{"id":9868,"date":"2022-02-21T15:22:00","date_gmt":"2022-02-21T20:22:00","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=9868"},"modified":"2023-06-26T07:07:02","modified_gmt":"2023-06-26T11:07:02","slug":"how-financial-services-firms-should-think-about-tech-investments-lessons-learned-from-a-venture-capitalist-turned-white-house-deputy-cto-part-1","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/how-financial-services-firms-should-think-about-tech-investments-lessons-learned-from-a-venture-capitalist-turned-white-house-deputy-cto-part-1\/","title":{"rendered":"Optimizing tech investments in financial services: Insights from a VC-turned-Deputy CTO (Part 1)"},"content":{"rendered":"
\n\t
\n\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t\tMoney Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
\n\t\t\t\t\t

\n\t\t\t\t\t\tOptimizing tech investments in financial services: Insights from a VC-turned-Deputy CTO (Part 1)\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t

\n\t\t
\n\t\t\t
\n\t
\n\t\t
\n\t\t\t\t\t\t\t
\n\t\t\t\t\t\n\t\t
\n\t\t\t\n\t\t\t\t\"ben-collins\"\t\t\t\tBen Collins<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n

At Sage\u2019s recent Transform customer conference, I had the great privilege of sitting down for a fireside chat with Nick Sinai, Senior Advisor at Insight Partners. With his unique background as a current private equity advisor, experienced venture capitalist, former Deputy CTO of the White House and soon-to-be book author, Nick offers a distinct perspective on how technology impacts the daily lives of financial services practitioners.<\/p>\n\n\n\n

In Part 1 of this two-part blog series based upon our conversation, Nick discusses tech-driven digital transformation in financial services according to what worked \u2014 and didn\u2019t work \u2014 in the many technology transformations in which he\u2019s been involved.<\/p>\n\n\n\n

Here\u2019s what he had to say.<\/p>\n\n\n\n

A big part of digital transformation is embracing the power of tech-enabled processes. <\/strong>Are there signs someone can watch for that signal an existing process or workflow is ripe for a tech-driven transition?<\/strong><\/p>\n\n\n\n

NICK: I want to be careful about being prescriptive because it really does depend on the particular company and what they’re trying to get done. The great thing is, we\u2019re living in a world where great, cloud-based software is available to automate all kinds of things, not just accounting. So you have to understand the context of the problem \u2014 what\u2019s the real problem that\u2019s driving the change, what are people trying to do \u2014 then from there you can bring in technology and data to solve the problem.<\/p>\n\n\n\n

For us at Insight Partners, it\u2019s about architecting for growth and hypergrowth. It\u2019s about trying to think several quarters or years ahead. For instance, you may only have a few customers today, but you\u2019re eventually going to have dozens and many hundreds of customers, so you better think about your customer relationship management (CRM), you better think about compensation management, you better think about how you\u2019re going to manage proposals, you better think about how you\u2019re going to get all the way to the close process with your accounting system. What worked when you were only getting a couple of customers per quarter isn\u2019t going to scale when you\u2019re suddenly getting 50 customers per quarter.<\/p>\n\n\n\n

Where do you think the financial services industry as a whole stands right now as far as embracing the power of tech-enabled processes?<\/strong><\/p>\n\n\n\n

NICK: We\u2019re still in the early innings. In many cases, we\u2019ve simply taken paper-based processes and brought them online.<\/p>\n\n\n\n

But we can reimagine these processes. We can figure out new ways to do things. There\u2019s an opportunity to think about how we collaborate, how we start to predict what\u2019s going to happen inside an enterprise. Then it\u2019s not just about putting that paper-based process online anymore. It\u2019s about what we\u2019re really trying to get done and what are the problems we\u2019re trying to address.<\/p>\n\n\n\n

Are there any red flags that signal a legacy financial process or system is overdue for that kind of tech-driven transition?<\/strong><\/p>\n\n\n\n

