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Welcome to the Digital CFO Hub. A safe space to foster dialogue and debate between finance leaders committed to embrace the future. A place that will reorient the mindset and skillset required to navigate the disruption triggered by the pandemic.  All Business rules, specifically the role of a CFO has been radically realtered in recent months.

This space will create conversations through podcasts and thought leadership interviews which will spark conversations on the responses needed to not just survive but thrive in the new environment.

Here you can hear fellow practitioners and CFOs reflect on how to leverage data which is seen as the “new oil” and how to wade through overwhelming loads of data for intelligent interpretation. You will also find ways to rescript the role of digital finance in sharpening the new enterprise edge.

Since this community is drawn mostly from TCS Customer relationships, you would also get to hear success stories on how traditional finance functions have been transformed into nimble footed agile, digital functions that have superior and speedy decision-making capabilities. And how such tools are driving value through rapid execution and growth.

In this episode, we will explore:

How can CFOs better leverage data to succeed with Hyper planning and rapid decision making: The critical role of high-quality information and how CFO organizations are approaching

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Moderator
Megan Billingsley
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Megan Billingsley, Megan has had the opportunity to moderate webinars for studioID since 2018, working with a wide variety of clients through the years.  Outside of her work with studioID, Megan facilitates meetings, conducts interviews, and plans/executes in-person and virtual conferences as well as serving as a radio personality for Positive Alternative Radio, Inc.  She got her start in marketing and promotions with CBS Radio and is a graduate of George Mason University and Drexel University.

Speaker
Keith D. Taylor
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Keith D. Taylor – Chief Financial Officer, Equinix, Inc.

Keith Taylor leads the company’s global finance organization, including accounting, business assurance, financial planning and analysis, finance transformation, investor relations, payroll, procurement, real estate, risk and security, stock services, tax and treasury.

During his 22+ year tenure, Keith has stewarded the company through a period of exceptional growth, delivering approximately $6 billion in annual revenue and a record-setting 18 years of consecutive quarterly revenue growth. He has completed 27 acquisitions and deployed more than $40 billion of capital to help fund the growth. Keith also oversees the company’s commitment to sustainability leadership, including developing a Green Finance Framework to benefit the communities where Equinix operates as well as its employees and stakeholders.

Keith joined Equinix in 1999 after holding a number of senior finance roles at International Wireless Communications and Becton Dickinson & Company. He was named a “Best CFO” on Institutional Investor’s prestigious 2021 list. Keith holds a B.B.A. from Bishop's University in Quebec, and is a member of the Canadian Institute of Chartered Accountants.

Speaker
Andrew Karolyi
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Andrew Karolyi, Cornell SC Johnson College of Business, Dean and Professor of Finance and Harold Bierman Jr. Distinguished Professor of Management.

Andrew Karolyi is Deputy Dean and College Dean for Academic Affairs at the Cornell SC Johnson College of Business. He is a professor of finance and holder of the Harold Bierman Jr. Distinguished Professorship in the College’s Johnson Graduate School of Management. He is also a professor of economics in Cornell's College of Arts and Sciences. Professor Karolyi is a scholar in the area of investment management with a specialization in the study of international financial markets. He has published extensively in journals in finance and economics, including the Journal of Finance, Journal of Financial Economics and Review of Financial Studies, and has published several books and monographs.

Speaker
Vikas Gopal
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Vikas Gopal - Global Managing Partner of Finance & Global Shared Services Transformation Consulting & Services Integration, Tata Consultancy Services.

Vikas Gopal is the Global Managing Partner within Tata Consultancy Services with responsibility for CFO solutions and consulting. He has extensive experience advising CFO's on industry trends and strategies for next-generation shared services, finance, and digital transformation. Vikas has held leadership roles in corporate and consulting and has led the strategy, design, and implementation of several transformative programs.

