In my day one review of Host Analytics Perform 2019, I hit on the broader issue of finance transformation and how Host Analytics customers are faring on that path. The rest of the show didn't bring any absolute answers.
That would be impossible given that Host Analytics customers are not all in the same mindset or using Host in the same way. But I was able to get clarity on the phases of FP&A evolution, and how finance teams with resolve can advance.
I'm known to poke fun at Powerpoint overdose, but now and again, a slide can tell a story better than words. That was the case during an exceptional session I attended, "Choosing the right technology to support your dream - a CFO panel discussion."
Moderated by Host Analytics CFO Dan Fletcher, the two customer CFOs on the panel shared "before and after" slides that showed a dramatic cloud shift. Start with a 2011 slide from Mike Rich, CFO of OnShift, a workforce management software company (pictured left). OnShift in 2011:
In case the slide isn't clear on your device, it contains a spaghetti platter of non-integrated, on-premise products and tasks, from Quickbooks to Excel-based reporting to lack of file sharing. Fast forward to 2019:
A totally different picture, 100 percent cloud-based, with key chunks integrated. The two-way integration between Sage Intacct and SAP Concur, and then into Host Analytics, is one notable shift. Rich would be the first to acknowledge this isn't an end state. But the changes are striking. The most relevant thing to finance teams, however is: did these shifts help make Rich's team more productive, more agile? More impactful to the business?
OnShift - tackling the data integrity problem
To get that answer, we need a quick snapshot of the pains of "before." Fletcher asked Rick: back in 2011, what were the limitations and challenges? Rich hit on the core problem: data integrity, with no single source of truth to draw on.
The very first one is data integrity. If I asked someone what were our bookings this month. If I asked three people, we'd get three different answers. If they log into the same system sometimes and run a different report, they would get a different answer. To me that was the big limitation: you didn't have one source of truth.
Fletcher asked Rich: in 2011, how would he roughly estimate the pie chart of his team's time split between data aggregation, wrangling, cleansing and actual analysis for business value? Rich:
Truthfully, ninety percent of our time was spent just getting the data clean. We had very, very little time to actually run the business. And do something with the data that we had.
For Rich's team, 2019 is a whole different story. Though he must still justify costs, he has the buy-in to press ahead in cloud. His mandate: make sure your infrastructure can handle the growth - and the data.
[They told me], go out and build a very efficient tech stack, so that we're ready to go. You know in a sense, business is all data. You manage everything through the data and basis points, and so if we didn't have access to every ounce of data, if we couldn't slice and dice it in every different way, we couldn't handle the growth that we had - and we couldn't have the success that we're having today.
This wasn't a "nice to have" project for the future - this was a business imperative.
We were trying to build an infrastructure that could handle growth because we knew we were going to be [dealing with] very fast-paced growth. And we weren't going to be able to do it two years from now - we had to do it now.
CFOs and growth stacks - asking the right IT questions
For those CFOs working with IT on their "growth stack", Rich advised these questions to future-proof your stack:
- Can your tech stack handle the scale of what you're going to be doing, including future acquisitions, new divisions?
- Can Host Analytics or other products that you're bringing in handle those requirements, and the data volume?
- Is it going to be efficient in terms of data manipulation?
- Is it secure? "Can people get locked out of certain areas? Because if they can't get locked out of certain areas, then they can't have access to any of it at all, and it becomes a big problem for you."
And, a huge one: how will the integration work, and is it automated? For Rich, that's the core of a cloud-based approach:
Everything we look at, everything we bring in, has to have an automatic feed somewhere, right? There can be no uploads or downloads - and that goes all the way down to our expense software. It all has to automatically upload and feed all of our various software so that it's automatic. We're not adding heads to do that.
