Episode 78 Transcript

Brent Trimble: Welcome to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. Again, I'm Brent. Today we're excited to have Kantata’s VP of Strategic Finance, Igor Mamut on the show as the VP of Solutions Engineering here at Kantata. I have conversations with prospects, partners, existing clients every day, working through the process of evaluating a platform, rationalizing a platform, and making that decision around readiness to ultimately purchase a new operation system for their business.

In my case, many times the CFO is introduced later in the process, but is often that gatekeeper, that ultimate decision maker for most organizations. We thought it'd be really interesting for our listeners who may be going through a process of evaluating a platform, making a strategic capital decision to understand what compels the head of their finance team, the decisions, the rationalizations, ultimately, the green light, like the thumbs up, to invest in new tools and to open that piggy bank.

Having been through that several times myself, Igor, I'm excited to listen and hear and have some dialog with you around that process. But before we dive into the conversation, why don't you tell our listeners a little bit about you and your background and what led you to Kantata?

Igor Mamut: Absolutely. Well, first of all, Brent, thank you for having me. Really excited to be here to be on the podcast and also to talk about something that's close and dear to what I've been doing, to my heart. By virtue of background, I head up strategic finance at Kantata. What that means is that I help the CFO oversee some of the most strategic decisions around M&A, capital deployment, investments and technologies. Prior to that, I've had experience as a standalone CFO within a tech company and as a divisional CFO within a Fortune 500 pre-op. I’ve been around technology and been around this topic quite a bit in my life and as I said, I'm excited to be here.

Brent Trimble: That's great. We'll dive right in here, and there's been maybe an overabundance of financial news in the markets, business press, and of course, we're a B2B platform, so we're just talking to businesses all the time. We've gone from periods of uncertainty to just explosion of growth back to maybe business austerity. I think in this year, with services companies in particular, looking at some data coming up, there's been growth again. It's been modest and very deliberate and very methodical. For our listeners, whether they run a services company or they are on the software side selling to a services company or a combination thereof, it's just been very contemplative, I guess. Investments have a lot more scrutiny. From that CFO strategic finance lens, in the work context, what do you get up and think about in the morning? Then from a cautionary perspective, what gives you angst and keeps you up at night?

Igor Mamut: It's a great question. I think it's a multidimensional question. I'll start off by saying over the last couple of years, the role of the CFO has evolved significantly. Traditionally, we've had a lot of CFOs who were these financial gatekeepers. They have that traditional accounting background. But the role of the CFO has expanded and evolved quite a bit. It has become an advisor and strategic partner in some ways to the CEO.

What I mean by that is that traditionally, the CFO might have thought about financial performance, but today, we think about other things, much broader things. We think about the uncertainty state of the economy we are in today, and how does it affect our businesses? How should we react to these uncertainties and managing cash flows, optimizing resources, making investment in technologies? We think quite a bit still about the effects of the pandemic. It changed our customer expectations, changed the way that we interact with our supply chains, with our distributors. For professional services firms, it specifically changed the way that they work.

We think about CFOs thinking a lot about this technology trifecta: cybersecurity, data, and the AI-driven changes. I think these are multiple dimensions we think about and quite honestly, we find ourselves in discussions where we were talking about and we're thinking about next generations of tools and technologies that can help us manage all of these multiple dimensions and complexities of our business to be able to take proactive actions.

Brent Trimble: Going back to that opening statement like that financial gatekeeper, and I think when folks think of the CFO, particularly in a services business context, there's been experiences of that. Services businesses typically run very light with OpEx and CapEx because most of their expense line is people or talent. Keeping a hand on the tiller of cash going out for large investments, things that keep the business running has traditionally been something that a CFO has raised a hand and said, stop, or proceed with caution, or perhaps we do it later, those types of things.

The second part of the equation here is really when you talk about strategy and evaluating where the puts and takes are going to be in the business, when you think about investing in a new tool to run the business, and of course, implied with software and technology is always that. It's going to do something to make us more effective, more productive, more predictive. What compels you to do that? What are some of that criteria you think of that's been useful in your career?

Igor Mamut: I think it's a very complex question. Number one is investing in new technology, new tools can help companies streamline their operations, reduce their costs, and drive innovations. Number one, as a professional services CFO, I imagine the person will be laser focused on making sure that they're running their organization optimally, that all consultants are deployed in the most optimal fashion. Number two is I want to be thinking about the reduction of costs in that, identifying opportunities where I could basically reduce my costs. I need tools and I need measurements.

