COVER STORY

Digital Finance: Transforming The Finance Function

The emerging technology landscape calls for a massive scale of convergence and measures that companies are scrambling to service and align with. Newer technologies are also disrupting the larger role of Finance within an organisation and are constantly re-shaping it. CFOs that are able to adapt to the new digital reality will be better positioned to lead their teams into a high-performance future – one built around a highly-automated Finance function focused on providing real-time, data-enabled decision support. The concept of a ‘digital Finance organisation’ raises questions about just how far the function can be automated. Technology has simplified transactions management, including accounts receivable (AR) and accounts payable (AP). Thanks to digitisation, firms no longer need to devote as much time to activities such as accounts closing or voucher-processing. In effect, the role of the CFO will expand from a business head to that of a key ‘strategy person’, shouldering strategy and accountability in equal measure.

M P Vijay Kumar, CFO of Sify Technologies – one of the largest integrated ICT solutions and services businesses in India – strongly believes that his company is at the right place at the right time. As a ‘converged ICT player’ that has been listed on NASDAQ for the last 20 years, it is well positioned to ride the current wave of digitalisation. Along the way, Finance, by leveraging an outcome-based pricing model, will necessarily play the twin role of enabler and regulator for any client project. This involves a thorough understanding of the client’s business and financial risks and building appropriate cost structures and pricing models.

In driving towards those goals, Finance at Sify will continue to support the expansion of data centres and network infrastructure in a cost-effective manner. To that end, Mr Kumar has taken several initiatives towards automation and digitisation, systematically automating repetitive activities via RPA; designing an immersive digital experience for vendors and customers to interface; making management reports completely system-driven; and ensuring real-time availability of data. Customer invoicing, for instance, was automated to ensure 360-degree visibility into the entire invoice-to-payment recognition cycle. This was instrumental in bringing down the total DSO time by 40%.

Organisations typically expect a large ‘payback’ on their technology investments. However, Mr Kumar believes that even as advances in technology bring quantifiable benefits, it is important not to focus excessively on ROIs or payback. Having a technological edge enables something greater: better customer experience and more efficient operations. To that end, top management sponsorship and endorsement are key – and ultimately, this is what enables forward-looking investments that help the company keep pace with or even lead global trends.

Mr Kumar believes that technology has played a transformational role not only within Finance, but also at the company level. For instance, the improvements in the quality of data coming out of Finance has improved both the quality and timeliness of decision-making and – thanks to more accurate information and standardised templates – ensured better engagement with customers and vendors. It has also helped to improve governances and the effectiveness of internal controls. Going forward, he believes that new technologies offer immense potential. AI will be a big area for investment and niche IT solutions such as Blockchain will be key to staying relevant.

In a candid conversation with CFO Connect, Mr Kumar shared his experiences with and plans for building a truly digital Finance function.

The Big Picture
  1. What are the Sify’s strategic goals for the next 3-5 years?

    In the next 3-5 years, Sify has three primary goals: to be India’s most comprehensive ICT solutions and services player; to be the first-choice IT service provider for all enterprises for their digitalisation journey; and to expand the IT managed service bouquet to geographies beyond India.


  2. Going forward, we believe that most IT services will adopt an outcome-based approach to solutions and Finance would play a key role in driving towards those goals.

  3. Where would you position Finance in the achievement of these objectives? What role does it play in enabling the business to manage change effectively?
  4. Going forward, we believe that most IT services will adopt an outcome-based approach to solutions. This involves a thorough understanding of clients’ businesses and financial risks and building appropriate cost structures and pricing models. In driving towards those goals, Finance will continue to support the expansion of data centres and network infrastructure in a cost-effective manner. I view Finance playing the twin roles of being an enabler and regulator for any client project.

    We believe we are at the right place at the right time to ride the wave of digitalisation as a converged ICT services player.

