CFO Studio magazine with Todd McElhatton

6 cfostudio.com COVER STORY TODD M c ELHATTON with the Street.” If the cloud segment were a separate company, those revenues would give it a perch on the Fortune 500, at around number 400. This sector is among the fastest-growing segments in SAP. Moreover, cloud business is not drying up—far from it. “Based on the fast adoption of its cloud platform,” wrote Forbes in January 2019, “we expect SAP’s cloud business to continue to drive [the entire company’s] value in the near term as well as long term.” While McElhatton is quick to hone in on the areas for potential improvement and focus for his leadership team, the cloud part of SAP’s financials looks strong in the near term: Half-year cloud revenue was up 42 percent, the company reported in July 2019, versus 13 percent for total revenue. McElhatton, with several hundred direct reports, has a small central team that helps him on planning, and six CFOs supporting different businesses. He reports to Luka Mucic, the Corporate CFO and Board Member in Walldorf, Germany. “It’s been an interesting ride to have end-to-end responsibility in a business that’s growing really fast, growing organically, but also driving growth from a world class acquisition strategy,” says McElhatton. He and Jennifer Morgan, President of the Cloud Business Group, share a belief that acquisitions can add desirable features to SAP’s cloud offerings and help fuel growth. “Last year we bought just under $3 billion worth of assets,” he says. In April 2018 SAP acquired Callidus Software (now CallidusCloud), a CRM solution; two months later it acquired Coresystems, a field-service management platform powered by Artificial Intelligence (AI). The buying spree continued into this year, with SAP Cloud moving into the new realm of experience data by picking up Qualtrics for almost $8 billion, and thoughtfully integrating each of these assets into its suite of offerings. SAP has been clear that there are only tuck-in acquisitions on its horizon. An Imperative for CFOs McElhatton has strong opinions on the 21st-century knowledge CFOs need in order to exercise a leadership role and to innovate their businesses. “CFOs need to be intellectually curious about technology. Take a look at the companies that are the most respected and have the highest market cap,” he says. “One thing you’ll see is they are either technology companies or they are companies that are heavily using technology to drive their businesses.” He acknowledges that it’s relatively easy for him to learn about Artificial Intelligence and Machine Learning, for example, because SAP has “such deep roots in technology.” But he advises CFOs whose knowledge of the emerging technologies is based on reading, not seeing, to visit customers and learn about new developments and ways technology is being deployed. McElhatton says he goes to peer CFOs and others when he’s got a question. “If we’re looking at doing something [in Finance], I have the opportunity to reach out to my network.” He traces a line from ERP systems (a centralized approach to business processes) to Supply Chain Management (a centralized view of the company and all its operations) to Machine Learning and AI. “At SAP, we look at Machine Learning and AI and say, ‘Not only are those ways for us to be more efficient in how we run our operation, but they’re also a way to give us an advantage over our competitors.’ We’re using Machine Learning to help us eliminate some mundane tasks. AI takes that to even the next level: predictive analytics.” McElhatton says the focus for his customers is less about the technology and more about the business outcome. “Companies and CFOs are constantly looking to improve business efficiency, create new processes, or develop new business outcomes. That’s what matters most. We first need to identify what business process needs to be created or improved, and then back into that with technology. Technology is the enabler to make it all happen.” Getting his Grounding At HP in the 1990s, McElhatton got a close look at business operations, sales, and customer relations as the company negotiated the largest deal it had ever done. His bosses GIVING YOUR TEAM MORE FULFILLING JOBS The traditional jobs of Finance—collecting information, examining it, doing reconciliations— are, of course, necessary, though they can be tedious and time-consuming. But with the advent of Artificial Intelligence to handle the mundane tasks, Finance employees at SAP are able to work with the information and analyze all sorts of “what ifs” and “what’s behind its.” Todd McElhatton, CFO for the SAP Cloud Business Group, has spent more than 25 years in Finance at companies such as HP, Oracle, and VMware during a time when the work of accounting began to change significantly. Today, people on his team aren’t tied to back-office jobs only. They can do interesting work while AI handles some of the boring transactional stuff. For them, says McElhatton, “what’s exciting is being able to look at a growth rate of X and, after some analysis, recommend how to invest and deploy our resources against that.” Others are turned on by finding answers to tricky questions like “How do we make sure that we’re growing our business and getting the return we’re looking for?” He says that kind of inquiry resonates with him and with most of the people SAP is hiring. “What’s exciting is spending more time on more value-added activities that drive more value for the company, and usually drive more fulfillment for our employees.” That’s the promise of AI, and it’s already a fact at SAP.