Episode Transcript:

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Megan Billingsley:

CFOs have had to step up and play a critical strategic role in transforming their organizations away from traditional operating models to one that gives access to insights in real time. However, many are unclear on the best way forward. That's why we've launched The Many Faces of the Modern CFO podcast series. During each episode, you'll have access to thought leadership interviews, which will spark conversations on the responses needed to not just survive, but to thrive in today's environment. TCS, along with CFO, identified the top 10 challenges for CFOs as they navigate the COVID-19 pandemic. One of the top challenges that required immediate focus was lack of real-time insights to make quick business decisions. In this first episode, we're discussing how CFOs can better leverage data to succeed. I'm joined by Vikas Gopal, Andrew Karolyi and Keith Taylor. You'll hear more about their backgrounds in just a moment. Let's get started.

Megan Billingsley:

First, can we start with a bit about each of you and your backgrounds to help provide some context for today's discussion? Vikas, let's start with you.

Vikas Gopal:

My name is Vikas Gopal. I'm the Global Managing Partner for Tata Consultancy, and I have responsibility for CFO related services. Obviously, I'm focused on finance transformation and shared services. I'm a lifer in the finance transformation world, and I have seen a significant evolution in the digital arena. So thank you for having me here.

Megan Billingsley:

Great. Thank you. And Keith?

Keith Taylor:

First and foremost, thanks for having me on today's podcast. I'm the CFO of Equinix. It's the largest digital infrastructure company in the world, but we've been around for 22 years. We're roughly a $70 billion business. We operate a digital infrastructure environment across 63 markets, 26 countries and 227 data centers. And we recently just reported our 72nd quarter in a row role of top line revenue growth. I'm a chartered accountant by trade. And as I said, I've been in the role for 16 years. Excited to be here with you today.

Megan Billingsley:

Wonderful. And last but not least, Andrew.

Andrew Karolyi:

Well, thank you very much, Megan. My name's Andrew Karolyi. I am a professor of finance here at the Cornell SC Johnson College of Business. I specialize in research on corporate finance and asset pricing and investments with an international focus. I currently serve as the Deputy Dean and Dean of Academic Affairs.

Megan Billingsley:

Wonderful. Well, thank you all. A recent TCS and CFO white paper identified the top 10 challenges for CFOs as they navigate the COVID-19 pandemic. One of the top challenges that required immediate focus was lack of real-time insights to make quick business decisions. Keith, can you share how you and your team have worked to provide the business with the real-time insights that are required to succeed in today's business environment?

Keith Taylor:

First and foremost, when the global pandemic struck, there's a number of things that one had to worry about. I think everybody started thinking about liquidity and we went and solved that relatively quickly. The second thing that we were certainly focused was our people, making sure the team on the ground and at home, and then all of our customers were safe. And the third piece is you've got to run the business. Recognizing there's a lot that happened during this pandemic. And some of us were prepared, some of us probably less prepared, recognizing that data consumption and data analytics was going to be critically important. And there's all aspects on how that took hold.

Keith Taylor:

First and foremost, no surprise to you when you think about data. It's just recognizing that getting good data to make good decisions was critically important. For us, understanding what was going on from a liquidity perspective, how are our customers paying their bills? Were are we able to invoice? What was the data that we're able to gather out of our operating environment? All of that had a very real impact. It was also making sure our sales reps understood that as we saw the world a lot changed very, very rapidly. And as the world moved to digitally transform very, very quickly. Even just thinking about the Zoom calls that we do or how we operate our stay at home environment.

Keith Taylor:

There was a recognition that we could provide analytics to our organization to make it easier for them to continue running their business from a sales perspective, finding the right customers, making sure it was easier for them to find access to digital infrastructure like Equinix. Making sure that those that were meeting challenges in this new world, that we could work with them to make it easier for them to run a work from home environment, which was not easy for many. And then there was just a myriad of other things about how we run our data centers, how we invest our capital. But overall, it was critically important across the organization to fully appreciate how data would help us work through this new world in which we know.

Megan Billingsley:

Thank you so much. Andrew, what does academic research say about the importance of financial flexibility, especially during periods of crisis.

