I know from speaking with SAP customers all over the world that many CFOs are deeply involved with company operations. This makes sense. After all, managing financial flows is at the core of what almost every company does. If you want to improve operational efficiency and free up resources for innovation – which is what digital transformation is all about – finance needs to be involved.
My own experience as CFO for Global Customer Operations at SAP shows this to be true. As you may know, SAP talks a lot about digital transformation. But it’s not just something we preach; we also walk the talk. My intention with this blog, and others in this series, is to share my experience with digital transformation at SAP – an experience I hope that other CFOs in similar shoes can look to as they pursue their own initiatives.
Reimagining finance for the digital economy
The way SAP sees it, we operate in a digital economy just as our customers do. We feel the pressure from newer, nimble, born-in-the-cloud competitors – and our response has been to disrupt rather than be disrupted. In-memory computing, a next-generation business suite for the cloud, cloud-native apps that plug into a digital core, and a development environment to build your own apps: all of this innovation has been part of our digital transformation. But little of it would have been possible without first reimagining finance processes.
Key to SAP’s success in recent years has been rapid growth driven by key acquisitions, including several of the cloud-native apps I mentioned above. To grow at the rate we targeted, SAP needed to undergo a digital transformation that would give us a) the flexibility we needed to manage the coming change and b) the standardization required to simplify processes.
Not as standardized as we thought
A few years ago, we decided to take a long hard look at the finance function at SAP. At the time, we operated on a regional model, where standard processes (order-to-cash, procure-to-pay, and so on) were replicated from region to region.
The idea was to switch to a shared services model. Instead of regions executing core processes on their own, we’d have shared service centers around the world to serve the regions and manage their financial processes. This might not be so difficult, we thought, because we were already standardized on these processes – just with regional differences to fit regional needs. But one of my first impressions as we got started with this transformation effort was that we weren’t nearly as standardized as we thought.
Yes, we used the same SAP software across regions. Yet, even while accounting for necessary deviations to accommodate local circumstances, processes varied significantly. One of the main culprits for this variation was that regions often had their own idiosyncratic touch points with critical sub-processes – which made their processes unique. What I realized was that rather than efficiently replicating processes around the world according to a core template, SAP was investing in different processes across regions. This was wasteful and inefficient.
Defining the ideal process
It also meant that my job—and the jobs of other finance employees—would be more difficult. What we needed to do as a team was define our ideal process, and then interpret that process for the cloud in the context of a shared services model. In other words, we had to reimagine the business model for finance at SAP.
As we moved through this work, I realized that when everybody is working together in the same office—which is common enough in the finance profession—workflow processes tend to happen of their own accord. Everybody knows their job, and the process runs relatively smoothly. Take, for example, order-to-invoice: There’s a lot that happens upstream, such as preparation of customer proposals and the final quote. Downstream, the payment is collected at some point and salespeople are compensated. In your office, you have people who manage these touch points, although the way they do it in Asia might differ from the way they do it in EMEA. But as CFO, as long as your team remains intact and you retain your people, you don’t really notice.
The problem is that this reality serves as an impediment to growth. Or to put it another way: It’s easier for SAP to centrally control the order-to-invoice process—and then manage this process for new acquisitions—than it is to replicate the process we once used in, say, SAP Americas. Idiosyncratic processes with unique touchpoints to sub-processes are inefficient, especially when you try to replicate them on a global scale. But shared services, when done right, facilitate growth. At SAP, this approach has allowed us to focus more of our energies on innovation.
As for defining exactly what the process is to support a given shared service center? That’s a story for another blog. Stay tuned for more on this and other topics.