• FP&A
• AR & O2C
• AP
• Treasury
• Payments
• SCF
• Expense Management
• Commodity Management
• Risk
• Corp Dev / M&A
• P2P

as well as

• Contracts
• Spend Intelligence (with all data/reports updated at least monthly)
• Inventory Management (with visibility into overhead costs vs. depreciation)

Moreover, as The Prophet has pointed out, each of these areas is very complex. Spend Matters considers AP alone as including the following areas: core AP workflow, dynamic discounting, e-invoicing compliance, fraud detection and prevention, supply chain finance, tax compliance, tax management and working capital management.

When you get into AR/O2C, you then get into PO receipt and tracking, shipment tracking and notification, invoice generation and transmission, invoice receipt acknowledgement, payment receipt, etc.

Expense Management may or may not include P-cards and/or virtual cards, and may or may not include catalogs, travel management, integrated airline or hotel bookings, app integration for auto-expense report generation (snap & go), etc.

Risk breaks down across multiple dimensions across supplier and supply chain risk, and for more information, see the doctor‘s Source-to-Pay series (especially Parts 15 to 20) and the first 9 parts of the doctor‘s Source-to-Pay+ series which are all on (primarily) supply chain risk.

Contract management breaks down into Negotiation, Analytics, and Governance, and each of these area has a lot of baseline functionality that is required (as covered in the Source-to-Pay series referenced above in parts 21 to 25).

And so on … it’s a mega-suite that goes far beyond your average S2P mega-suite.

However, before writing off the effort as too intensive or too expensive, one must remember that Finance is ultimately responsible for cutting the cheque, so they are going to want visibility into where the money goes and how it is supposed to be used. Not to mention, sometimes the only authority they need to cut the cheque is their own, so it might be an easier sale to sell or joint-sell to the CFO as well as another C-Suite exec. So a great FinTech Suite could be the easiest sell a new back office tech start up or aggregator could have!

Data, Data, Data A

The Prophet has said that data will be your best friend in procurement and supply chain in 2024 if you give it chance.

And then asked Is 2024 the year you final opt to invest in [data] at the level you should?

Because it should be. As The Prophet also said, if for nothing else, do it to avoid being made the business function where fingers point when things go wrong, which they most definitely will if you don’t take every step you can make sure they don’t (and they still will, but you can be prepared for it and ensure that the disruption that happens is as minimized as possible). However, as I noted in a comment on the original article:

It’s not just better data analysis systems, it’s better data … chances are, if you haven’t been applying proper data governance, and let’s face it, there’s a 99%+ chance you haven’t, you need cleaner, richer, better organized data.

Also remember that’s not as easy as just buying some AI-based auto classifier / enrichment tool that will enrich your brake shoe database with the latest Girotti Oxfords and Montcler runners or take your incorrect supplier abbreviation and classify a denied party as perfectly safe when they are known to source from organizations that use slave labour and supply to militant groups and terrorists. (Don’t think it won’t happen if you fully trust an AI-based auto-classifer/recommender engine. It will. It has!)

Trusted data sources, such as those you get from data enrichers like Tealbook or validators like Apex Analytix will go a long way, but you will still have to manually review and fix those that can’t be auto-matched with very high accuracy (high accuracy is good enough for spend analysis, it’s not good enough for regulatory compliance or risk prevention).

And remember, have fun fishing the data lake you’ve neglected since you literally installed your first database. You never know what you’ll catch. While you’ll hook a lot of old rubber boots on your lines, you may also haul up a solid gold bar! Remember, you never dredged the lake, and there will be some priceless relics mixed in with the rancid pile of garbage.

Moreover, without great data, and the insight that comes from great data, the downside risk of the visibility, insight, predictive and actionable capability you lack today is immense and likely incalculable.

Once you have the data, you can easily install the right compliance, risk, and visibility platforms and achieve the intended results. (But without the right data, those solutions will be worse than expensive shelf-ware because if they are used, they will give the wrong results and insights that will lead to worse decisions than if they weren’t installed at all!)

Get Ready to Make BIG Supply Chain Decisions A

The Prophet says we will make far more BIG decisions in 2024 in Procurement and Supply Chain and possibly more than we have ever done.

the doctor will actually go one step further here — there will be NO little decisions. Every decision you make will lead you down further down a path that will inevitably branch or disappear in an unexpected way and you’ll need to make a BIG decision, and that decision will be limited by prior decisions, which are actually the starting points of the BIG decisions you might not even see coming!

And, as The Prophet says,

1) you need better data than your competitors. Let’s be clear here. That is data that you should have had yesterday! This means you need to clean up your data and enrich it. And this is an effort. But more on this in the next article in our discussion of Prediction #7.