Number three is I want to make sure that everything within my organization, all the tools that we invest in, drive innovation, so that we can pivot and alter our businesses, identify new models, identify new value propositions for our customers and change. First of all, I think that's best done by technologies. There's a lot of great technologies, AI-enabled, RPA-enabled technologies, that can help us do that and do what CFOs traditionally were doing mechanically for a very long time. We now can do a lot of things in an automated fashion. Number two is all of this needs to add up to us being able to drive better and more optimal financial performance for our companies.

Brent Trimble: Those are really good points around the notion of compelling you as a CFO to be a strategic partner to the business, saying, listen, these are really strategic imperatives, and platform investment could ultimately be a really good fit for us. Maybe now is the time to make that decision and open those purse strings.

Then we go to the next stage, which is which is assessing. A CFO is going to assess plenty of platforms for their practice; cash flow management, ERP, general ledger, expense management tools, maybe modeling, enterprise tools. But let's assume the business and professional services come to you and said, we want to make this investment that'll help us run our core business better. In that scenario, what are three or four dimensions and components that you think of when helping assess? You’re a partner to the CEO, and you’re a partner to the business. But from your strategic CFO hat, what's your criteria?

Igor Mamut: I find myself being asked and asking four or five simple questions that tend to provide a lot of visibility. Number one is what is the strategic fit of particular software to my business? Ultimately, I'm looking for a way to answer a question of does it enable my organization to do something it couldn't do before or do it significantly better and align to the future where the organization is going? There's a strategic fit.

The second question that I ask people that I work with, and I'm being asked a lot of times by our senior leaders, is there a financial fit? Do we have the money to potentially pay for this particular software, and does the software produce the benefits necessary to justify the cost? We're looking for case studies. We're looking for ROI. We're looking for timing, implementation, benefits. We're looking for a financial justification for investing, and the discipline we apply to this is the same discipline we apply to any other investments that we make within our business. It needs to produce a good return on investment to justify the allocation of both capital and resources.

The next question I ask is, does it satisfy my need for measurement? Is it easy to measure the benefits within the system and the impacts of the software? When we are capturing certain benefits, and we’re capturing impacts, we want to be able to not only capture, analyze, and index, but we also want to be able to report on it. We want to share it potentially with our customers, with broader constituents within our ecosystem, such as shareholders, so we want to make sure that we're able to collect that.

The third component is, does it increase it accountability, better decisioning, visibility, and efficiency within my organization? I think that these are the types of things that I want to collect, both in qualitative and quantitative form, when I'm talking to potentially technology vendors when we're making a decision and partnering with them.

Brent Trimble: That's great criteria, particularly the notion of accountability. I think with our constituents, with our potential partners, whether they be contemplating a platform, whether they're already on a platform, many of them are also scaling for the future. It could potentially be an exit. Maybe they have a capital partner that wants to recapitalize, exit the business, transact to another one. Perhaps they're contemplating acquiring some other businesses because a lot of times, the services business scales with headcount, with new disciplines, with new practices, and things like that. What do you ascribe, and what kind of dimension or layer do you put on when you're thinking, hey go a little deeper there? Will this really affect our horizon in a positive way?

Igor Mamut: I will start off by saying that one of my favorite quotes is about Gretzky. One the reasons why Gretzky became a great hockey player is that it wasn't that he possessed any particularly exceptional skill, it's just that he knew where the puck was going and was always going to where the puck was going to be, not where the puck hits. The reason why I think that's really relevant to what we are doing today is a lot of organizations are addressing the need of today. They're going out, and they're partnering with companies and technology vendors to address what they need today. Sometimes they're short sighted, and they're not focused on the needs of tomorrow.

We live in an environment where regulations are changing all the time. We live in an environment where our shareholders are changing. Their demands for data and reporting and analysis are changing. I think, Brent, it's very critical to look for vendors that can fulfill the gaps of today, but even more importantly, fulfill the perceived gaps of tomorrow, and to build with you, partner with you, and provide you with tools necessary to address the challenges of tomorrow today.