NICK: I realize we all have imperfect information, and we\u2019re all captive of our own, limited experiences. But I see it from the top. It\u2019s pretty clear, if a CEO or CFO at a fast-growing startup company is taking a while to get an answer to a Board member, it\u2019s not because they\u2019re busy or on vacation. It\u2019s because they\u2019re using outdated systems and don\u2019t have the data at their fingertips<\/a>.<\/p>\n\n\n\n

Once a financial services firm or finance department is ready to embrace a tech-driven transition, what are the primary challenges with which you see them struggle when evaluating new technologies?<\/strong><\/p>\n\n\n\n

NICK: It\u2019s an interesting problem when a line-of-business especially is responsible for bringing better software into the fold. When you think about any function in a business, the people in that function are good at that function \u2014 people in Finance are good at finance or accounting, for example.<\/p>\n\n\n\n

But they\u2019re not necessarily good at articulating their requirements, writing their user stories, thinking about and prioritizing their needs, doing market research on vendors. All those things that are really important to know when evaluating a new technology. So you could be a really great accountant or controller, but it doesn\u2019t mean you\u2019re going to be good at doing the market research for and buying next-generation software.<\/p>\n\n\n\n

Until recently, the IT department and CIO made most software procurement decisions. So is that tech-driven transition issue exacerbated by the fact that now the business lines themselves are charged with identifying and procuring their own new solutions \u2014 or they take it into their own hands when they need to address process inefficiencies through a tech solution?<\/strong><\/p>\n\n\n\n

NICK: I think that\u2019s part of it. Not everyone has a big, centralized IT function \u2014 it depends on the size of your firm. You may just have a single person being the CIO, or you could use an outsourced firm. But in larger firms, yeah, you did have more of a centralized IT function before.<\/p>\n\n\n\n

It\u2019s an interesting tension. Sometimes it\u2019s derogatorily called \u201cshadow IT.\u201d But it\u2019s not shadow IT \u2014 it\u2019s the guts of what we\u2019re all trying to get done, whatever our business function is. Yes, you\u2019re going to have IT and security putting guardrails around security and identity, but the software has to work for the people who are using it. Those are the people who are trying to innovate, they\u2019re trying to get home at the end of the day, they understand their process the best. That\u2019s why I\u2019m a big believer in software \u2014 especially analytics \u2014 really being owned by the business lines because that\u2019s where stuff gets done.<\/p>\n\n\n\n

In that scenario, is the new role of the CIO or IT team really to make sure all these discrete, line-of-business investments can play well together, in the same sandbox?<\/strong><\/p>\n\n\n\n

NICK: I would hope so. We don\u2019t typically buy software in a vacuum. But again, it depends on the size of the firm. One of the advantages to having a CIO, or even a Chief Data Officer or an enterprise architect, is for someone to say, \u201cHey, it\u2019s great you want to buy this, but let\u2019s make sure it has an open API, let\u2019s make sure it integrates with our other applications. We have a set of existing systems and processes, so are we going to swivel from one to another, or are we going to find ways for the data to flow? Can we pull the data out and do useful analytics?\u201d<\/p>\n\n\n\n

All those kinds of questions. It helps if you have centralized support, but not everyone has that. I think that\u2019s also why it\u2019s important to invest in more open platforms, ones that have more open APIs that are easier for people to use.<\/p>\n\n\n\n

So, from what you\u2019ve seen, at what point do growing companies need to implement a more structured and operationalized approach to their back-end systems \u2014 specifically, when do they need to move on from the QuickBooks- or Excel-driven financial reporting approach they might be using?<\/strong><\/p>\n\n\n\n

NICK: Our companies are often going global, to Europe or Asia. They may be entering the government. As a result of this expansion, there are often multiple entities<\/a> in play. In these scenarios, Excel and QuickBooks aren\u2019t set up to answer the kinds of questions that need to be answered. So they have to catch up. You can see that when you ask the CEO or CFO questions, and they don\u2019t have that agility or speed of answer.<\/p>\n\n\n\n

As a CEO or CFO, what you really want to be able to do is answer those questions from your Board of Directors immediately and present Board members with detailed data, so they can ask even better questions. When companies are doing well and in hypergrowth mode, we don\u2019t necessarily want to wait until the next Board meeting to make a particular decision about stepping on \u2014 or pausing \u2014 the gas.<\/p>\n\n\n\n

