FinancialForce CEO Tod Nielsen tells CXOTalk about digital transformation in the new services economy. More businesses are moving to cloud computing, focusing on speed and curated functions.

“Services are devouring the galaxy,” Nielsen says. “The economy of how consumers and businesses buy from other businesses is changing completely. The idea of having assets and owning physical goods will go away. There’s going to be a day when people literally won’t own anything.”

Nielsen adds that the premise of the “triangle” – people, processes and technology – has changed as people and processes are as important if not more important than the tech itself. A partnership in the vendor-customer relationship “is no longer just a buzzword. It is an important imperative for successful projects.”

Transcript

Michael Krigsman: I’m Michael Krigsman, an industry analyst and the host of CxOTalk. We’re here in Las Vegas at the FinancialForce.com conference called Community Live 2017. And I’m speaking with Tod Nielsen, who is the CEO of FinancialForce. Hi, Tod! How are you?

Tod Nielsen: Good, Mike! How are you?

Michael Krigsman: I am great! So, this morning at your keynote, you spoke about the new service economy.

Tod Nielsen: I did.

Michael Krigsman: What is the service economy?

Tod Nielsen: So, I talked about the evolution our industry has been going through, and how our experience as consumers is changing from buying products to consuming everything as a service. And, we spent some time talking about the op-ed piece that Mark Andreessen wrote in 2011 saying how software was going to eat the world, and how in just six short years, we’ve not evolved into where more and more things are experienced as a service. And so, going forward, I laid out the premise that services are devouring the galaxy. And, the economy of how consumers and businesses buy from other businesses is changing completely. The idea of having assets and owning physical goods is actually going to go away. But, there’s going to be a day when people literally won’t own anything.

If you look at WhatsApp, that Facebook bought for $19 billion, it was sixteen developers and then, 30 million users. How a company could have sixteen developers and 30 million users and be able to build this incredible service is something that we’re now seeing as reality. And it will be important going forward.

Michael Krigsman: And this is affecting companies in every industry. You gave the example of Boeing.

Tod Nielsen: Absolutely! You know, Boeing used to be known for “Hey, we’re going to build jet planes. Let’s go!” And they buy their parts, and they’re jet engines. And they’re finding from their suppliers that they actually are selling to Boeing the engines at cost and they’re making their money on the maintenance and the upkeep and all this stuff. And any classic hardware companies, quote-on-quite like Tesla, and now realizing they’re really a services company, and the hardware is simply a delivery vehicle for them to enhance their services.

Michael Krigsman: FinancialForce is a, can we say, a back-end software provider of ERP. Although, you also now are touching the front-end, touching the users. And so, why is this so important to FinancialForce?

Tod Nielsen: Well, I think if you look at the market right now, we're seeing a couple of interesting trends. One is the adoption of cloud computing. I've spent my career in the infrastructure and platform world, and I think we're now getting to the point where businesses are realizing there's opportunity in the cloud for them. And there's no longer a point of if they go to the cloud, but when. And so, it's a great opportunity for our customers to say, "How are we going to get our back office? How are we going to get our systems to the cloud so we can be more aligned and attuned with the overall business?"

Second, with all the demanding changes, one of the phrases I said this morning was, “Speed is the new currency.” And, you know, businesses are saying “We need more, we need more, we need more,” and when they look to their back office, their back office team is saying, “Sorry. We can’t accommodate. We can’t move that fast.” It’s going to be viewed as slowing growth or preventing future progress. And so, the back-office teams are saying, “What can we do to transform ourselves to respond to the incredible demands that our businesses are giving us?”

Michael Krigsman: So, this issue of speed is extremely important, and we hear the phrase “digital transformation.”

Tod Nielsen: Absolutely.

Michael Krigsman: This issue of speed is so important. So, could you maybe elaborate on that dimension as well?

Tod Nielsen: Sure! So, speed is no longer the point of

Michael Krigsman: I’m Michael Krigsman, an industry analyst and the host of CxOTalk. We’re here in Las Vegas at the FinancialForce.com conference called Community Live 2017. And I’m speaking with Tod Nielsen, who is the CEO of FinancialForce. Hi, Tod! How are you?

Tod Nielsen: Good, Mike! How are you?

Michael Krigsman: I am great! So, this morning at your keynote, you spoke about the new service economy.

Tod Nielsen: I did.

Michael Krigsman: What is the service economy?

Tod Nielsen: So, I talked about the evolution our industry has been going through, and how our experience as consumers is changing from buying products to consuming everything as a service. And, we spent some time talking about the op-ed piece that Mark Andreessen wrote in 2011 saying how software was going to eat the world, and how in just six short years, we’ve not evolved into where more and more things are experienced as a service. And so, going forward, I laid out the premise that services are devouring the galaxy. And, the economy of how consumers and businesses buy from other businesses is changing completely. The idea of having assets and owning physical goods is actually going to go away. But, there’s going to be a day when people literally won’t own anything.