Brent Trimble: Absolutely. You let off at the top. There's so many dimensions to consider, certainly AI, economic conditions, the price of capital, so you've got to have a little bit of clairvoyance. I'll put you on the spot a little bit. Think through in your career, in your role as the strategic capital advisor, strategic CFO, partner or partner to a CFO, has there ever been a bet you made on a platform that you wish you could have back? When I say that, I encourage listeners, you can talk in abstractions. You don’t have to obviously name a brand or type of platform or investment, but you're like, gosh, it seemed really good at the time. A year or two down the road, I may have made a better or a different decision.

Igor Mamut: When I think about my experience, obviously, there's numerous occasions where we've made mistakes that we could have changed or could have done better if we had the advantage of retrospective proverbial window. I think where I get really mad at myself is where I make an emotional decision, where I do not stick to that framework that we talked about. The framework puts a lot of things into context. But generally speaking, one of the most important things is we all make mistakes. When we make mistakes is a great learning opportunity, and then we take that opportunity to figure out where our logic was wrong and then pivot both the way that we interact with such vendors or the way that we do business.

I’d say one of my examples is that over the last couple of years, not at Kantata, but we've made an investment into a partnership that we thought was going to be wildly successful. This was both investment and resources, capital investments and public relations investment. The business did not perform as well as it should have because the winds of economic change have shifted, and you realize how big of an impact it would be.

As I said, I think that if I had asked the questions that we talked about earlier, those strategic questions, we might have made a different decision. But ultimately, what's more important is analyzing what has transpired and understanding where the errors in decisioning is and then pivoting yourself and your organization for future success.

Brent Trimble: That’s a great example because I think for many of our listeners and our constituents, strategic partnerships are the lifeblood of many consulting service organizations, system integrators. There's so much energy invested in partnerships, so when they don't pan out, that can be a real downer to the business, so I'm sure folks feel that pain.

You made a reference to Wayne Gretzky, a hockey analogy, which is fantastic. We're recording here in mid-August on the East Coast, which means my wallet and my calendar begin to get filled with my son's youth hockey pursuits. Along that, as they get older, comes this notion of, they’ve got to have the latest equipment. I've got to have the best stick, and there's a new Bauer or CCM stick that's $400. It always comes to that balance. I say, well, is that a real nice to have or is it essential? Does the $150 stick really work just as well, and if you practiced a bit more with that, would you have the same outcome?

In our processes, with our potential clients and our existing clients really deliberating over decisions of where to invest, there ultimately comes that, is this something that we can decide on now, or is it a decision we push off to the future? From your vantage point as that strategic CFO role, how do you distinguish between a nice to have or something that is really essential and it's time to make a decision?

Igor Mamut: This question pops up quite a bit now, especially in an environment that you live in today, the question of what is a must have and what is a nice to have. I find myself asking relatively simple questions of the teams that want to get something. Is a must have feature critical to company's success and are essential for the daily use of our teams? Is it something that we're going to be utilizing? Is it something that is critical to our success today and in the future? Do we think that we're going to have a lot of utility out of it? Are people interacting with these tools? Do they love these tools? Do they depend on these tools? Does it make things like decisioning easier?

In my definition, that could be a must have. If an answer to a lot of those questions or most of those questions is yes and a degree of yes, then I believe that it's a must have. While nice to have tools are software that are desirable to have but are not necessary. There's a lot of software that we have today that we interact with that might not be necessary or may be duplicative to what we do. I tend to say well, that is a nice to have.

I would also say that, coming back to the themes throughout this discussion, a must have must have a linear alignment to that strategic, operational, financial mandate of the organization as a CFO. In my mind, that's the distinguishing line between a must have and a nice to have.

Brent Trimble: That notion of duplicative and then the themes around usability, how much of it is going to be consumed by our overall business and those types of elements are really good to consider.

This has been a fantastic conversation. I think the framework, strategic fit, financial fit, satisfying CFO’s needs for measurement, increase of accountability, decisioning, visibility, efficiency, and performance, that's a great rubric, I think, for folks to use and really put those requests against that prior to it probably going up to that CFO desk for approval, that ELT team, and just say, we've evaluated and we've analyzed against this framework, and we really want to proceed.

Igor, this has been great. You're newer, I guess, to our business, but I appreciate the chance of having the conversation and then working together in the future.

For our listeners, thank you for tuning in. If you have any follow up questions for myself or Igor or any topic really, please reach out to us at podcast@kantata.com. We’d love to hear from you. Thank you.

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