2) you need frameworks for decision making and framing — what do you even need to consider, and who needs to be consulted before the decision is made and included in the decision making team

3a) you need tech for planning and forecasting as well as
b) tech to identify confidence, or lack thereof, in data, models, and predictions
c) tech to support a deep dive into models and predictions with high confidence when the answers are unexpected so that an explanation, or root cause, can be identified and addressed (because sometimes the right response to a situation will be completely unexpected; and you can’t risk brushing off a right response that feels false)

4) you need the scenario analysis and [multi-objective] optimization that should have been in use since the day it became available! [the doctor hasn’t been publicly promoting multi-objective strategic sourcing decision optimization [SSDO] since SI started in 2006 just because he’s a contrarian!] Not only has the lack of use contributed to a consistent loss year after year after year (as companies paid as much as 10% more on total COGS than needed), but it contributed to lack of balance in decisions (as these models allow you to balance cost and risk, cost and carbon, cost and carbon and risk, etc; if you can quantify it, these tools can help you balance it), which is becoming more and more critical. There’s no savings if there’s no purchase … and without supply, who cases what the spend was supposed to be?

5) you need the best “decisioning” team, which MUST be multi-disciplinary and multi-departmental; with so much hitting you from so many angles, it’s virtually impossible for one person to see everything

but you have to go beyond this and

6) a) identify the short-term results expected from your decisions which can be monitored and tracked,
b) implement solutions that allow you to monitor and track toward measurable results, and
c) track progress against those expected short-term results

7) if the actual results start to diverge significantly in the short-term, be prepared to bring the team back together, revisit the data, frameworks, technology, models, and decision factors; find the assumptions, etc. that are no longer valid; and make a new decision, even if there is a short-term drawback (or contract penalty).

The Suites, ERP and Big Tech Strike Back A

When everyone writes you off in favour of the new, new thing, there is one thing to do to prove the young turks wrong: thrive.

Never write off the Turks! A lot of people are these days, but remember they are one of the oldest known civilizations on the planet, with continuous settlement dating back to circa 7,500 BCE (at Çatalhöyük). But I digress. (Even though I should note one of the next powerhouse S2P suites is likely to come out of Istanbul … see the recent archives for more information on a rich caffeinated Turkish Punch.)

Back to The Prophet‘s prediction that 2024 will be the year where procurement and supply chain suites reclaim mindshare (and more) in the market. (More specifically, S2P [Source-to-Pay] suites, supply chain suites, and ERP providers.)

Which will happen. The only unknowns are how fast and in what areas.

As you get older, you get wiser, and the big corporations have not only learned how to make themselves indispensable, or at least irreplaceable, and how to identify, and attack the shortcomings / risk posed by smaller players and, even if they lose some new business in the short term, reclaim it in the long term.

According to The Prophet, this is firstly because suites and big tech have the capital to fund innovation (through acquisition) in lieu of Series B and C venture rounds.

While big players have, more or less, lost their ability to innovate internally (as their risk and audit departments quash innovation faster than a minnow can swim a dipper), they didn’t suffer^* during the COVID years, or the recovery, because those subscription payments kept coming, and now, especially with the drop in available VC and PE capital, they alone have the money to spend to buy whatever they need. And, as The Prophet has indicated, they will.

Moreover, where they can’t, or won’t, buy, they’ll “exclusively” partner with small specialist providers in Direct that make their interfaces more user-friendly and integrate with related applications, use those partners as lead-ins, and pretty much lead the partner down a development path that props up their suite (because they make it more financially lucrative for the smaller partner to do so).

This is also secondly because of the backlash of SaaS proliferation.

While Procurement wants best-of-breed, they can only deal with so many application providers because each new throat-to-choke is yet another provider they have to manage. So unless they truly need something unique or best-of-breed offering wise, an 80% suite solution will do for many departments.

It is thirdly because no one has cracked the direct materials procurement code at scale, especially in the smaller providers. Direct more or less requires a deep, sophisticated, integrated suite of capabilities that cross multiple stand-alone modules in indirect. It’s hard for a smaller player to attack. (And that’s why, as The Prophet notes, Direct is still owned by ERP and Excel!)

Finally, as cash again becomes king, it is because we will see the SaaS Office of the CFO.

Which is true, and which will be discussed again in Part 8, we’ll also see an upsurge is the acquisition of SaaS management tools, which will hopefully lead to a crackdown on Sales and Marketing that have an average of 20 tools each, which do, at most, 2 different things. (And maybe, finally, free up some budget for the CPO for the tools the organization ACTUALLY needs.) (So it’s going to be a good year for those SaaS [Subscription Cost] Management tools!)

So keep an eye on your current suite/ERP provider as well as the competitor suites targeting their market (who may soon bring back the offers of free data transfer/migration services and configuration replication to lock in a multi-year deal).

^* Sure they had to tighten the belt and stop having their corporate Christmas parties in penthouse suites while telling the CEO his expense account was no longer unlimited and he couldn’t upgrade the corporate jet, but that’s not exactly suffering.