Andrew Karolyi:

There is extensive amount of research on this topic, actually Megan. But my favorite is research that was done in the aftermath of the global financial crisis, in 2008. It was a large scale survey of about a thousand plus CFOs in US, Canada, Europe, and Asia. The researchers explored whether and how firms were financially constrained and what the consequences were in terms of their planning. This is actually a 2010 publication in the Journal of Financial Economics by one of my colleagues, Murillo Campello, I'm proud to say, along with Duke University's John Graham and Cam Harvey. So the measures of financial constraints that the CFOs reported on included levels of cash balances, as well as access to their lines of credit. These typically represent about 15% of the total assets of the typical US firm, for example. They use these for their daily operations or short-term liquidity needs, such as for example, inventory management, anything to do with their supply chain, for example.

Andrew Karolyi:

Among those in the survey that reported that they were constrained, 81% experienced credit rationing, 59% complained about higher costs of borrowing. This is in the immediate aftermath of the crisis. And 55% cited difficulties in initiating or renewing their credit lines. So what the study then found was that having now classified these firms into constrained and unconstrained, among those that reported themselves constrained, i.e., less financially flexible. They reported that during the crisis period, employment dropped by 11% more than that among those that were less constrained, more flexible. They cut 22% more of their spending on technology. They cut their capital investment programs by 9% more and their marketing expenditures were cut by 33% more. Dividend payments were cut 14% more often. 86% of those more constrained firms, self declared, admitted to having to bypass attractive investments due to difficulties in cash management, whereas only 44% of those that were more flexible, less constrained.

Andrew Karolyi:

And a majority of the more constraint actually reported selling down assets to fund their operations. A notable aspect of the study was how the authors then reverse engineered the self identified constrained versus non-constrained. And then what they did was they found that there were a number of publicly available data, information, financial statement information, things from their financial disclosures that actually could have allowed them to successfully discriminate between the two types. And so, sit there and wonder, "Well, why is that important?" And it really relates to the topic that Vikas and Keith and I are addressing, which is had they had timely data-driven reports and invoked a more analytical approach, that could have really helped these CFOs self identify these potential financial flexibility problems that they were likely to face in the event of the crisis. So that's one of my favorite studies.

Andrew Karolyi:

Now, if you wanted to bring it up to the present day, this is an unpublished study as yet. It's a really relevant one. It stands on the shoulders of the earlier one that I talked about, and it talks about the value of financial flexibility during the COVID-19 crisis of last year. We're still in it, of course. But certainly during last year when we were feeling it most acutely. This is a study by Rudy Fahlenbrach, Kevin Rageth and René Stulz, and it's stated on its posting as of October, 2020. So what they found is that firms with greater flexibility, and their definition is again, leaning on the earlier work like the one I cited earlier, firms with greater flexibility within an industry experience a 26% more stock price drop compared to those with less flexibility during the March revenue shock, and the differential return persistent.

Andrew Karolyi:

So it is a less dramatic, less adverse share price reaction for those firms that had revealed themselves before the fact to be more flexible. And then on the rebound that happened in April and May of 2020, for many of these companies, the differential return was that much more dramatic in April through June for those firms that were more financially flexible. In this study, the distinguishing characteristics was larger cash holdings among those that revealed themselves to be financially flexible. Whether the firms had more R&D, expenditures or capital expenditures, didn't really help to explain over and above cash holdings to explain the differential stock price declines. The researchers looked at the CARES Act, voted by Congress, which restricted share repurchases. Whether the firms were made more flexible with lower payouts, didn't seem to matter for understanding the stock price decline, the differential stock price decline and the rebounds. So that brings the research up to the more present day, and shows just again, how salient is this thing of financial flexibility during times of crisis.

Megan Billingsley:

Awesome. Thank you. Vikas, how are you seeing CFOs fostering a culture or bonding infrastructure to support a data-driven team? What tools and technologies are you seeing CFOs invest in to make this a reality?

Vikas Gopal:

That's a great question. I'd like to cite the famous quote from the legendary management consultant, Peter Drucker, "Culture eats strategy for breakfast." Finance has historically been very verified and trust culture. This has often push in finance as a drag in an organization's ability to respond to the growth needs. As CFOs shape their vision to move finance into a role of a true strategic partner, finance is often seen as the barrier of change for organizations. Process transformation that is framed within the context of a single source of truth is the most impactful way to start the culture rehaul. This often enables a redesign of the organization into a data driven decision and accountability structure. Cloud is often a cost mutualization and is critical that that is considered as a major enable in this transformation journey towards a single source of truth.

