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Help for the CFO: Pinning Down Your Vendor

Perhaps the CFO can take some time to line up with the others and ask some CFO-oriented questions

A recent article by Rob Livingstone on CFO.com [1] attracted my attention. In the article, Rob talks about the need for a tighter, ongoing working relationship between your company and its IT vendors for "as-a-service" technology-delivery models. We have in previous blogs also discussed the changes required in the everything-as-a-service (XaaS) movement. Clearly, Rob's target audience here is primarily the CFO, and Rob's suggestions are intended to help financial officers focus on some of the vendor selection issues that are emerging as the technology evolves, and as the customer-vendor relationship evolves in parallel. It is also worth noting that this lack of foresight and adaptability is a leading cause of project failure throughout IT history and not just with as-a-service technology delivery models.

As a billing vendor, I look at this from the other side of the negotiation fence, but nevertheless I find I'm pretty much in agreement with Mr. Livingstone.

The article contains a number of useful reminders, some of which I may return to in a future blog. However, for today, I've picked out a couple of Rob's comments, because they happen to resonate with discussions we are constantly having with our customers and prospective customers. They both address adaptability and flexibility, important tag words for us here at MetraTech.

RL: Adaptability is key. Adaptable, responsive organizations win business and can respond to changes in the commercial, regulatory and security environments. It may be a problem if either your or your vendor's business is based on inflexibility and process compliance.

Process compliance a problem? That could be a surprise to some Financial Officers, but I see what Rob is getting at. The problem is not that systems deliver process compliance, because to an extent they should all do that; the problem arises when systems are designed to comply with one specific way of doing business, and can't be changed.

A dominant focus on "Can this system support our way of doing business?" can get in the way of understanding "Can this system help us evolve better ways of doing business?" It is possible to buy a system that is perfectly tuned to the way you (and many other companies) do business today, but is completely incapable of supporting any of the ways you might want to do business tomorrow.

Many, if not most, "traditional" billing systems fall into this category. They were generally designed with a specific industry in mind, with a well-understood range of products and services that would be delivered and charged for according to a generally understood set of process best practices. Best practices, in some cases, that pre-dated the concepts of cloud, just-in-time logistics, low-touch customer service, mass customization, agreements-based billing, subscription billing, and behavioral billing, for example.

These are software systems that seem to behave like hard-wired systems. Making minor changes to the process is slow and risky. Making major changes requires a skilled software development team, possibly working for months to achieve modest improvements.

We have all found that the systems that provide the best environment for process improvement are those that make it easy for business users (not the IT department) to quickly and safely implement substantial changes to the method of working as business needs evolve. Naturally systems that are flexible in this way require more effort and thought initially, as they do not come all nicely programmed with a standard (that is, hardwired) way of working.

This is a tradeoff that is often lost in a focus on compliance with current process compatibility alone. Good point, Rob.

RL: What's the purpose of your contract? Encapsulating in your vendor's contract every possible change scenario that could occur in your business or technology environments is problematic. Stitching up a restrictive contract with your vendors could be counterproductive in an agile, volatile environment.

With a traditional system, there doesn't appear to be any option for a CFO other than to insist that all possible future scenarios are described in detail. After all, no system can do everything for everyone, can it?

Actually, we can get pretty close, providing we understand the limits of the functional domain of the system under investigation. In the functional area of billing and compensation, which is where our MetraTech product lives, we believe we are there. Instead of the RFP asking, "Can you bill for product/service type A, B, C ..." in a long, specific and tiresome list, the RFP can much more easily and efficiently ask the vendor: "Can you capture and bill for any event for which billing data can be captured? State any exceptions."

This approach gets round the other problem with painting future scenarios in detail: no one knows exactly what the future will be like, what technology, regulations and cultural changes will change our schemes no matter how well we plan.

Modern billing systems, like ours, are designed to be completely agnostic to process, product, service, customer organization. I think ours is the best of the bunch, but of course I may be biased a little. Every CFO should know that these ultimately flexible capabilities are out there, and use that knowledge to write RFP and contract verbiage that seeks out the best and most flexible, not the least inflexible examples of the old school systems.

Having saved the CFO hours of slaving over RFP and contract wording by this suggestion, we have more to offer. The typical financial officer is, as we all know, on a quest for perfection. While others around them are asking, "Can this product help me do my job?" the CFO often is focusing on "Can these guys deliver what they say they can?" Now that we've made it so much easier for the CFO to get an answer to that question, perhaps the CFO can take some time to line up with the others and ask some CFO-oriented questions. There is now an opportunity for the CFO to address some specific pain points of revenue analysis, revenue recognition, assignment of supplier costs along the complex value chain, true product/service profitability, customer value profiling, and more. If you're a CFO steering the list of topics in an RFP, how about indulging yourself by including a few questions around your own job?

[1] August 26, 2013, Rob Livingstone, "Time to Dust Off Your IT Vendor Strategy". http://www3.cfo.com/article/2013/8/it-value_technology-as-a-service-livi...

More Stories By Esmeralda Swartz

Esmeralda Swartz is VP, Marketing Enterprise and Cloud, BUSS. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda was CMO of MetraTech, now part of Ericsson. At MetraTech, Esmeralda was responsible for go-to-market strategy and execution for enterprise and SaaS products, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. She was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of resource and service control software, now part of Extreme Networks.

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