Outlook is Sunny


As Seen in CFO Studio Magazine Q3 2019 Issue

In the world of enterprise application software, SAP is a giant even amidst a towering $419 billion market. The German-based company has 437,000 customers in 180 countries, including 92 percent of the Forbes Global 2000 companies. Some 70 percent of the world’s transaction
revenue touches one of the company’s systems. But even with a market-share advantage, the organization’s leaders know it can’t stand pat—and that’s part of the reason SAP is transitioning those clients from on premise software to the cloud. Of course, such a maneuver means that SAP’s strategic thinking and internal processes must also change. Radically.

The CFO who is helping SAP make that transition is Todd McElhatton, an energetic, down-to-earth executive whose mission has been to steadily and nimbly steer the Cloud Business Group even as SAP has continually transformed its business to ready itself for the next wave of growth and disruption. He joined SAP in February 2017 as CFO for North America and was promoted into the Cloud role in June 2018. He’d had extensive experience before that, much of it with Hewlett -Packard, but also with cloud technology providers Oracle and VMWare.

SAP has individual CFOs for its regions and largest lines of businesses, but McElhatt on alone has end-to-end P&L responsibility in his Cloud Business Group role. He’s the decision maker on pricing strategies and on deploying resources to accelerate the company’s growth
trajectory. “It’s really like running your own company,” he says. “Th is year SAP’s cloud business will be somewhere between 6.7 and 7 billion euros [US $7.5 to $7.8 billion] based on the most recent guidance that we’ve shared with the Street.” If the cloud segment were a separate company, those revenues would give it a perch on the Fortune 500, at around number 400.

This sector is among the fastest-growing segments in SAP. Moreover, cloud business is not drying up—far from it. “Based on the fast adoption of its cloud platform,” wrote Forbes in January 2019, “we expect SAP’s cloud business to continue to drive [the entire company’s] value in the near term as well as long term.” While McElhatton is quick to hone in on the areas for potential improvement and focus for his leadership team, the cloud part of SAP’s financials looks strong in the near term: Half-year cloud revenue was up 42 percent, the company reported in July 2019, versus 13 percent for total revenue.

McElhatton, with several hundred direct reports, has a small central team that helps him on planning, and six CFOs supporting different businesses. He reports to Luka Mucic, the Corporate CFO and Board Member in Walldorf, Germany.

“It’s been an interesting ride to have end-to-end responsibility in a business that’s growing really fast, growing organically, but also driving growth from a world class acquisition strategy,” says McElhatton.

He and Jennifer Morgan, President of the Cloud Business Group, share a belief that acquisitions can add desirable features to SAP’s cloud offerings and help fuel growth. “Last year we bought just under $3 billion worth of assets,” he says. In April 2018 SAP acquired Callidus Software (now CallidusCloud), a CRM solution; two months later it acquired Coresystems, a field-service management platform powered by Artificial Intelligence (AI). The buying spree continued into this year, with SAP Cloud moving into the new realm of experience data by picking up Qualtrics for almost $8 billion, and thoughtfully integrating each of these assets into its suite of offerings. SAP has been clear that there are only tuck-in acquisitions on its horizon.


An Imperative for CFOs
McElhatton has strong opinions on the 21st-century knowledge CFOs need in order to exercise a leadership role and to innovate their businesses. “CFOs need to be intellectually curious about technology. Take a look at the companies that are the most respected and have the highest market cap,” he says. “One thing you’ll see is they are either technology companies or they are companies that are heavily using technology to drive their businesses.”

He acknowledges that it’s relatively easy for him to learn about Artificial Intelligence and Machine Learning, for example, because SAP has “such deep roots in technology.” But he advises CFOs whose knowledge of the emerging technologies is based on reading, not seeing, to visit customers and learn about new developments and ways technology is being deployed. McElhatton says he goes to peer CFOs and others when he’s got a question. “If we’re looking at doing something [in Finance], I have the opportunity to reach out to my network.”

He traces a line from ERP systems (a centralized approach to business processes) to Supply Chain Management (a centralized view of the company and all its operations) to Machine Learning and AI. “At SAP, we look at Machine Learning and AI and say, ‘Not only are those
ways for us to be more efficient in how we run our operation, but they’re also a way to give us an advantage over our competitors.’ We’re using Machine Learning to help us eliminate some mundane tasks. AI takes that to even the next level: predictive analytics.”

McElhatton says the focus for his customers is less about the technology and more about the business outcome. “Companies and CFOs are constantly looking to improve business efficiency, create new processes, or develop new business outcomes. That’s what matters most. We first need to identify what business process needs to be created or improved, and then back into that with technology. Technology is the enabler to make it all happen.”


