MIAMI & LONDON--(BUSINESS WIRE)--Faster adoption of digital tools is critical if finance is to deliver on its key mandates in 2018 -- to help companies drive growth while holding down cost, according to new Finance Key Issues Research from The Hackett Group, Inc. (NASDAQ:HCKT).
Finance also faces significant budget constraints of its own in 2018, which can also be addressed in part through digital transformation, the research found.
Unlocking the value of digital transformation is emerging as a strategic imperative for the enterprise in 2018. The Hackett Group’s research identified four “must dos” for finance: balance investments to improve performance; improve analytics to better support the enterprise; leverage digital strategy to improve efficiency, effectiveness, and agility; and reshape the service delivery model to improve customer service and reduce cost.
Almost all finance organizations now understand that digital transformation will radically reshape their ability to add value to the enterprise and reduce cost. The research found that more than half now have a digital transformation strategy in place, significantly more than in 2017. But only 35 percent say they have the capabilities to execute on this strategy, and this number has not increased over last year.
Despite this capability gap, finance organizations are set to rapidly increase their adoption of both mainstream and emerging digital technologies over the next two to three years, with the fastest growth expected in areas such as robotics process automation, cloud-based applications, advanced analytics, and master data management technologies.
“Smart automation and other digital transformation approaches are critical if finance is to accomplish its goal of lowering costs and headcount, while at the same time driving greater value through improved insight to support management decision making,” said Nilly Essaides, The Hackett Group Finance Advisory Program’s senior research director.
“But before finance can fully realize the potential benefits of digital transformation, it has to close the gap between its strategies and its ability to execute,” said Essaides. “This is a significant challenge at present. Finance must find ways to attract, develop and retain new talent, and offer new learning and experiential opportunities to allow existing staff to develop the skills and competencies most valued by the business.”
According to The Hackett Group’s research, finance must balance cost and performance in 2018, with a significant productivity gap being driven by a combination of a 1.3 percent projected reduction in operating budget and revenue growth of 3.6 percent. The cut to finance budgets is the smallest in the past three years, but it is significantly larger than those expected for other business services functions in 2018. While IT budgets are expected to rise slightly in 2018, both procurement and HR are expecting smaller reductions.
One reason that finance costs will drop by less than in recent years is that automation initiatives and organizational changes have already driven out significant process inefficiencies, making additional cost cutting more challenging.
Support the Enterprise with Improved Analytics & Insight
Supporting enterprise information/analytics needs is finance’s top enterprise objective in 2018, closely followed by supporting enterprise digital transformation, The Hackett Group’s research found. It is also the area where finance intends to focus more of its improvement efforts in 2018. The goal of the analytics focus is to enable finance to more effectively provide insight so management can make smarter decisions about investments and capital allocation.
Most finance organizations are undertaking a number of technology, process, and people-related initiatives to improve this capability. But at the same time, the combination of analytics, modeling, and reporting is one of several areas where a dramatic capability gap exists in finance. While it is of the highest importance, it is also ranked as among the most challenging to address.
An important part of this challenge is finding the right talent. While finance can access new technologies, it has a very hard time finding the right people to implement and use them. Talent is another area where finance sees high importance but low ability to address.
Leverage Digital Strategy
Nearly all finance organizations now expect digital transformation to bring step-change improvement to performance and alter the function’s operating model. A total of 56 percent now have a digital strategy in place, up from 44 percent last year. But only 35 percent believe they have the resources and competencies in place to execute in their digital transformation strategy, and this number has not increased in the past year.
Senior finance management is now aware of the importance of digital transformation, and is beginning to reallocate additional resources to drive fuller adoption. The research examined current and projected adoption rates for more than a dozen digital technologies, and identified several interesting trends. Cloud-based tools are already gaining momentum for applications such as EPM, expense reporting, and account reconciliation. A cloud-first policy is also emerging for applications that extend the functionality of core transactional finance system.
The research found that the percentage of finance organizations that have broadly adopted advanced analytics is expected to grow by more than 8X over the next two to three years. A similar trend is expected in several other areas, including master data management technologies, where a 5.4X growth in broad adoption is expected, and data visualization tools, where a 4.5X growth is expected. High growth rates are expected for the adoption of an array of emerging digital technologies, including 12.7X increase for robotic process automation and 6.8X growth for cognitive computing.
Robotic process automation, which is projected to be the fastest-growing of all the digital technologies considered in the study, can help finance automate transactional processes, replacing staff with automated solutions that can provide the link between disparate systems, enter data from one system to the other, and substantially reduce cost and error in processes like accounting. Robots are best suited for rule-based processes. But with the addition of cognitive computing, another strong growth area, they can do even more.
Reshape the Service Delivery Model
Virtually all research respondents also agreed that digital transformation is expected to significantly alter finance’s service delivery models. The research found that this is already taking place, with reallocation of finance headcount and workload from business units to global business services and centers of excellence expected to occur over the next few years.
“The pace of growth for digital technologies in finance is rapidly increasing,” said Tom Willman, associate principal and Finance Executive Advisory Program leader, The Hackett Group. “It’s no longer enough to simply understand the potential impact of digital technologies. Finance must move beyond readiness, move beyond exploration, to fuller adoption in those areas with the greatest impact. You must have a strategy in place, a robust business case, a roadmap, and the people and resources to support it. If you’re still just preparing to move forward, you’re likely to be left behind.”
The Hackett Group’s 2018 Finance Key Issues research, “CFO Agenda: Finance’s Four Imperatives to Accelerate Business Value,” is based on results gathered from more than 160 executives in the US and abroad, most at large companies with annual revenue of $1 billion or greater. A complimentary version of the research is available for download, following registration, at this link: http://go.poweredbyhackett.com/keyfin1801sm
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices digital transformation firm to global companies, offering digital transformation including robotic process automation and enterprise cloud application implementation. Services include business transformation, enterprise analytics, working capital management and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle and SAP practices.
The Hackett Group has completed more than 15,000 benchmarking studies with major corporations and government agencies, including 97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of the DAX 30 and 59% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository and best practice configuration guides and process flows, which enable
The Hackett Group’s clients and partners to achieve world-class performance.