  5. Which risks would you identify as key? Conversely, what are the key opportunity areas?
  6. Primarily, there are three key risks:

    1. Business model risk: Considering that the IT services industry is going through significant changes, one needs to be conscious of the need to either disrupt or get subsumed by a disruption caused by another player - new or otherwise.
    2. Governance risk: Effective internal controls are key to ensuring that we do everything in an efficient manner and that high standards of governance are followed.
    3. Liquidity risk: The discipline of good working capital management given, that the customers are operating in an environment of tight liquidity and low capacity utilisation.

    In terms of opportunities, we believe we are at the right place at the right time, riding the wave of digitalisation with our services capabilities as a converged ICT player. Our outcome-based pricing model will be the future of IT services pricing and we are well-positioned with capabilities to bring value to customers through this model. Customers are investing significant time to evaluate proposals for their digitalisation and are willing to spend on IT. They see us as productivity enablers.

    Our approach to automation involves reducing manual, repetitive work through RPA/AI and designing an immersive digital experience for vendors and customers to interface. This has been instrumental in ensuring accuracy, consistency and timeliness of information flows, resulting in improved experience and controls.

Digital Transformation of Finance
  1. What initiatives has your organisation taken towards automation and digitisation, especially in the Finance function?

    Specific to the Finance function, we have taken the following initiatives:

    1. Automation of all repetitive, regular activities, such as bank reconciliation, matching of receipts to invoices, with Robotic Process Automation (RPA).
    2. We designed an immersive digital experience for vendors and customers to interface, resulting in improved experience and controls.
    3. A reduction in the use of spreadsheets over time through a continuous review of the work done on spreadsheets using set KPIs (by reports from BI) to ensure consistent, accurate and timely availability of information.
    4. Making the management reports driven completely from the system without any human intervention.
  2. We recently automated ‘customer invoicing’ for 360-degree invoice visibility. We have automated the entire cycle of invoice-to-payment recognition with mitigating measures for customer default and dispute resolution. This process enables raising customer invoices automatically and lends visibility on the timelines of invoice acceptance. Whenever a payment becomes due, the system auto-prompts a renewal-day mail to the customer. If the customer does not pay, the system notifies the team and disconnects the service automatically. However, if the payment happens within the due date, the services continue till the next round of invoicing. In terms of its impact, a total of 900 new customers have been on-boarded while the total DSO time is down by 40%.

  3. How did you prioritise the processes or activities that should be taken up for automation/digitisation?
  4. The most obvious candidate was the repetitive manual work (including spreadsheet-based work), which was replaced by RPA/AI. To improve compliance, we created a ‘compliance matrix’ which is solely driven by the system. The next areas of automation are those that require a higher level of internal controls effectiveness.

    We select external partners on the basis of their thorough understanding of the project, expected outcome and commitment of their leadership team to execute.

  5. What new organisational processes did you adopt?
  6. We have a mature internal CIO organisation, which executes the IT strategy and we have not hesitated in engaging with partners. Vendors (partners) are selected on their thorough understanding of the project, expected outcome and commitment of their leadership team to execute. IT projects are all funded out of internal accruals. I believe in funding only revenue-generating assets through debt.

    Most IT projects fail because the leadership focus gets diluted during the implementation phase.

  7. What challenges did you face in implementing your tech initiatives and how did you overcome these?
  8. My experience is that most IT projects fail because the leadership focus, which is key to initiating the project, gets diluted during the implementation phase. Through effective project management and by ensuring that every IT project, even very small ones, gets the same level of attention right through the project phase, we were able to overcome implementation-related issues. There is an effort to manage change management in a focused manner, despite the fact that a few unknowns do crop up. Specifically, the large IT projects do cause a bit of disruption during the transition. In that case, effective testing of all possible scenarios before implementation helps to significantly minimise the surprises during implementation.

    Other than improving the quality and timeliness of information flows, automation has helped in improving effectiveness of internal controls and good governance.