CFO of EMSI - "We were able to scale with adding very few head count"
The other CFO panelist, Israel Askew, of Emissions Monitoring Service (EMSI) hit on similar themes. His "after" stack slide showed a move from paper-based processes and Excel reliance to Sage Intacct, with data flowing from Sage Intacct into Host Analytics, and from UltiPro cloud HRIS into Sage Intacct. As with OnShift, what EMSI presented wasn't an end state, but a huge advancement from 2011.
Askew raised the same types of challenges, such as defining the role of IT, and how to support business owners who want to choose their applications, but need integrated data. Addressing security is a constant discipline. For Askew's business users, once the data is flowing from cloud ERP and other systems into Host Analytics FP&A, life is good:
We have an HFC director who has his tool, but it's still integrated to where we're pushing the data through. All of that is saving a lot of time, and the cloud tools that we were able to implement work. So we were able to scale with adding very few head count. That's a big reason why we get a lot of ROI.
These issues came together in the final session of the conference on the evolution of FP&A. Host Analytics' Brian Martell and Chris Howard laid out a three-phase FP&A journey, with stats from CFO.com for the big picture view. I've tried to define these types of phases for cloud ERP. The same principle, in my view, applies to FP&A: you only get to the advanced phases through dedicated organizational effort. And while the early phases achieve some value, it's the elusive third phase where things get really exciting.
Martell and Howard agreed, saying:
The benefits of FP&A phase three are critical: optimize business performance and stay ahead of competition.
I won't detail each phase here. But in a nutshell, FP&A phase one is a reactive phase, exemplified by the 2011 challenges articulated on the CFO panel: manual data collection and validation, spreadsheet management challenges, inefficient collaboration and limited forecasting. By and large, most Host Analytics customers I spoke with are well on their way out of that phase - though not without issues caused by mergers, acquisitions, and new divisional rollouts. A survey of almost 500 finance professionals reinforces that CFOs aren't out of these reactive woods yet. Finance executives were asked how they view their current system and budgeting processes:
- 70 percent say they're too time draining
- 63 percent say they're too labor intensive
- 53 percent say they're not easy to use
Martell and Howard describe FP&A phase two as a pro-active phase. Here we see gains like monthly forecasting, real-time, self-service reporting, automated data collection and validation, shortened budget cycles and reduced errors. This is where the benefits of working towards a so-called "single source of truth" start paying off. The Host Analytics customers I spoke with at Perform 2019 were mostly somewhere in this phase, working towards one/two/several of these benefits to their project. What is phase three? "optimized" FP&A:
My take - on Chief Performance Officers, and the role of AI/ML
I didn't run into customers that were very far in phase three. To me, this is the real ROI phase, where finance teams become strategic, and CFOs cement their move from bean counters to business leaders (Host calls these "Chief Performance Officers"). Host Analytics thinks they can help CFOs here with their MyPlan functionality, a modern UI for budget owners across the business who are turned off by too many finance tools and details.
One lingering question: how much can AI and machine learning help? My view is that RPA and workflow automation can help with the phase one to phase two transition, freeing up time from administrivia. Host Anayltics clearly feels the same, adding more automation with each release. At an AI/ML for finance session with Host Analytics' Bill Peterson, he detailed some of the ML use cases that are emerging, including anomaly detection (useful for budget reviews), classification and regression (e.g. predicting potential prospect revenues). I don't see AI/ML as a magic jump to phase three of FP&A, but it may be of some help in each phase as capabilities are added. I expect to see Host Analytics roll out more of these next year.
Overall, it was encouraging to see customers advancing their FP&A capabilities, even if transformation remains a non-urgent concept for many of them. Building the right cloud stack is sure to bring change management challenges, which I heard plenty about from finance leaders in Vegas (Lee Johnston, VP - Finance and Corporate Strategy at LT Apparel Group, is one finance leader who shared plenty with attendees on his own Host-driven change initiatives - here's one video featuring his story).
So there is work ahead, and also a need for a gut check on Host Analytics CEO Ron Baden's vision - along with the role of Vector Capital going forward. We weren't able to meet with Baden or Vector Capital in Vegas, but I look forward to picking that up after the show.