Professional Services: Office of the CXO space attracts mid-market investment
The Office of the CXO space sits across business functions, encompassing the Chief Financial Officer (CFO), Chief Human Resources Officer (CHRO), Chief Compliance Officer (CCO), amongst others.
Finance transformation is a key theme – a CFO has a lot to do with limited resources, supporting a broad range of commercial and operational needs. CFOs are expected to develop a finance function that is efficient, effective, future-proof, and interacts smoothly with the wider business; easy to say, difficult to do.
Office of the CFO tech and services
The Office of the CFO technology stack will typically consist of best-of-breed point solutions that supplement core ERP functionality. This group of tools can be used to run, improve and optimise financial reporting and operational processes. These solutions can provide ROI and improved performance as a specific point solution, and, as is increasingly the case, work across functions.
Vendors often take a modular sales approach, allowing businesses to scale up functionality (and therefore cost) based on needs. Finance departments will have a general ledger, Excel, and various separate data feeds. Competition for spend will often be against Excel + plug-ins and manual processes. Deciding which software to select will be dependent on how complex requirements are, with options ranging from “making do” with Excel customisation, to full scale EPM implementation for enterprise businesses.
Implementing a new system can be complex, time consuming, and expensive. External consultants are typically brought in for implementation to best fit the business needs, as well as ongoing customisation and support. This can be the Big Four, or smaller vendor-aligned specialist firms (these will typically be either sector, function, or vendor aligned, or a combination of the three). For these consultants aligning with the ‘right horse to back’ in terms of vendor is crucial, as demand for their services can be driven by demand for software.
A growing market
The Office of the CFO tech and services market is large and growing. With positive underlying demand drivers, there’s plenty to attract the mid-market investor:
- Multiple points of entry: Each vendor operates a different approach to its channel, but there are some common themes. The ecosystem is serviced by a) tech providers, b) implementation consultants, c) tech-enabled service providers, and d) to a lesser extent, MSPs.
- Dynamic market: Adoption of cloud-based accounting software and growth in core ERP and EPM software has caused a fundamental shift in the market towards cloud-based software adoption and best-of-breed solutions.
- New revenue streams: Businesses in the space can service the market with a) software (generating sales margin), b) services, or c) both. There’s an opportunity to cross-sell other services and/ or modules to clients, as well as offering ongoing support services. Developing the channel network is key.
- Sell-on: Software providers can extend their offering with new/ different complementary product and/or service lines to existing and new clients, though becoming a vendor/ function/ sector specialist can be a differentiator.
Do the diligence
Know-how, track record and industry knowledge are critical.
There will be constraints (this may be headcount growth, specialism, track record/ expertise, geographic coverage) that investors need to understand fully. Gaining new geographies or verticals may require new skills and capabilities outside of the business, M&A or acqui-hire could be an attractive and fast way to ‘buy’ capacity.
A deep dive into the sales process and demonstration of ROI (better, faster, cheaper) is essential. Each sale vs. in-house/ incumbent solution will be different due to pre-existing systems, processes, integration and reporting. Engaging the right consultants to understand business needs, with the requisite expertise is essential in minimising ongoing cost and difficulties associated with introducing new software or processes, and maximising utility and ROI.
Speak to a member of the team about opportunities in the Office of the CXO space.
Rupert Cookson, Senior ConsultantEmail Rupert