If you look at WhatsApp, that Facebook bought for $19 billion, it was sixteen developers and then, 30 million users. How a company could have sixteen developers and 30 million users and be able to build this incredible service is something that we’re now seeing as reality. And it will be important going forward.

Michael Krigsman: And this is affecting companies in every industry. You gave the example of Boeing.

Tod Nielsen: Absolutely! You know, Boeing used to be known for “Hey, we’re going to build jet planes. Let’s go!” And they buy their parts, and they’re jet engines. And they’re finding from their suppliers that they actually are selling to Boeing the engines at cost and they’re making their money on the maintenance and the upkeep and all this stuff. And any classic hardware companies, quote-on-quite like Tesla, and now realizing they’re really a services company, and the hardware is simply a delivery vehicle for them to enhance their services.

Michael Krigsman: FinancialForce is a, can we say, a back-end software provider of ERP. Although, you also now are touching the front-end, touching the users. And so, why is this so important to FinancialForce?

Tod Nielsen: Well, I think if you look at the market right now, we're seeing a couple of interesting trends. One is the adoption of cloud computing. I've spent my career in the infrastructure and platform world, and I think we're now getting to the point where businesses are realizing there's opportunity in the cloud for them. And there's no longer a point of if they go to the cloud, but when. And so, it's a great opportunity for our customers to say, "How are we going to get our back office? How are we going to get our systems to the cloud so we can be more aligned and attuned with the overall business?"

Second, with all the demanding changes, one of the phrases I said this morning was, “Speed is the new currency.” And, you know, businesses are saying “We need more, we need more, we need more,” and when they look to their back office, their back office team is saying, “Sorry. We can’t accommodate. We can’t move that fast.” It’s going to be viewed as slowing growth or preventing future progress. And so, the back-office teams are saying, “What can we do to transform ourselves to respond to the incredible demands that our businesses are giving us?”

Michael Krigsman: So, this issue of speed is extremely important, and we hear the phrase “digital transformation.”

Tod Nielsen: Absolutely.

Michael Krigsman: This issue of speed is so important. So, could you maybe elaborate on that dimension as well?

Tod Nielsen: Sure! So, speed is no longer the point of, "Hey, let's do a project that's going to take three years." So the idea of an SAP implementation that's going to take three years to go, that is so yesteryear. Now, businesses are saying, "What can we do to move fast?" And so, I think what you're finding is companies are saying, "Okay, I'm going to be less picky about the particular customization and I want to have a more curated path of technology that's going to meet my needs, so I can move fast."

You know, every business I talk to is talking about incredible releases. In fact, in the software industry, it used to be… I grew up with Microsoft. We would do a release every year, or every two years. And then we went to quarterly releases, and that was a dramatic event. And now in the cloud computing, when I was running Heroku when I was at Salesforce, we were doing releases every day. So, there's a certain amount of responsiveness and iteration and “in-the-game” that’s important.

Michael Krigsman: So, software and features as a set of curated functions.

Tod Nielsen: It used to be viewed as here is a lump of clay, and let’s take time to mold and sculpt it into what you…

Michael Krigsman: And […] had ten-year, twenty-year implementation…

Tod Nielsen: Exactly! And no one is happy at the end. And so, I have a view that going forward; it's more of a "Let's make a deal" approach.  Do you want door number one or door number two, and which is going to meet my needs? And then, the focus is on configuration, not customization. So, you can figure it can meet your particular needs or business model nuances, but not have something that's completely customized and sending you down a rathole that you may be able to get out of.

Michael Krigsman: What advice do you have for customers who want to move to the cloud, who want to adopt this kind of speed?

Tod Nielsen: Yeah, I think the most important thing, and I talked a little bit about it this morning, is in the IT world, there’s a triangle, a famous triangle of People, Process, and Technology. And it used to be that technology was the long pole in the tent. And we’re now to a point where people and process are as important, if not more important. And so, what I would say to people that are wanting to move fast is identify your vendors or who you’re going to purchase products from, and lean in with them because success is a team sport. It’s going to require you to lean in and invest your time and actually deliver to let them know what you need, and then expect them to lean in equally hard to provide you the capabilities and functionality you need. And together, you can be the yin and yang to actually deliver the success.

Michael Krigsman: So, collaboration inside the organization is the key.

Tod Nielsen: Inside the organization and with your partners, it is now a matter of… The idea, “Oh, we’re going to be a partnership in this vendor-customer relationship,” it’s no longer just a buzzword. It is an important imperative for successful projects.

Michael Krigsman: So, ecosystem is a fundamental part of this.

Tod Nielsen: Absolutely. The cloud is all about the network effect and bringing people together and as you're driving these implementations, you can't do it alone. No successful company will be an island; it has got to be working together as an ecosystem, working together as a team to achieve that success.

Michael Krigsman: I love that. You can’t do it alone. Tod Nielsen, thank you so much!

Tod Nielsen: Yeah, thank you!