The M&A scene may be hotter than ever, but the chilled champagne toasts are short-lived for the acquirer's management team as pressure mounts to deliver speed-to-value. The ensuing integration process can be messy. In particular, complex, disconnected systems require integration to drive synergies and support a new operating model.
Given the urgency to accelerate speed-to-value in a merger, there's never been a stronger business case for CFOs to embrace and utilize new technologies, such as the cloud, to simplify business complexity and devise a combined enterprise resource planning approach that eases the migration to shared processes and a common system of record. Increasingly, CFOs are choosing to leverage cloud technologies to create a more agile operational environment so they can accelerate the combination's value. This agility starts by prioritizing what must first go to cloud — even beyond F&A applications — such as customer master data to support sales, or sourcing processes if new manufacturing plants are being acquired.
Gartner notes that the future ERP system "will result in a more federated, loosely coupled ERP environment with much of the functionality sourced as cloud services or via business process outsourcers." Every CFO's journey to cloud ERP will be different, but all will be better positioned to obtain the business results and value they desire so long as they do the following four things to lay the groundwork.
Engage the Business User
CFOs desire minimal business disruption during the integration period. The best way to ensure that is through close collaboration with their chief information officer. They both are acutely aware of the baseline reporting needs of the business user most critical to keeping key activities and business operations moving forward. Throughout this integration process, it's important both C-suite members engage their business user to determine what is the most vital financial data tied to the customer to dictate which data types take priority. This also ensures baseline business value is created immediately.
On balance, this practice also allows both executives to identify within the acquiree the ERP best practices to potentially implement within the parent organization. Consider letting the tail wag the dog. This is where CFOs and CIOs filter their ERP decisions by focusing on where there is the most to gain. They may find that the acquiree is leveraging F&A applications in the cloud that link to an ERP, a practice that looks completely foreign to the parent company's financial organization. Instead of discounting the difference, CFOs and CIOs should embrace it. They can gradually scale processes across the parent company's financial operation where business users will have ample opportunity to familiarize themselves with the new while phasing out the old.
Map Out a Plan to Shareholders
CFOs have shareholders to please, which is always a delicate balancing act. CFOs need to constantly ask themselves during this process, "How am I enabling the business to grow?" A move to the cloud signals that the business is focused on simplifying integration phasing and embracing new ways to more swiftly move to a new operating model. The cloud is a reinforcing strategy as a CFO illustrates the business growth roadmap and reaffirms how the company will continue to make money in the near term while remaining profitable. ERP systems are one of the highest cost technology investments for companies, so there's certain to be hesitation in pursuing any drastic new expenses during an integration.
Characteristically risk-averse, CFOs may inadvisably choose to keep their ERP systems and those of the acquiree on-premise for the foreseeable future. With the scale and function limitations that on-premise presents, cloud technologies should be a considered destination for ERP to avoid stifling long-term operational agility. Shareholders will be more accepting if there is a clear plan for future ERP investment that includes the cloud and also acknowledges the potential impact on near-term financials.
Compliance vs. Risk
Post-acquisition integration also sets off a multitude of regulatory and compliance evaluations that could greatly influence cloud ERP investment. It seems every year companies are faced with meeting new regulatory requirements that put more strain on both human and technical resources to stay compliant. CFOs will likely find that the cost to comply on-premise is more expensive than complying in the cloud due to the additional costs associated with keeping financial data compliant with the owned IT infrastructure. With cloud ERP, CFOs place all the risk on infrastructure and software service providers while freeing up personnel to tackle other aspects of the merger integration.
The Big Data Roadmap
Acquisition integration also presents an opportunity for CFOs to look at the company's data management strategy. At the time of an acquisition, CFOs and their financial operations are faced with sifting through a "lake" of data. As ERP data is integrated, CFOs should prioritize the financial data that enables the company to better understand financial performance and leads to a single system of record. It is this data that should be among the first candidates to migrate to a cloud ERP system, thus enabling the CFO to perform analytics and start generating actionable insights. The other component of this data management strategy is putting in controls and security measures to ensure the integrated data remains secure and its integrity intact.
ERP integration post-acquisition is challenging on many fronts for CFOs who actively engage in the process. This is not a job for the faint of heart. Rather, it's an opportunity to future-proof the business. A clear roadmap and bold decision-making are required in this era of digital transformation. So long as CFOs keep these four areas in mind, they will soon see that a commitment to cloud ERP as a top priority will deliver the business value they seek.
Christopher Stancombe is the chief operating officer for Capgemini Business Services. He has been responsible for the growth and development of the BPO organization and currently leads the delivery organization that drives innovation across the business services offerings and supports a broad range of services to clients around the globe.
Christopher Stancombe (Credit: CFO.COM)