Last week, cloud-based subscription management platform Zuora named Todd McElhatton its new CFO, effective June 22. McElhatton leaves behind his CFO position at SAP’s $7 billion cloud business where, during his tenure, he has executed cloud strategy across multiple lines of global business, including SAP Concur, Fieldglass, Ariba, SuccessFactors, C/4HANA, and Qualtrics.
Over the past two decades, McElhatton has led the financial operations for numerous enterprise software companies making the shift to the cloud. He served as CFO of SAP North America, CFO of VMware's Hybrid Cloud Business, CFO of Oracle's Cloud Services and CFO of Hewlett Packard Managed Services Business.
"Over the next decade, every company must transform into a subscription business. Leading finance organizations at SAP, Oracle and VMware, I’ve seen how a cloud-first strategy backed by the power of recurring revenue can power growth at scale,” McElhatton said in the press release. "I am thrilled to join Zuora as CFO, as I wholeheartedly believe in Zuora's mission to transform every company into a subscription business. It’s the future of the enterprise."
The following is a Q&A between CFO Dive and McElhatton. Responses have been edited for clarity.
CFO Dive: You've served as CFO for several other cloud companies over the years; how will your role at Zuora be different?
Todd McElhatton: I joined Zuora hungry to be part of a company focused on the future: subscriptions. I helped SAP, Oracle, and VMware all transition from selling on-premise software to cloud-based subscription SaaS. Now, I can help drive business transformation for all of Zuora's customers.
At some traditional product-based companies, the CFO often looks through the rear-view mirror, lacking insight into the future state of the business. At a pure subscription company like Zuora, I’ll be focused on providing my team, and the entire organization, with meaningful metrics that aren't addressed by GAAP standards, including metrics that can accelerate growth and shareholder returns.
Subscription business models deliver better financial predictability, offer deeper insight into customer preferences, and provide greater flexibility for adapting to shifting market demands. Overall, it's a more reliable business model.
How are Zuora's services becoming particularly vital during this pandemic?
McElhatton: Subscription-based business models are the key to coming out on the other side of a post-crisis economy. A recent Zuora report found that roughly half of companies have not seen a significant impact to their subscription growth rates; less than 20% see an acceleration.
Amid the current COVID-19 climate, Zuora is perfectly positioned for a customer-base seeking recurring revenue growth, and the flexibility needed to authentically engage with their customers.
Zuora can help businesses not only manage and launch subscriptions, but quickly adapt to external pressures, and spin up new offers for customers; whether it be launching a free trial, issuing credit memos, or offering the option to suspend or resume a subscription.
These business responses are critical to retaining customers long-term. Companies looking toward their next decade of growth need agile subscription models with the flexibility needed to meet unique industry needs.
Do you anticipate many new companies will pivot to the cloud following the pandemic?
McElhatton: Absolutely. While many companies have some cloud adoption, the current crisis has shown the value cloud applications have, both in their ability to operate, and, more importantly, the ability to pivot the business in real time.
The pandemic is changing buying behaviors, and, ultimately, prompting industries to shift their business models for good. The "old" way of doing business won’t cut it in the post-pandemic world.
Moving from a manual-based subscription to a fully-automated process drastically improves overall efficiency and customer experience. To help fuel these transformations in the new era, the CFO role is evolving to really drive technology adoption.
How will you orient yourself with your team and with Zuora's financials from a distance?
McElhatton: Over-communication will be key, of course. While working in a remote setting can be challenging at times, I'm luckily joining a team of individuals who have proven their grit and determination over the past few months.
Frequent discussions about current processes in place will be critical to driving operational improvements, particularly in today's climate and as we settle into a new normal.
What advice do you have to share for other CFOs struggling to help their businesses through this uncertain time?
McElhatton: Continue improving your processes, frequently communicate with key stakeholders, and plan for post-COVID-19 recovery scenarios. I also cannot stress enough the importance of using this time to assess your current technology needs. and to make smart investments that will ultimately help you succeed in the long run.
Over the past decade alone, technological investments have seen the greatest return on investment (ROI), and I only expect that to accelerate going forward.