Megan Billingsley:

Back to Keith. Can you share any best practices for transforming data into actionable insight? How can finance exploit business intelligence and predictive analytics to gain a competitive advantage?

Keith Taylor:

The reality is, there's a lot of data there and it's plentiful and it's only increasing with time. I think one of the best practices, as we think about what is an immediate actionable opportunity, is to ensure that the data is clean, that it's without noise, that it allows people to make the right decisions. And so for us, that was critically important as we thought about our business. And then once you've gotten that clean data, there's all sorts of aspects in which we could use it to our advantage. Some of it is what I would refer to as predictive. Some of it is preventive analytics. But using data insights and intelligence to allow different functional groups inside our organization to better operate their business in a very unique way, recognizing a lot of people, they're no longer in our buildings. They're all working from home and not only across the country, but it's really across the world because we're a global company.

Keith Taylor:

But it's making sure that we could make that actionable and allowing that to be fed into basically the front line workers that still had to operate. Again, not that we were first responders, but we're operating critical infrastructure for the internet. Part of our recognition as a company, being a core component of all of these important companies, infrastructure being the on and off ramp to the internet and the cloud, we had to use the data to make sure that customers could continue to consume. We had to understand where there's challenges.

Keith Taylor:

And so for us, it was using, again, the artificial intelligence that we placed on top of this raw data to make it easier for us as a business to consume. I would argue that one of the other things was really important, it's not only how we interface with our customers, how do we deal with how do we operate the business? Again, if I can take human capital out of the equation and allow processes and systems and tools to better allow us to detect how the spend, look at spending analytics and tie that back to our revenue analytics, I just think that it allows us to make a better decision as an organization. And at the same time, use the resources that we have as an organization to do more of the analytical work, use the raw data to deliver that information to our core analysts. And I just think overall, the organization gets smarter. So they would've used it today at very early stages, but we're making great progress and we're going to continue to invest in our data science initiatives, which will become a larger, more important part of our organization.

Megan Billingsley:

And Andrew, how has finance becoming more analytical or data-driven impacted the skills that are needed, especially now?

Andrew Karolyi:

That's a topic really close to my heart, Megan. Let me give you a little context. I'm currently the Deputy Dean, Dean of Academic Affairs. So the business of training and acquiring of skills for undergraduate business students, master's level students, MBA students, executive MBA students, is clearly top of mind for me in my role. But before I became a Dean at Cornell, I served as an executive editor of one of these peer reviewed journals in finance called The Review of Financial Studies. During that time, the platform gave me the occasion, or I took the opportunity to meet with a number of CFO corporate colleagues, chief investment officers in the asset management industry as well. And I enjoyed that because it would be opportunity to listen to their challenges. So imagine people like Vikas and Keith would be people I would be talking to. And I often use these meetings to figure out how to best use my position of influence as an editor to try to push for more research towards their greatest needs.

Andrew Karolyi:

So that's a nice lead into what one of the big pushes that I and my colleagues actually took. And this was focused on the topic of financial technology, or aka Fintech, and investments in which are really transforming the business of financial services really from top to bottom. And companies clearly need to be agile in adapting to this transformation for success. So when people hear the word Fintech, they often think about cryptocurrencies like Bitcoin, Ethereum, and Facebook's Libra. But the truth is that it's so, so much more. And this is what came out of this push for research that we initiated. We're talking about artificial intelligence, natural language processing, other forms of machine learning applied to basically big data analytics, digital technology to process those analytics.

Andrew Karolyi:

And all of that is transforming how investors access markets think robo investing, robo-advising. How credit is channeled to borrowers, think about peer-to-peer or online lending platforms. How funds are raised, think here like a crowdfunding platforms. And how payments are made and settled. This is where we talk a lot about enterprise distributed ledger and blockchain technology, which includes as backbone for things like cryptocurrency, but also so much more smart contracts, like customer supplier transactions.

