Why Modern O2C GPOs should Look Beyond the ERP
What you’ll learn
- Why are GPOs and Technology the perfect match?
- Why is it important to go beyond ERP for continuous business improvement?
- How should your ideal O2C tech stack look like?
It is now certain that without digital transformation there will be no success. ERP software, which is the first step of digital transformation, is no longer sufficient for competition. So you need to look beyond ERP.
In 2012, Gartner analyst Laura McLellan famously predicted that in five years, chief marketing officers would spend more time on IT than chief information officers. At the time, her statement was radical. Although IT was growing in importance in correlation to business productivity, it seemed it would remain the domain of the CIO.
Today, we see that McLellan’s prediction was far from radical, bordering on prophetic. If your CMO isn’t tech-savvy, chances are you may be looking for a new one. And they’re not alone. Among the various leaders in a shared services or a global business services organization, the Global Process Owner (GPO) is today spending a disproportionate amount of their time in driving the technology strategy behind their business processes.
GPOs and Technology are a Perfect Match
Why should the GPO be the ones to manage the incredibly time-intensive process of building the order to cash tech stack? Shouldn’t they simply focus on driving process-level changes and focus on continuous improvement (CI) initiatives? Consider the other obvious alternatives.
Your Enterprise Resource Planning (ERP) vendor could build and manage your order to cash tech stack, but they have an obvious conflict of interest. The ERP vendor has a vested interest in containing you within their own ecosystem. Your tech stack is limited by what your ERP vendor can provide and not an outcome of the best-of-breed options available in the market.
Keeping it in-house, your CIO could lead the charge. But chances are, they may lack insight into some of the nuanced end business goals which O2C process owners and Global Business Services leaders are trying to drive. A CIO will likely lack the same awareness of how their technology choice might impact other order to cash stakeholders – including customers, sales, brokers, and other parts of the financial supply chain. This puts them at risk of choosing a system that may work well on paper but struggles to overcome the complicated user and customer adoption process.
That leaves us with the order to cash GPO. While both the ERP vendor and the CIO should certainly maintain inputs into your tech stack, the GPO vote should carry the most weight. Since a tech stack is critical for the success of a modern order to cash function, a GPO well-versed in IT can control their own destiny.
Going Beyond the ERP
While a tech stack is 100% necessary, having one doesn’t cancel out the importance of a comprehensive ERP; in fact, the ERP should be at the core of your tech stack. Whether your company uses SAP, Oracle, or a legacy ERP system, the ERP will always be the single source of truth.
Your ERP allows you to digitize all of your information and store it centrally, but actually accessing and processing that information requires hours upon hours of manual clerical work and laborious data entry. Thus, an ERP can serve as an excellent record-keeping tool, but doesn’t actually do much to facilitate day-to-day tasks. Most ERP platforms have developed extensions for businesses to manage their accounts receivable and order to cash operations – but the functionality is lacking and largely limited to recording keeping.
For completing tasks in the most efficient way possible, a major enterprise should seek out purpose-built platforms for all of their core finance processes such as record to report, procure to pay, or order to cash. By choosing these types of technologies that work well with the mainstream as well as legacy ERP systems, companies can level up their productivity in a big way.
A Glimpse at the Ideal Tech Stack
Your order to cash tech stack should start with automation and workflow solutions that can solve for 80% or more of your order to cash use-cases out of the box. Review each of the sub-processes within the order to cash function – credit reviews, customer onboarding, dunning, collections, dispute resolution, cash application. For each of these functions, look for ready-to-use software-as-a-service solutions that automate daily functions and improve productivity. When done right, these software solutions can more than pay for themselves by helping you reduce FTE costs and drive faster conversion of receivables to cash.
If the ERP is the star of your tech stack, then a data integration layer should serve as your best-supporting actor. The data integration layer should connect all data across the company, and support reporting, analytics and visualization. Think about a GPO who is able to get a single-click view into the health of receivables and portfolio aging across all of their business units spread across multiple continents without having to first deploy an army of analysts to gather that data. Gaining this level of visibility and resulting insights should be a priority for all GPOs.
Change Management: Ideation vs. Implementation
Knowing what your ideal technology endgame looks like is half the battle; the other half involves actually implementing your tech stack by gaining buy-in across all levels of the company. That battle can often be uphill as even the most tech-savvy finance team can be resistant to change. To overcome inertia, change tactics by gaining employee buy-in through prioritizing and trial testing new tools that offer an immediate impact; systems that can automate clerical functions are often the lowest-hanging fruit for starters. Think about areas where you can deliver quick results such as cash application, document aggregation across credit reports, customer portals, and claims.
Instant productivity gains for your order to cash team will go a long way in convincing them that investing the time and energy into mastering new systems will bring worthwhile rewards. Then, focus your amp-up on products with a clear and tangible return on investment (ROI). While many vendors will try to sell you based on hype, ROI should always win out over buzz-based benefits.
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