Anaplan founder and CTO Michael Gould tells Financial Executive magazine how new tools are helping customers improve planning across the company and what senior-level financial executives need to consider when making technology investments.
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Financial Executive: How would you describe the accounting and finance industry’s take-up of technology?
Michael Gould: When I started Anaplan, my focus was on the office of finance. One of the interesting things that’s happened is that we’ve broadened a lot, and that’s partly just because the industry had broadened. The technology, even though we’ve built it with financial planning and budgeting forecasting purposes in mind, turned out to be broader than that.
The thing that we’ve really seen recently, and this is a reflection of the kind of maturity of our customer’s adoption of the platform, is movement into non-core areas. Our conversations have very often shifted from dealing with the business end, in terms of you working with the CFO or the finance director at the head of FP&A or whoever, to a conversation with IT, so a lot of discussions with CIOs.
There is close cooperation between those two departments. There’s some history there, in terms of companies where the level of cooperation between the business side and the IT side isn’t always what it could be. I think there’s a response to a need in business for agility, and for being able to respond quickly to disruption to innovation. It’s forcing these business functions to work more closely together, and to be dependent on IT to build, to help them move forward quickly. A lot of things we’re seeing with adoption of the cloud and the way that’s helping businesses to be able to respond more quickly is with that.
Many of the conversations we’re having now are with IT teams, who are struggling with some of the biggest organizations in the world. You’re literally dealing with thousands of different systems that are running. They’re looking at how can they consolidate those, streamline in order to be responsive, and at the same time, engage more closely with the business functions who need fast response times.
They can’t wait for 18-month or two-year IT projects to deliver the things they need. That’s a lot of what we’re seeing happening—the need for those functions to work more closely together, and to be able to respond much more quickly to changing needs.
FE: At what point did the CIO and the CFO work more closely together and who’s leading those combined efforts?
Gould: It’s actually coming from both ends.
I think it’s just a recognition that business can’t afford to be weighed down by the number of systems that they’re running. Particularly, large organizations that have grown by a series of acquisitions need to try to come up with a whole set of different platforms that have been adopted that actually and initially, typically have to be integrated.
Rationalizing that has become critical, because of the need to be able to respond.
I was talking with a CIO at a large insurance group about how they started to think of themselves almost as a software company rather than an insurance company. That’s because they’re building platforms to enable the delivery of new product more quickly. Yes, the business is also insurance. But to be able to respond to whatever disruption may come with very different models of offering insurance, they need to be able to become a different business.
I think you’ve got that kind of push from IT, and I think you’ve got the same kind of response to the same market factors coming from the business of needing to be able to model things out. If it’s finance, they need to be able to come up with alternative plans for different business models, not just kind of restructuring or expansions or mergers acquisitions. They might have to look at much more fundamental shifts in the way the business operates, as a result of the disruption that could happen with technology.
FE: As the technology advances, do you think that businesses are keeping up with the sort of data that needs to be put in there, and the data integrity?
Gould: I think there’s a mixture. We see some companies that are very much on top of data.
To me, the key sign of success is when IT is getting involved early. We’re in a conversation with a large technology company, who was looking at improvements to their business functions.
Once IT got wind of the fact that we’re engaged both in finance and some of their sales operations, said, “Okay, we need to understand what the platform is, and how we can ensure the integrity of the data.” Sometimes you see it very much the other way around, where IT steps in once several applications are up and running. I see a lot of progress being made in understanding of the need. I think companies are at varying levels of maturity in terms of rationalizing and getting the data into the planning systems with a level of integrity around it.
That’s where the IT department is so critical in the CIO’s function — obviously, getting that information into those systems in a clean form that’s auditable and has provenance as to where the data has come from.
On the whole, I’d say it’s certainly a challenge everyone recognizes, and I see a variety of levels of maturity, but certainly, there’s a recognition of the importance of it.
FE: Do you feel that there’s a pipeline of people coming in who can sort of manage this change?