Andrew Karolyi:

The demand from industry for this propelled a big push for research in this area. And I'm really proud to say that this has really taken hold in the academy. Just to add on to that, what we're seeing now at top business schools around the world, like my own at Cornell, we are also responding for this demand for analytical skills. So it's not just about the research. It's about taking that research, that knowledge that's created there and transforming it into knowledge dissemination and training programs, developing curricular, co-curricular initiatives related to Fintech and big data analytics. And I'm impressed by the adeptness of programs like ours at Cornell and at so many other top business schools. But the biggest challenge is the pace of innovation in the industry is so high that our programming in the schools that we're putting into place need to be even that much more agile to adapt and respond to the needs. So the short answer is it's transformative, massively transformative, and we're feeling it in business schools where the training is needed to respond to the challenge.

Megan Billingsley:

Great. Vikas, digital transformation and data go hand in hand. Can you describe the digital transformation initiatives that you're seeing teams prioritize? What makes teams prioritize digital transformation?

Vikas Gopal:

Almost all the digital transformation programs these days include culture, people, process, cloud and data. Process and predefined operating procedures with definitive controls and segregation of duty have always been the bedrock of finance. We are involved in a significant number of finance transformation programs, driving global standard processes, often on a single ERP, enabled by a data lake on a solid data foundation. We are now starting to see the cultural elements being added to this. This then enables the organization to become data driven, to move accountability and empowerment or financial decisions, making them closer to the front line of the business. And these are some of the initiatives that we are seeing in how teams are prioritizing digital transformation.

Megan Billingsley:

Great. And then Vikas, as a follow-up, what are some of the barriers to transformation? How have you seen CFOs and their teams work to overcome these barriers?

Vikas Gopal:

We see a significant amount of barriers to transformation. People and the fear of unknown is the single biggest barrier to any transformation. CFOs are often in the seat of transformation and need to lead from the front. Their actions and words are aligned and their personal investment of time and effort to define and shape the transformation needs to be visible. I've been involved in so many transformation programs within the Fortune 100 companies. One of the concepts that have always stuck with me, through various programs, but this one specifically is this concept of a Wednesday night pizza night, where the CFO cabinet would meet every Wednesday from 5:30 to 8:00 PM to discuss and review the various decisions and choices being made in the transformation program. The power of this visible act was felt by everyone in the organization and helped those organizations overcome that significant hurdle.

Megan Billingsley:

Thank you. Keith, over to you. Can you share any examples of how you have leveraged data to become more agile, especially now?

Keith Taylor:

Well the agility of data is critically important. And again, I recognize that we do live in a different type of environment today. I don't think any surprise to any [inaudible 00:20:23] in that the global transformation has taken place, digital transformation has taken place. It's still very early days to see the full impact of it. Then making sure that we can leverage the data with agility is critically important. And there's a number of things that we've done to help unlock that. One of the things that I've been talking about is using data in an agile way to make sure that we can look at those predictive analytics that help determine what is the right customer opportunity.

Keith Taylor:

But actually more importantly to us today is also, are there analytics that could predict basically whether there's churn inside our environment, whether our customers churning? How does that, therefore, impact our decisioning? We spend billions of dollars a year in capital. And if you can find ways to therefore use the data analytics to determine capacity planning past the utilization capacity investment, it's going to allow us for our investors to make a better return on capital. It's going to also allow us for our customers to put infrastructure in the right place. So using that data with great agility, I think will make a difference. But it has to be real time. You have to use the empirical data, you have to look at the predictive analytics and then using the sizes that we've created to all create that opportunity for us.

Keith Taylor:

One of the other things that we've actually used data for is, again, we recognize that we're the largest global infrastructure provider, but we do a lot of that through interconnection. We create ecosystems inside our environment. And one of the things that's very important, not only for the environments in which we operate, but for those who consume around us, as we prepare this report is the global interconnection index, so people know where data gravity is. People understand the implications of what the ecosystems are doing, whether it's a financial and electronic trading environment, whether it's digital media and content, whether it's cloud-based services. All of this comes into play so customers ultimately know what to do and where to do it. And it's up to us to take that data and make sure that we share with a broader market. Some of the things that we share also with a traditional consumer of this data is understanding what are the key drivers of their business? What's happening with DDoS attacks?