Getting his Grounding
At HP in the 1990s, McElhatton got a close look at business operations, sales, and customer relations as the company negotiated the largest deal it had ever done. His bosses gave him an entrepreneurial role next, sending him to Switzerland to start a new business for HP’s Outsourcing Business.

“One of the things I tell people who I mentor now is don’t be so prescriptive: ‘I want to start at X, and I’m going to move in lockstep and manage people at this stage, and manage a larger team at this point,’ ” says McElhatton, who earned his MBA at the University of Tennessee. His early HP experience gave him an understanding not just of the impact the numbers had on the business, but the timing: how long before that revenue adds to the business. It taught him, in other words, “how Finance could make a difference,” he says. “And sometimes the difference was keeping the company from doing something that wasn’t going to have a good outcome.”

He also absorbed how to lean-in on a decision, asserting the correctness of a course when there are “more variables to the equation than just the variables you have on the spreadsheet,” he says.

McElhatton gained other valuable experience when he moved to WebMD in 2000. “Tech stocks were hot,” he says, “and it was an opportunity for me to learn a whole different skill set.” He went from an environment where everything was very structured and the hierarchy was two or three people deep to one where he was making decisions on his own because “nobody had done it before.”

But soon the heady atmosphere soured as the dotcom-led recession hit. Although WebMD was heavily capitalized and able to withstand the downturn, the company had to roll back its ambitions quickly, focus on making money, and release around two thirds of its employees in a three-month period. “It’s super hard, but if you don’t make those tough decisions, no one will be there. You realize you’ll never have perfect information, and how do you make the call with 80 percent of the information because time is of the essence?” he asks before quickly adding: “The difference between having 80 percent of the information and 88 percent doesn’t make that much of an impact.”

A restructuring or a recession can forge character, though. “You learn a lot as a leader about what you don’t want to do,” he says. “People want a leader that doesn’t have their hair on fire. They want one who is calm and can be thoughtful even if you are under the pressure of a deadline or difficult decision. They also want to have a leader who is authentic and thoughtful. You’ve got to provide hope but at the same time be truthful and authentic with people and give them the context around what’s happening in the business.”


Beyond Being a Traditional CFO
That McElhatton brings his best to work every day is apparent. Working hand-in-hand with sales comes easily to this people executive who early in his career absorbed the lesson that broader knowledge is better. He frequently showcases tools for customers—SAP products, aft er all, make the Finance function hum.

He’s a practical man, understanding that no one can focus on too many imperatives at once. “You get a much better outcome if you can help people distill their focus on the three things that are really going to make a difference,” says McElhatton.

In fact, McElhatton believes that one of the most beneficial contributions he can make as CFO is to provide focus in a business world that can sometimes off er too many priorities or directions.


Finance Transformed


As Seen in CFO Studio Magazine Q3 2019 Issue


To understand how the Finance organization role has changed in today’s digital age, we recently interviewed Jim Lusk, CFO, and Tim Leger, SVP Business Process Transformation, for Sutherland, a digital process transformation company headquartered in Rochester, NY. Sutherland’s focus is on improving the customer experience and delivering meaningful and measurable business outcomes to clients. Lusk and Leger provide a unique perspective, bringing insights from a company’s CFO as well as from a business leader responsible for partnering with primarily small and medium businesses to transform and automate their Finance operations.

Jim started by sharing that, as CFO, his ultimate goal is “to become a strategic partner to the business.” To achieve this, his top priority is to make “the Finance organization more agile, forward looking and decision-centric to address stakeholders’ growing demands for access to the right information, at the right time, to make the right decisions. With the right data and business insights, he said, “you can really beat your competition. Th e most important question you need to ask is, ‘What information do we have that is not being used that can help the business run better?’ ”


Transformation Journey
Jim, like most CFOs, shares a passion for improving business operations, and recently completed a “multiyear end-to-end intelligent
transformation” of Sutherland’s entire Finance organization. It included implementing a new ERP system along with digital technologies and
an analytics platform. Th e results are noteworthy. The 50 percent operating cost savings are impressive, but the true benefits, Jim pointed
out, were the “business outcomes delivered and improved controls and compliance.” The department’s process transformation significantly improved cash fl ow by reducing DSO (days sales outstanding) to world-class levels. By rethinking and digitizing its transaction activities, the close was reduced from 22 calendar days to 7, leaving time to analyze results as opposed to just reporting them.

The most important result was significant improvement in customer satisfaction, achieved by automating the billing process. Automation improved accuracy while at the same time reducing cycle time from 80 hours to less than 8 hours.

Jim admitted the significant advantage he had was a built-in partner, Tim’s F&A transformation team. They have 8,000 finance professionals working with clients to create next-generation Finance organizations. Tim shared that a majority of small to-medium businesses, even some Fortune 500 companies, lack the skills and investments required to truly transform their Finance operations. An
interesting statistic he quoted was that “more than 50 percent of companies that try this themselves fail. The primary reason is that they lack the required automation experience, and there is a shortage of those skills in the market. My organization has that expertise to accelerate automation and takes on the risk of delivering the results.”

