The CFO Tech Stack going into 2024
Observations, Opinions, and a Prediction
CB Insights just dropped the hottest rap album market map on the CFO Tech stack. It’s one of the better illustrations as to what’s going on in the finance space.
Here’s one CFO’s humble commentary:
Three observations:
I. The proliferation of FP&A tools
II. NetSuite never dies
III. A new Big 3 in expense management
Two opinions:
IV. How stuff gets bought has changed
V. How stuff gets trialed still needs to change
One prediction:
VI. Consolidation will occur in 2024
I. Proliferation of FP&A Tools
A lot has changed since TM1 dropped (clarification: I’m talking about IBM Cognos TM1, not my all time favorite album, TM101 (Thug Motivation 101)).
By all estimates, there are now between 150 to 200 tools dedicated to planning. That’s a mind boggling number for a functional area of finance that’s been underserved for the greater part of 20 years (or since those rusty-ass on-prem ERPs launched).
The debate amongst maturing finance departments has matured from “do you use an FP&A tool?” to “Is your planning tool excel based or web based?”
Speaking of excel, a quick reminder:
Mosaic, Planful, and Vareto are three web based application leaders, while Aleph, Vena, and Datarails offer excel native solutions for those in fear of losing their Alt - HOI column auto resizing skillz.
II. NetSuite Never Dies
I like to joke that once you get NetSuite implemented, you have a better chance of ripping and replacing the office carpet than your ERP. Office carpets last for 10 years. Unless you work with Kevin from the Office:
Netsuite’s LTV to CAC is off the charts.
While the number of FP&A tools jumped through the roof over the last five years, the only “newish” entry into the ERP market during that time is Workday. They’re making a push to own the entire back office stack across headcount, planning, and accounting. Other than that, not much has changed. NetSuite is still the 800 pound Gorilla in the room.
An admittedly small sample size, but peep the ERP that guests of my pod Run the Numbers are using:
There’s an old saying in startup land that:
“You aren’t a real SaaS company until you build a QuickBooks integration.”
And that might be true for the non-finance app builders.
There’s another saying that:
“You aren’t a big boy finance department until you use NetSuite.”
III. Expense Management’s New Big Three
SAP Concur, Expensify, and Chrome River Technologies were the original Big Three.
But Brex, Ramp, and Navan are solidifying a new-age oligopoly, as CFOs from the midmarket to the Enterprise standardize on them for a full suite of expense management tools, from credit cards to travel, to automated payments.
While they didn’t all start in the same place, with Navan originally focusing on travel (as evidenced in their original name - TripActions), and both Brex and Ramp starting as flexible corporate card solutions to replace AMEX, they’re all coalescing (confession: no idea how to actually pronounce that word) on the same space.
The ability to address 100% of the reasons why cash leaves the building (outside of payroll) is a gamechanger. To get there, integrations with international contractor platforms Remote and Deel feel like the last step.
IV. How stuff gets purchased
I’ve noticed two seemingly separate trends that influence each other
CFOs are taking on more operational responsibility, including business intelligence (BI). They’re getting more into the weeds of the day to day, and no longer flying 40,000 feet above the org. This takes up more time.
CFOs are offloading more negotiation and vendor management responsibilities. And they are basing decisions on benchmarking data from peers. This gives time back.
There’s a whole whack of Procurement as a Service vendors who have popped up over the years. That was Step 1 of the buying evolution. The next step was to merge services with software for workflow approvals and data insights.
As someone who both buys and sells software, I was obviously thrilled about this on the buying side, but initially pretty skeptical on the selling side. That was until I spoke to my friend Ethan Schechter, VP of Sales at Snyk. He put it nicely:
“You should be willing to trade dollars for speed.
Sales cycles have to align to a price that makes sense. So when negotiations stretch out forever and your $60K deal went from 30 days to 60 days, that deal had a lot more sales velocity and efficiency and value when it was going to happen at 30 days if you just gave them that $15K discount.
Time kills all deals and what’s the value from a capacity standpoint?
Speed is very underrated.”
Like I said, procurement as a service (BTW are we actually calling this PaaS? Is the jury still out?) was the start of this new wave. This helped grease the skids for faster deal cycles. But the data surrounding what we buy, and the processes to manage that stuff, increases deal velocity through renewal anticipation, automated approvals, and buying benchmarks.
Looking for savings? Duh, that’s table stakes.
Looking for data? OK, now we’re getting smarter.
Looking for process? Throw some kick ass software in, and that’s the final step in Maslow’s Hierarchy of Procurement.
And it’s why I’m so bullish on those innovating across these three vectors in the space, like Tropic.
Speaking of Tropic:
With an average cost savings of 23%, Tropic has helped finance teams take control of $3b in spend across 40k+ contracts.
V. How stuff gets tested
Finance is notoriously anti-PLG (product led growth) and free trial. Why? You have to upload sensitive data, their are usually implementation cycles that require professional services to get up and running, and by nature the time to value is longer, resulting in a delayed “aha” moment.
That's always a point of friction.
As an example, if a software helps you close the books faster, the first time using it is likely to have some hiccups, implementations are a pain in the ass, as companies have specific ledgers in their ERPs, and it may take a few months (or quarters) to actually see the time savings.
I was actually surprised Finance wasn’t last in this survey OpenView did on PLG adoption. As evidenced, it’s certainly not winning any prizes in the Mid Market (where I live each day).
Aleph, a new comer to the FP&A space, is one vendor I’m keeping my eye on - as they promise to get you up and running in under a half hour. That’s pretty nuts, and goes against the anti-PLG grain the finance department gets a bad rap for.
VI. Consolidation on the horizon?
This feels like the type of landscape a Thoma Bravo or Vista Equity are primed to sink their teeth into.
Thoma Bravo (CB insights illustration below) already owns multiple layers of the CFO tech stack, with Anaplan (FP&A) and Coupa (procurement). And Vista Equity already made concentrated bets in Ramp (payments) and Avalara (taxes). The wolves are circling.
It’s only a matter of time before a motivated private equity buyer cobbles together something more compelling than what Workday is trying to do, in stitching together their core HCM module for headcount + an ERP for Accounting + Adaptive Insights for FP&A. 2024 could be the year that someone gets as close as they’ve ever been to owning the Finance Tool Stack, whether that’s a PE player or industry incumbent.
The Run the Numbers Podcast
Me and Razzak Jallow, CFO of FloQast, talk about how CFOs can support a CEO’s ambitious vision, lesson’s from Apple’s execution, and Looker getting acquired by Google.
You can listen on Spotify / Apple / YouTube
Quote I’ve been pondering
“Last year was bout branding this one about expanding”
-Benny the Butcher
Navan’s original name was TripActions. TravelPerk is a European competitor
What do you think about the FP&A software out there, CJ?