What are some of the common mistakes you\u2019ve seen companies make when it comes to implementing technology?<\/strong><\/p>\n\n\n\n

NICK: The biggest mistake is not really understanding the user need. It\u2019s something we thought a lot about in the White House \u2014 what\u2019s the actual user need?<\/p>\n\n\n\n

For example, we would sit with actual homeless veterans and watch them try to fill out this nifty new website that\u2019s going to help them get better benefits or healthcare \u2014 at least in theory. So, understanding user needs is just so important. If you\u2019re not attuned to what the users need, then all the purchasing and executive-level decisions don\u2019t matter as much and can make implementations a lot harder.<\/p>\n\n\n\n

In our book, we talk about how the U.K. government requires its government ministers to try every new digital service they launch. The ministers have to find out firsthand, for example, what it\u2019s like to apply online for a particular welfare benefit or obtain a particular license.<\/p>\n\n\n\n

Is solving that implementation problem as simple as involving end users in the procurement process? Giving them a seat at the table and making sure you have their buy-in?<\/strong><\/p>\n\n\n\n

NICK: I think that\u2019s part of it, doing the research to understand what their stated needs are. But human beings aren\u2019t that great at articulating their needs all the time, so it\u2019s also about their behavior.<\/p>\n\n\n\n

I think the other important piece to solving the implementation problem is letting actual users try to use software before it\u2019s purchased. I teach a field class at the Harvard Kennedy School of Government where students work with real clients. When we were working with a large U.S. city government, city leaders wanted to invest in software to automate an Excel-based process around the Freedom of Information Act that wasn\u2019t working for them at the local level. When a citizen would request a public record \u2014 if it were a record that could be released \u2014 one ombudsperson would run around to many dozens of city agencies trying to retrieve it.<\/p>\n\n\n\n

As my students were working with the City on procuring software that could automate this process, they discovered the City had not required as part of its RFP that the software be demoed to the actual end users. As a result, my students wrote a new RFP process for this particular City requiring solution providers to now demo proposed software with actual users \u2014 and allow those users to try the software themselves \u2014 before a purchasing decision is made. I think that same kind of thinking can be applied to every software investment, but especially in mid-market financial services.<\/p>\n\n\n\n

Want to hear more? Check back next week for the second of our two-part blog series with Nick Sinai.\u00a0<\/a><\/p>\n\n\n

\n\t
\n\t\t
\n\t\t\t
\n\t\t\t\t\t\t\t\t

Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t

Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tSubscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\"Working\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

At Sage\u2019s recent Transform customer conference, I had the great privilege of sitting down for a fireside chat with Nick Sinai, Senior Advisor at Insight Partners. With his unique background as a current private equity advisor, experienced venture capitalist, former Deputy CTO of the White House and soon-to-be book author, Nick offers a distinct perspective […]<\/p>\n","protected":false},"author":1444,"featured_media":9210,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[43,48],"tags":[2,346,154],"business_type":[40,41],"lilypad":[],"context":[418,429],"industry":[453],"persona":[100,98],"imagine_tag":[234,242,233],"coauthors":[847],"class_list":["post-9868","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","category-technology-innovation","tag-accountants","tag-cloud-technology","tag-technology","business_type-small-business","business_type-growing-business","industry-biotech"],"sage_meta":{"region":"en-us","author_name":"Ben Collins","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965462842.jpg","imagine_tags":{"234":"Enterprise Management","242":"Financial services","233":"Medium Businesses"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice US","distributor_original_site_url":"https:\/\/www.sage.com\/en-us\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/9868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/users\/1444"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/comments?post=9868"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/9868\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media\/9210"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media?parent=9868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/categories?post=9868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/tags?post=9868"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/business_type?post=9868"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/lilypad?post=9868"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/context?post=9868"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/industry?post=9868"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/persona?post=9868"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/imagine_tag?post=9868"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/coauthors?post=9868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}