Sharing the Road


As Seen in CFO Studio Magazine Q3 2019 Issue


Founded over 100 years ago, Oak Brook, IL–based Chamberlain Group (CGI) is a leader in access control solutions with its Lift Master and Chamberlain garage door openers powered by myQ connectivity. Earlier in the year, this household name in homes (and businesses) around the globe joined forces with Amazon to provide package delivery into the garage, whether or not anyone is home to hit the clicker and open the door. And, like most things these days, it all happens in an app and on a phone. “Th e world is changing rapidly,” says CGI Chief Financial Officer Brendan Gilboy, “and trying to stay ahead of that change is really the most exciting part of my job.”

Gilboy, who’s been with CGI, a privately held company with more than 6,000 employees worldwide, for just over a decade, “developed the original financial model that was used to frame the discussions about what a win-win proposition looked like from a CGI perspective.” As for Amazon’s viewpoint: “Based on our experience,” he says, “Amazon looks to partner with folks who enable their vision of being the Earth’s most customer-centric company. Packages delivered safely and securely to the garage is truly a customer-centric solution.”

Gilboy is proud to have played a role in this new-to-the-world innovation, and believes a CFO can make the most significant workplace impact as a business partner and co-visionary to the CEO. “Continued focus on being a key element of setting company strategy is an important aspect of the ongoing evolution of the office of the CFO, moving from a numbers-only game to the position of the CEO’s right hand.”

But, with companies like Amazon disrupting the pace of business, such a partnership is not without its challenges. “You have that tension of making sure things get done right while moving quicker than the rate of change in the world,” notes Gilboy. It’s akin to speed walking on a tightrope, he says, but it’s all in a day’s work.


Office Culture
According to Gilboy, “the biggest challenge for any CFO is—and should be—actively supporting and, most importantly, guiding the company to support creativity and innovation focused on end consumers, while driving shareholder value creation by ensuring mind share and resource devotion is focused on greatest impact.” However, that doesn’t mean, he continues, that every good idea can be pursued.

“One of the most beneficial contributions a CFO can make at his or her company is to drive a day-to-day leadership strategy in which a culture of honesty and critical thinking wins the day and emotion does not.” Gilboy explains that such a culture is achieved when attention is focused on an honest assessment of what the data portrays. “This leads to tough, but objective, decision making, and it ultimately forces the team to pivot and move on to the next thing, instead of chasing ideas that aren’t going to pan out.”

Gilboy says the office of the CFO can foster this type of culture by maintaining a stance that “every ‘no’ is one step closer to a ‘yes,’ ” and by openly celebrating successes and “ideas that stick” so people feel good about being part of a winning team. And, most importantly: “By leading a team that clearly articulates a vision, and then a mission, of how we’re going to pursue that vision, so people can start with what the
bull’s-eye looks like and go from there.”


Top Teams
Gilboy, who spent two decades in public accounting at KPMG before sett ling in at CGI, believes he’s been able to propel his position to that of strategic and visionary “right hand” by forever focusing on being part of, and then building, great teams: “teams that were very performance focused, that understood what the goal was, and that went about achieving it.” Gilboy suggests CFOs zero in on people, and on trying to hire the best team possible. “At the end of the day, it’s a war for talent, and you need to build a team that makes the company better.” Th e CFO needs to lead that team to demonstrated results. “Not just financial results,” he notes, but “accomplishing
whatever the objective is.”

Furthermore, considering so much time is spent on data-driven insight, CFOs can seize the opportunity to play a more active role in shaping the next best move to create shareholder value by “shepherding the emerging trends of big data and predictive analytics in that context.” Gilboy recommends CFOs get up to speed—yesterday—on how such capabilities can add value to a company and how to build them into an organization. “In today’s world of rapid change and increased efficiencies, you have to work hard and smart.”


The End Game
As a strategic and visionary partner to the CEO, Gilboy is playing an active role in keeping the Chamberlain Group one step ahead of the times as it takes “access solutions,” a space where the company has a tremendous legacy, and redefines what that really means. “As a result, we’re transforming CGI from a manufacturer of products for the past century plus into an Internet-of-Things solution provider.” That, he says, is “very exciting.”

Although he’s far from retirement, Gilboy, 54, says the success he relishes the most is watching people he’s hired develop in their careers. “Seeing them flourish, starting their own consultancies and businesses because I gave them the opportunity, or coached them, and they rose to the challenge, it’s a tremendous compliment.”

And knowing that, eventually, their new flat-screen TV will be safe and secure in the garage, instead of out in the rain on the front porch—or worse, in the back of a getaway car—is just the icing on the cake.

Copyright 2017