  9. What results have you achieved in terms of enhancing information flows, business decision support and/or efficiency in the functioning of the company at large and/or the Finance team in specific?
  10. The biggest outcome has been the information from the source without the use of spreadsheets and timely information to all internal stakeholders. It has improved both the quality and timeliness of decision making and ensured better engagement with customers and vendors with more accurate information and standardised templates. Given the business growth rate, this has helped in improving effectiveness of internal controls and good governance. For instance, we implemented the ‘Linear Project Programming Module’ that provided all stakeholders a uniform view into the different stages of the project through an online dashboard. Now all stakeholders, including customers, have the same reference point, with real-time updates on aspects like project scope, the status of hardware acquisition and delivery, implementation, customer acceptance, etc. This has helped us eliminate the need for regular status update meetings.

  11. How do you assess RoI from technology spends, quantifiable or otherwise?
  12. RoI has not been the primary criteria for IT spends. There is, of course, ROI in terms of either saving of some costs or improvement in overall experience, but the primary driver has always been improving both the customer/vendor experience and internal controls.

    In the next few years, the volume of digitalisation activity is expected to go up owing to the XaaS model, but the quantum of spends on Finance systems and technology will be low

  13. Do you see spends on Finance systems and technology increasing over the next few years?
  14. Yes, but since most of the IT services are now available on the outcome or consumption model (XaaS model), the quantum of annual spend will be low, whereas the volume of digitalisation activity will be high. For instance, enterprises have almost stopped creating server rooms or investing in huge IT computing and storage devices. They have all moved to the cloud and scale-at-will.

    With new technologies coming up, the ability to evaluate such opportunities and timely investment will be key to staying relevant.

  15. What are the results expected in the future? In what timeframe? Are these expected to be continuing benefits?
  16. It is a continuous journey and we will continue to explore new evolving technologies. Our investment in AI is pretty low. We would also like to understand the use of technologies like Blockchain more. The interesting part is that there are a lot of niche IT product/solution players who are coming up on a daily basis. The ability to evaluate these opportunities and timely investment will be key to staying relevant.

  17. Going forward, what new technologies are you looking at, or which other activities are you looking to digitise?
  18. In the immediate future, there is a significant opportunity to use RPA across various processes within the organisation. I am keen to see a day where nobody in the Finance team will use spreadsheets. My sense is that it may remain an unfulfilled wish, but would like to have this as a driving force.

    The role of a CFO would see more of a business partnering focus as against a mere Finance Controller role. The CFO’s relevance will be based on his/her ability to continuously engage with the CIO organisation and the willingness to implement new and evolving technologies.

  19. How do you see the CFO’s role changing in the years ahead, as technology takes over some of their responsibilities?
  20. The CFO will continue to own the functions and areas of Compliance, Governance, Financial Reporting, Taxation, Project finance, Treasury, working capital management, etc., but the way these will be delivered will be different. The CFO’s relevance will be based on his/her ability to continuously engage with the CIO organisation and the willingness to implement new and evolving technologies. Most of the key areas would be executed/monitored through predetermined systems, which will make the decision quicker and more efficient. The CFO’s time in the future would be spent in the areas of improving internal controls and identifying the internal and external risks which may have an impact on the business. Thus, we would see more of a ‘business partnering’, as against a mere ‘Finance Controller’ role.

  21. Do you see IT and the role of the CIO expanding or contracting in the future as technology comes increasingly within the domain of the CFO?
  22. The role will expand as the CFO is, as evident in most organisations, the only person with a 360-degree view of everything happening within the organisation. CFOs will utilise a larger percentage of their time to engage in business expansion initiatives and planning new growth strategies.

    When it comes to IT initiatives, the leadership commitment is key to achieve the desired outcomes.

  23. Are there any generic lessons or principles you have learnt from your technology adoption experiences?
  24. Every IT initiative is similar, irrespective of its size and complexity. The leadership commitment has to be the same throughout the project implementation phase until the outcome is achieved.



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