Keith Taylor:

How can you re-architect your infrastructure in a multi-cloud environment? What are digital leaders doing related to their ecosystems and how can they drive value? When I think about urban areas, what is the predictive analytics around how people consume data on a global basis, or even what are they doing with their digitally enabled business models to help create value for their shareholders? All of this comes to play when we take the data, use it for our purpose, put it into our digital globally interconnection index and share it with the broader community, and I think it's worked very well for us.

Megan Billingsley:

Great. And then just one final question. Is there anything else you would like to leave our listeners with today? Keith?

Keith Taylor:

I think we all realize that the world in which we know and operate is changing and it has been changing for many years. Digital transformation is real. It's at the forefront of all that we're doing. It's how we operate our day-to-day lives from how we bank, how we consume content, how we communicate, and Zoom's a perfect example of that or other mediums. So one is to recognize that we, as an organization, are continuing to invest and then growing and scaling our organization to meet this digital transformation. We're also working very, very extensively with a broad set of customers, including the large hyperscalers around the world. No surprise to you, whether it's the Googles, the Amazons, the Microsofts, the Alibabas, salesforce.com or Apple or Facebook, others, those digital behemoths are certainly, they're investing heavily around the world.

Keith Taylor:

And we want to make sure that our company and our resources are positioned to help the world scale. And so we have a very broad investment involved, we refer to as the X-scale of data center initiative. And that's making sure that we use our capital alongside our joint venture partners to build out in capacity around the globe so this digital transformation continues to take hold, takes root. And I think it will serve not only our customers and our communities, but certainly will serve our investors as well. Equinix is highly dedicated to pairing, protecting, connecting the digital world at which we operate. We have a real belief in what we can do as an organization, not only continue to build, but we want to make sure it's secure and it's operationally reliable for our customers. And so as we take these analytics and the data tools that we have, we want to ensure that we're there for the long run.

Keith Taylor:

Reliability is critically important to our customers and having this information will be important. We're really proud of what Equinix has done. We're proud of how we consume our data. It's only going to get more important as we look forward. It is not only based on empirical data, it is also predictive data. And the investment and the data science initiative, I think is only starting. It's going to become more and more important as we look forward. I think in some ways it could be a competitive advantage as we continue to scale ourselves as the world's needing globally data infrastructure company.

Megan Billingsley:

And finally, Andrew.

Andrew Karolyi:

Well, I don't think any of your listeners or Vikas or Keith will be surprised if I say that partnerships with industry, and I know I'm speaking to a broad audience of those who are involved in industry as officers in companies, in asset management firms, think about the importance of partnering with schools of business, colleges of business, where the training is that you so desperately need to be successful with all this digital transformation, all these initiatives that we're hearing about from Keith and Vikas in their respective organizations. Know that we can be your partner, we business schools. Cornell for sure, but so many others. We can be your partners. And so my message is to encourage them to think about those partnerships and to reach out and engage.

Megan Billingsley:

Great. Well, thank you so much, Vikas, Andrew and Keith, for sharing your insights on how to leverage data, especially today. It was great to hear you elaborate on the importance of real-time insights and the implications of finance becoming more analytical. And thank you everyone for being with us today. If you haven't heard, this is the first episode in a series. We hope you'll join us for episode two of The Many Faces of the Modern CFO series, where we'll focus on the changing landscape of finance and dive deeper into new service delivery models. We'll also expand on our thread from today and focus on the tools and technologies that CFOs are investing in, from planning to cloud ERP. The series can be found wherever you get your podcasts and at cfo.com.

About TCS: Tata Consultancy Services is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for the past fifty years. TCS offers a consulting-led, cognitive-powered, integrated portfolio of business, technology and engineering services and solutions. This is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. For more information, visit www.tcs.com.

About CFO.com: CFO is the leading media brand in the United States catering to influential finance executives who collectively control trillions of spend annually. Through the award-winning CFO Magazine and CFO.com, it provides insights into the most pressing issues in business as well as practical advice and innovative thinking on the technological forces that are disrupting industries and transforming the chief financial officer’s role.