Once every three months, Unit4 Asia Pacific CFO Eric Cheung (pictured) hosts a briefing with fellow CFOs as part of his business partnering role. The company provides enterprise applications, including ERP solutions, to services organizations worldwide.
Drawing from those interactions, he recently wrote an article on what he sees as the 15 structural shifts that will change the future of the Office of the CFO, including the eternally transitioning CFO, the call for finance to provide strategic and visionary counsel, the transition to customer and client success as key metric, and the rise of soft factors in measuring ROI.
So is Unit4 already experiencing to those shifts? The answer is yes, at least on some of those dimensions. If you read his résumé, you can say that Cheung is in periodic transition himself, for example. He started out as senior accountant with KPMG Hong Kong in 1996 before moving on to two-three year stints with Oracle, BMC Software, Hewlett Packard, SAP and Microsoft.
“What is truly business partnering is to be able to say, this is the report, this is the budget, this is the actual and ask, why are we having such variance? What’s the action item? You need [a finance business partner] to discuss with the head of that operation”
“I give myself three years to make a mark,” he says. The first months are given over to understanding the company. Then he moves on to transforming the finance function to focus the team on business partnering, strategy, risk management and other value-added tasks.
In the final year, he focuses on succession planning “so I can move on to a different role or company in terms of advancing my career.”
Not all CFOs are in constant transition, of course – the phenomenon seems to be more pronounced in the technology sector, where changes in strategy and business models can happen almost overnight, and among the younger finance professionals. But citing a Deloitte study, Cheung says more than 40% of senior executives leave their role within 18 months.
As it happens, that’s just about how long he has been with Unit4 Asia Pacific after 17 months with Microsoft and nearly four years with SAP. Cheung says he intends to stay on because the work of finance transformation at Unit4 in Asia is still in progress.
When he signed up in 2014, almost everyone in the finance team had left. Given a blank slate, Cheung decided to recreate the transactional layer in Kuala Lumpur, where salaries are about 40% cheaper than in Singapore. This allowed him to increase headcount but still with the same budget.
“Of course you need to assess the skill sets,” he concedes. So far, recruiting and managing 11 headcount in Malaysia – twice the size in Singapore – have been “a positive experience.” But he reports that other CFOs have told him their experience in KL has been mixed.
With the transactions side established, Cheung is now concentrating on business partnering and other value-added services. Two finance business partners have joined the retained finance function in Singapore, where they support the heads of other functions including sales and customer service.
“What is truly business partnering is to be able to say, this is the report, this is the budget, this is the actual and ask, why are we having such variance?” he says. “What’s the action item? You need [a finance business partner] to discuss with the head of that operation.”
For his part, Cheung as CFO partners with the MD on go-to-market strategies to increase the revenue base. “We’re looking at different industries, vertical markets, where we’re going to be using a partner strategy and where we’ll develop some of the vertical software with a reseller,” he explains.
The effort is a mix of traditional FP&A and deploying analytics to help the business understand how the numbers translate into strategies. The retained finance team in Singapore deploys those same tools to help with risk management.
The attrition rate – how many customers leave mid-stream or do not renew – is a KPI of the sales department and customer support department. But it should also be part of finance’s KPIs
“My approach is, whatever we want to do, build a strategy or action plan, we need to think of what are the associated risks, so we can say, these are the benefits, these are the risks,” explains Cheung. “Then you can perform an action on time.” Everything, he says, have to go through a proper risk assessment.
It’s all part of an expansion of the CFO remit that he says is made possible because the transactions layer has been put in place in KL, freeing the retained finance team in Singapore (and himself as CFO) to focus on strategy and risk management.
The expansion is increasingly important because the ground is shifting under the company. When Unit4 was selling on-premise solutions, it was relatively easy for finance to forecast and plan because the revenue stream was predictable. Once you sell a license, the customer is locked-in. The only variable is license renewal when an upgrade is offered years later.
The rise of the cloud and Software-as-a-Service as delivery platforms means the company can no longer depend as much on the traditional on-premise model. “Revenue trickles down over a longer cycle,” says Cheung. “It may be a three-year contract, but you have to make sure the customer is happy.” It is easier for clients to change SaaS solution providers in mid-stream, which was not the case with traditional on-premise products.
Most industries and enterprises will soon discover what technology companies are already finding out, which is that they cannot ignore soft factors like customer success, says Cheung. The relationship with customers will no longer be just transactional, “not just how much you’re going to spend, how much you’re going to get” – the traditional hard ROI.
Cheung says the idea of soft factors in ROI is still evolving. Translating these into “a proper ROI mode” is difficult because they are not easily quantified. What is clear, though, is that customer success translates into revenue. The finance team that can accurately measure the cause-and-effect relationship will be able to optimize use of resources in drivers that best strengthen customer recruitment and retention.
The broad outline is emerging. “Customer success is company-wide,” says Cheung. “So customer success should be [part of] everyone’s KPIs.” The attrition rate – how many customers leave mid-stream or do not renew – is a KPI of the sales department and customer support department. But it should also be part of finance’s KPIs, in the sense of enabling retention by coming up with the right pricing, for example.
Customer success should also be part of the KPIs of other departments in terms of enabling customer support to keep attrition low, for instance. Is HR extending training and coaching support to client-facing staff? Is IT providing and maintaining the technology tools that enable sales and customer support to track potential customer problems and proactively offer solutions before they are requested?
Above all, is finance analyzing the causes of attrition, whether it’s pricing, service problems, issues customer support or whatever else? And is finance, along with the other departments, coming up with effective action steps to arrest attrition?
“We have tracking for the attrition in contracts,” says Cheung. “Why are they terminating? This is data that is important for us to read, and address in our action plan for retention.”
Singapore is still skeptical of the gig economy, unlike in markets like the US and Cheung’s native Australia. “People here say, why do I want to be a contractor? I want a full-time job”
The gig economy
The rise of the gig economy – where skilled professionals prefer to be independent contractors rather than permanent employees – is yet another structural shift that requires a response from the CFO.
Why hire full-time if the worker’s services are fully utilized only for a certain peak period? “We are under constant pressure to improve our EBITDA,” says Cheung, who notes that companies typically need to add 20-25% on-cost for full-time employees representing on things like medical and pension plans.
Leveraging on the gig economy makes sense “when there is a lot of opportunity where we can say, it’s only during this peak period where we require resources, and there is a readily available supply of skilled resource employed only on a contract basis.”
That said, Cheung concedes, Singapore is still skeptical of the gig economy, unlike in markets like the US and his native Australia. “People here say, why do I want to be a contractor? I want a full-time job.”
Still, the contractor need not be physically based in the country. They can work remotely or travel on assignment. Cheung has hired a number of contractors in the past 18 months to help with the finance transformation at Unit4. “R&D is also ripe for the gig economy,” he adds. There are many programmers in India “at very low costs,” for example.
He has been in contact with Virtual Employee, a company in India that supplies companies with engineers, finance professionals and other skilled workers on a contractual basis. “It’s very much like Uber for Employees,” says Cheung.
Unit4 had screened four candidates in India, but did not hire any of them because Unit4’s need was for someone with experience in a particular software module. But the CFO say gig workers will remain a potential resource for finance, R&D and other departments going forward.
After all, he himself is already part of the gig economy, in a sense, as structural shifts of one type or another compel him to constantly transition from one job to another.
About the Author
Cesar Bacani is Editor-in-Chief of CFO Innovation.