Middle Office Transformation: The Essential Precepts and Principles


Gajanan Pujari

Senior Director, Professional Services

As defined, a precept is a commandment that one must adhere to while principles are the guideline that one must follow. For example, asking someone to drive carefully is a statement of “principle” while asking them to adhere to the 50 KMPH speed limit is a “precept.”

In this blog series, we attempt to clear the clutter and call out the precepts and principles of the Middle Office transformation. We have relied mainly on our experience in listening to customers and seeing their journey. We believe this series will help our prospects and customer alike.

Enterprises globally get bombarded with the messaging for digital transformation and the need for optimizing the processes for a better return on every dollar invested in tools. With the implementation of Salesforce CRM and SAP/Oracle as ERP solutions, global organizations have access to large systems of records for customer and enterprise operations data. However, the organizational processes linking the two segments, referred to as the Middle Office, have existed in isolation for far too long.

The core of the Middle Office involves a wide variety of processes such as Configure, Price, Quote (CPQ) process, Enterprise Contract Lifecycle Management (CLM), Digital Commerce, and Enterprise-Wide Approvals. These are the core revenue-generating processes that touch across all functional areas of the enterprise. They involve configuring the best product offerings, managing pricing, generating quotes and contracts, enforcing and meeting legal obligations, capturing detailed sales order and usage information, and ensuring accurate billing and revenue recognition along with self-service buying and selling options.

We see global organizations struggle with significant challenges when they have not focussed on systematizing the Middle Office processes.

o Digital Commerce:

a. Non-existent self-service mechanisms for quote or contract generation.
b. Multiple manual interfaces for customer or vendor onboarding processes
c. Inability to react to changing market pressures mid-year

o Revenue Management

d. Lack of ability to manage forecasted and quoted pipeline across numerous business units
e. Slow and inefficient promotion management processes
f. Lack of information to pinpoint cause and impacts of revenue leakages
g. Lack of ability to manage pricing catalogs centrally with multiple bundling options and frequent pricing changes

o Enterprise Contract Management:

h. Increased time spent on Contract negotiations year on year
i. Lack of systemic expertise to meet regulatory changes and compliance requirements in defined timeframes
j. Lack of control over managing obligations
k. Unauthorized access to contract content.

o Enterprise Approvals Management:

l. Manual approval processes for the quotations, the first step in real revenue generation
m. Long approval cycle times for deal compliance and deal closures
n. People-driven governance of approvals with lack of ability to systemic delegations

To address the above challenges and question the status quo, leadings Organizations embark on the journey to transform the middle office processes.
We believe the following are the core “principles” of this journey that all leading enterprises must consider.

Principles of the Middle Office

Principle 1 – Drive process transformation from the top
Automation effort for a business process has several naysayers across the enterprise. As middle office processes touch multiple departments, the journey needs buy-in from senior management. A steering committee focussed on continuous improvements in revenue and enterprise contract management processes is the first step in the journey.

Principle 2 – Strategize for a brutal attack on the status quo even when manual processes seem to be working
The adage, “if it ain’t broke, don’t fix it” does not apply for the middle office transformation. Enterprises need to rethink all their approval processes and aim to remove every manual process to achieve real visibility and higher ROI.

Principle 3 – Visualize a single data model connecting the front office to back office
Enterprises must visualize having a unique and coherent data model for the Middle office, like what is present in a CRM OR ERP. Benefits of having a single data model are immense. Real $ magic happens when your quoting, contracting, and order management systems work in a seamless workflow.

Principle 4 – Relentless focus on TCO and quick wins
Enterprises must focus on “quick wins” in the areas of Contract management and get the elements of middle office solutions in front of end-users. Good feedback from end-users for a pilot solution has a long-term impact on the project’s success and helps manage the total cost of ownership much more effectively.

Principle 5 – Build future proof capability by leveraging AI and the right platform
An AI-enabled system with the right platform and access to correct data for the Middle Office can deliver industry-leading revenue growth. Hence, enterprises should always aim to build to such future proof capability as part of the Middle Office transformation roadmap. Intelligent systems such as Apttus Max use Middle Office specific taxonomy and machine learning tools to delivery highly contextual insights and recommendations.

While the above are core principles of the revenue critical Middle Office transformation, below are precepts that every organization should be aware of:

Precepts of the Middle Office

Precept 1 – Believe in the journey of thousand miles but start with the first step
Define a milestone-based mission with the first step always as an MVP (minimum viable product) for a particular business line or a line function. Then you visualize at least 4 to 5 critical functional milestones that will enable victories during the transformation cycle and keep the momentum going.

Precept 2 – Focus on Consistent, measurable and scalable business processes changes
Define measurable improvement areas across the spectrum of Middle office transformation involving CPQ (Configure, Price, Quote), Contract Management, Billing Management, Revenue recognition, Deal management, and Order Management.

Precept 3 – Relentless focus on a single source of truth
Middle Office processes tend to be disjointed, so enterprises must drive internal teams to establish a single source of truth across the “customer, product, quote, contract, and order data.”

Precept 4 – Set Realistic yet bold targets for the ROI from Middle office tool stack investments
Establish a baselined version of a business case that will get tracked throughout the transformation program. A few of the vital ROI related metrics are: Quote Quality, Time to Quote, Reduction in cost to serve the customers, Total Cycle time from Quote generation to Contract execution, Contract Accuracy, Approval cycle time, Deal Compliance

Precept 5 – Achieve “Self-service” for customers, partners, employees, and vendors at a maximum number of touchpoints
Identify the low touch self-service use cases upfront and implement those first. Take note that self-service use cases have a magical impact on the cycle times for specific departments and help to manage the complexity fears for the large-scale middle office transformation program.

Precept 6 – Build into a plan for periodic system upgrades as new features and functionalities get delivered
The middle office solutions technology space is evolving, and every six months, significant features get built. Enterprises must focus on having a period system upgrade plan for every six to nine months that will enable the incorporation of ongoing innovation.

We believe following the precepts and principles of the Middle Office transformation mentioned above is vital for driving commercial excellence and igniting growth. Thus, in our experience, enterprise executives must keep the following takeaways in mind to achieve industry-leading business outcomes using Middle Office transformation.

1) Drive process transformation to streamline functions and fill the gap between the front-office and back-office.
2) Leverage superior technological solutions that utilize a Single Data Model, with modules that are architected to work together, without additional integration effort for the Middle Office transformation.
3) Implement “Best of Breed” Suite applications to meet business needs and future business models, with focus on minimal customizations
4) Partner with an “Analyst Recommended” Vendor with a history tried-and-testing successful implementations, delivered to some of the world’s largest and most trusted corporate brands.
5) Future-proof your investment by using a solution that is designed to incorporate newer technology trends, such as AI, Machine Learning, Big Data, and Blockchain.

In our follow-up posts, we will investigate these takeaways in greater detail, and provide a roadmap for identifying a suitable Middle Office solution for your organization.

This post was co-authored by Charles Harb and Gajanan Pujari

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