The Digital Transformation Partnership

Promoting the CFO-CIO Alliance

The CFO-CIO Collaboration for Finance Transformation

Information technology will have a greater impact on how the finance department operates over the next 10 years than it has over the past 50. The cumulative impact of a decade of steady technology evolution along with the demographic shift to digitally-native executives and managers is enabling a fundamental change in how the department operates.

Information technology will have a greater impact on how the finance department operates over the next 10 years than it has over the past 50.

The events of 2020 forced most companies to operate outside their comfort zone in a virtual environment. Dedication and hard work enabled finance and accounting departments to overcome obstacles, but the experience led executives to make commitments to adopt technology that will make their organization more resilient and able to adapt more easily to any circumstance. To accelerate what has come to be known as “digital transformation,” CFOs and CIOs should collaboratively develop a roadmap of goals and timetables that will enable their organization to thrive regardless of the circumstances. For many organizations, this will mean redefining core processes to make them faster, more efficient, more accurate and more controllable. Rather than representing a threat to the staff, the technology deployed as part of this digital transformation can eliminate tedious repetitive work, thus freeing people to perform tasks that require their intelligence, experience and judgement.

Finance Must Transform from a Technology Laggard

Today’s information technology enables finance and accounting departments to assume a more strategic, agile and forward-looking role within the organization. Technology will further automate an increasing amount of rote, repetitive work, enabling a new generation of finance and accounting executives to provide their workforce with tools that help them avoid tedious tasks. Robots are not about to take over finance and accounting, but new waves of intelligent automation will transform jobs, shifting time and attention away from repetitive tasks to work that requires insight, judgement and experience.

Our research confirms the value of using software wherever possible to eliminate the need for individuals to do repetitive, low-skill work that computers can do faster and more accurately. For example, our Office of Finance research found a correlation between the degree to which companies automate their close processes and how quickly they close their books: 88% of companies that have automated substantially all their close processes are able to close within six business days compared to 59% that have automated some parts and just 40% that had applied little or no automation.

Finance organizations have also discovered the value of taking a cloud-first approach to deploying software when remote work becomes the norm. Although accessing on-premises systems remotely is not impossible, security and scalability issues can make it more problematic than working natively in the cloud. And technology has demonstrated its ability to transform how people work. The need to operate virtually forced organizations to use collaboration tools to work remotely, but even when lock-downs end, same-time-same-place teamwork will cease to be the default method of interaction. Collaborative tools will enable more frequent informal interactions by eliminating the need to get everyone together physically. Working remotely will give employers and employees greater flexibility on who is hired and how they work. Of course, in-person interactions are necessary and not every organization or group has found remote working to be a practical alternative. But technology has shown that entirely new approaches are feasible and preferable to the status quo.

However, the optimistic view of technology’s potential runs into the reality that finance and accounting departments are often risk averse, which effectively makes them technology laggards. We use our benchmark research methodology to assess how organizations perform core business processes and functions. To do this we evaluate performance on the dimensions of people, process, information (data) and technology (chiefly software), distilling our evaluation into four levels of performance: from top to bottom, Innovative, Strategic, Advanced and Tactical. Our recent Office of Finance benchmark research reveals that half of finance organizations place at the lowest level of performance in using technology while just 12% place at the highest. An unwillingness or inability to master technology is likely to be a major impediment in achieving a fundamental transformation of the mission of the Office of Finance.

Moreover, our research confirms that most finance and accounting departments still grapple with mundane issues that must be resolved before they can use more advanced technologies. For example, it is hard to mount a big data initiative when the management of regular data is a chore. One-third of participants in our research said that the data they need is either inaccessible or too difficult to integrate. Our research also finds that 68% of people in finance departments spend the biggest part of their time dealing with data preparation; only 28% can devote more time to analytics-related tasks. To use big data analytics successfully, organizations must have the processes, tools and priorities in place to address their data issues.

The Importance of Finance IT

To have the technology competence necessary for transforming the department, organizations must have a Finance IT (FIT) group made up of individuals who are grounded in core finance and accounting disciplines, but also knowledgeable about software and information technology. This is where the CFO-CIO partnership comes in. While these finance professionals have a higher level of IT competence than most, they usually do not have the skills (or the desire) to assume the essential IT role of operating or maintaining systems. Usually, IT professionals are needed for initially configuring systems, but past that point there is little (if any) need for resources. Increasingly, software vendors are designing applications with Finance IT in mind. The combination of Finance IT skills and cloud-based software designed for finance means delivering the best of both worlds: reduced workloads for IT departments and greater satisfaction for the Finance department.

Our research underscores the value of having a FIT group. The data shows that there are correlations between having a dedicated unit and having a high-performing finance organization. For example, 50% of the companies with FIT report that they perform financial analysis very well compared to 29% that lack one. There is a similar significant difference in correlations for a range of functional areas: 48% of companies with FIT perform cost accounting very well compared to 20% of organizations without. In budgeting and fiscal control, the comparison is 46% to 20%. Companies with FIT also communicate better: 60% of organizations with this capability provide timely information to the rest of the company, compared to only one-third (32%) of those without one.

FIT and a CFO-CIO partnership will become even more essential as the pace of technology innovation in Finance accelerates in the coming decade. Innovations in areas such as artificial intelligence, blockchain and the Internet of Things increasingly are incorporated into core software applications such as ERP. To be effective, finance departments must adopt a “fast-follower” approach to technology adoption. Fast followers do not operate at the bleeding edge of IT innovation, but they are poised to incorporate technology innovations as soon as they have proven to be practical. To make this a reality, it is necessary to have a standing group with clout that stays abreast of relevant technologies and anticipates their introduction into departmental processes.

The IT Organization Can Focus on Essentials

Just as technology is allowing finance and accounting departments to transform, IT departments must shift resources away from “keep the lights on” maintenance in favor of high-value work. Our IT Performance Management benchmark research found that 57% of IT organizations say that financial constraints are the most important factor influencing how well they manage operations and resources.

One important way IT organizations can concentrate on more consequential activities is to reduce its maintenance burden by supporting more self-reliance in other departments. The growing use of cloud-based software, for instance, eliminates the need for IT to perform maintenance, patches and upgrades. Wherever practical, IT must continually enhance the application environment to modernize business processes and put more useful tools and information in the hands of those who produce business results. CIOs and IT must find ways to be more efficient and more effective by serving needs of the business, especially the office of finance. A CFO-CIO partnership helps the IT department concentrate its resources where it is most effective, which enhances the department’s performance.

Sustainable Transformation Through a CFO-CIO Alliance

Fundamental business challenges do not change: organizations must offer valuable products and services, attract and retain the best employees, and manage operations efficient and effectively. What do change constantly are the tools that organizations can bring to bear to address their challenges, and those that can master technology sooner usually achieve a competitive advantage. Digital transformation of the office of finance can enable executives to manage with greater intelligence, agility and resilience. CFOs and CIOs should align their departments’ skills and resources to achieve that transformation as soon as possible.