Gould: I think there’s a lot of competition. If you look across many industries, you’re seeing so many industries are turning into software companies, so I there’s a huge pressure there. We’re certainly seeing, from our own perspective, pressure on hiring people is certainly not getting easier, particularly in some of the technology hubs. Maybe less, not so much of a challenge, in different areas sort of outside the bigger hubs for technology companies.
Take car manufacturing - over time it’s become so much more of a technology discussion, rather than just an engineering discussion, and so you have a shift there. I think there’s a lot of pressure on those kinds of resources.
FE: Where do you see FP&A going in five years? What do you think will be the biggest significant change, where do you think that technology can help out with that?
Gould: I think, in my mind, the biggest shift is the requirement for speed, in terms of responding to different marketing, changes in market conditions.
One shift we’re seeing a lot is from our annual budgeting process, basically saying, “Well let’s take last year’s figures, tweak them a little bit. Say we’re planning for this much growth, everyone’s budget goes up by this much so we’ll make a few adjustments here and there. Then we’ll carry on business the same we’ve been doing it for the last 20 to 30 years.
Everything is shifting away from that.
Firstly, there’s a need to run the cycle of change much more frequently in that annual process, and there needs to be a bigger shift in the approach. We’re engaged with some of our customers with our partners and their customers on zero-based budgeting, and putting that in as a process. Rather than thinking of our budget as “What did we do last year or “What do we need to change?”, everything in the business has to be re-justified from the ground up, as if we were starting again. It’s the only way you can be responsive to fast changing market conditions. The business needs to rethink very fundamentally with a much more frequent cycle than a traditional budgeting process, particularly if you need to review last-year’s budgeting process and make adjustments.
FE: Does that work into sort of the concept of forecasting?
Gould: People want to make use of machine learning and more statistical forecasting methods. Again, I think that’s partly in response to being competitive, based on the amount of available data. With more source data available, the companies that are making use of that to make smart decisions will be at an advantage over the ones who aren’t.
People are still stuck with technology that doesn’t allow them just to run the mechanics of fast change within their business, and fast change of the modeling of the business. In a way, getting more sophisticated statistical forecasting, or your artificial intelligence predicting analytics type input, into that process. If you don’t have a system that will actually allow you to respond quickly and model differently anyway, then those things, they may help you but they’ll be done very much as a kind of sideline exercise, rather than being able to feed into a main planning processes, which is what you really want.
FE: Do you think the discussion surrounding the cloud and cloud security is over? Do you think that most organizations and enterprises are comfortable using a cloud solution?
Gould: I don’t think the discussion is over. The discussion will carry on for a long time because there’s a lot detail. I think the point where you actually hit a roadblock is very rare, now.
There’s debate, but I think once you present the level of security that you can give with a cloud solution, and really get into the discussion with the security teams of the customers who are evaluating cloud versus on-premise solutions, I think it’s very rare now that it becomes a blocker, which I think is perhaps more shifted in the last few years.
Things like bring your own key encryption due to be launching very shortly, allows all the encryption keys that are used to secure the data within the cloud infrastructure, which are managed by the customer’s security team. This means you’ve got a very strong separation of duties between the people running the physical infrastructure and the people who are managing the encryption of the data stored within the infrastructure. That’s actually a level of separation that’s stronger than you get typically, even with an in-house, on-premises system.
Once you get down to that level of detail, then I think we see the blockers come out of the way, but it’s certainly still a debate that’s had. People don’t put detailed, forward-looking financial forecasts in the cloud without some serious debate and thought about the security of it.
FE: What do you think is going to be the biggest change to the way financial executives work and use technology in the next five years?
Gould: Coming back to your earlier question around data integrity, I see the potential to make that question less of an issue. We’ll see technology that enables the integrity of data across multiple systems and as a result, more data platforms emerging. The data platforms we’ve seen in the past have been traditional, BI platforms that are essentially collecting data from multiple sources. But it’s more about presenting historical data and getting useful information out of it. Instead, we’ll see that more can rely on the integrity of data that you’re working with, and that will get over the decision-making.
That is a critical enabler to be able to be responsive in terms of remodeling businesses to respond to threats of what the next big thing is.