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CFO's Role in Digital Transformation

If the first reason needs to be a wake-up call for CFOs to start taking a deeper and closer look at digital technology to reinvent themselves, the second reason - the mindset of Finance as a back-office support function requiring only the minimal IT investment to stay alive - is clearly a relic of the past. Let's look at some of the business drivers of the changes in the Finance function and how recent advancements in digital technology are finally delivering the answers to enable CFOs to embrace digital transformation in their own turf.

We have talked about Digital Transformation in several previous blog posts. Digital transformation is the use of new technologies to drive significant business improvements. Many industry leaders - established companies such as Under Armour or digital native startups such as Uber - have been embracing this inexorable trend to tap into its transformative potential.

However, many such efforts are limited to customer-facing processes covering customer engagement and experiences, driven by CMOs (Chief Marketing Officers) and CDOs (Chief Digital Officers). The role of CFO in leading such transformation has not been understood or widely discussed yet, but it's critical for two reasons:

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Many IT organizations report to the CFO, giving him/her a clear stake in the enterprise IT strategy and how digitalization shapes its competitiveness

The Finance function is central to digitalization within the organization, as it allocates resources for growth, but is often not the leader in applying digital technologies. Paradoxically, Finance often (rationally) allocates IT investments to the revenue-generating and customer-facing functions risking its own functions to be stuck in the digital wilderness.

If the first reason needs to be a wake-up call for CFOs to start taking a deeper and closer look at digital technology to reinvent themselves, the second reason - the mindset of Finance as a back-office support function requiring only the minimal IT investment to stay alive - is clearly a relic of the past. Let's look at some of the business drivers of the changes in the Finance function and how recent advancements in digital technology are finally delivering the answers to enable CFOs to embrace digital transformation in their own turf.

Volatility: Today's Finance professional will heartily agree with the statement made by the Greek Philosopher Heraclitus more than 2000 years ago: "The only thing that is constant is change". Companies today are faced with tremendous volatility. A single tweet can cost the company millions in market cap, we have seen this a couple of times . Macro-economic and geographic volatility can result in exchange rate and commodities price fluctuations. Often, Finance reacts slowly to these changes struggling to keep up with the daily operations of recording transactions and closing the books. They are stuck in the annual budget cycles that increasingly become obsolete the moment they are created. Due to the workload to perform this routine work, Finance teams often have little bandwidth to support the strategic needs of the business in assessing risks to respond to volatility and more importantly, develop new strategies to capture new opportunities and business models.

New generation of Finance users: Finance professionals who were considered expert users, had to be trained to use the complex accounting and finance software needed to get their job done. As the new generation of 'digital native' users starts entering the workforce, they have widely different expectations of modern applications and have little tolerance for arcane UI. Banks and financial institutions are already experiencing the millennial users' wrath from unusable software. Though enterprise professional users are a different segment, the user experience expectations are gradually going up.

Finance within a connected company: Finance used to be an isolated function in the past. The accounting group just focused on recording transactions right and external reporting to ensure compliance. Controlling focused on the specific line-of-business they were supporting and just provided the plan, budget, and profitability reports. Interactions with other groups within the company were limited to performing specific transactions such as extending a credit balance for an account or fixing invoice issues with a supplier. However, in today's networked and collaborative world, Finance needs to closely collaborate with many functions within the company to problem solve and explore optimal solutions. One example is HR, where Finance needs to strategically support the hiring and growth plans across locations, while keeping an eye on the budget. Beyond the company, Finance also needs to collaborate with external strategic suppliers and financial institutions.

Let's now look at the recent leaps in digital enterprise technologies that can help the CFO transform Finance function to address these trends.

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Real-time and in-memory platform: Responding to volatility requires access to the latest data and the ability to look forward, not just backward in a 'rear-view mirror' with historic data. In-memory platforms combining transactional and analytical information available at the fingertips of Finance professionals as the single source of truth is a transformative tool. Real-time data visibility at the lowest level of granularity also enables running simulations and predictive analytics to explore multiple option paths when faced with volatility. An automatically reconciled and inherently compliant data platform, because of the lack of redundancy, helps Finance department do a 'soft close anytime'. It eliminates a lot of the manual work freeing up the time to do strategic analysis of the business. Applications using real-time data also put the insights in the hands of business driving better compliance and self-service. 'Real-time data is Finance's best friend', as Gina McNamara, CFO of SAP Australia and New Zealand says.

Modern user experience: All iPhone users are familiar with the notion of a few essential apps that are configured exactly for your role and help you run your life. The role-based apps concept in enterprise applications takes a similar approach moving away from the monolithic transactions with complex menus and hierarchies that casual or beginner user found intimidating. Once these central applications are provided with a coherent and delightful experience across all devices using adaptive designs and technologies, Finance users now have the opportunity to get a simple consumer-grade experience. State-of-the-art applications also include collaboration and notification functions found in consumer applications as well, helping the acceptance and adoption within the next generation users.

Cloud deployment: Finance has been a slow adopter of cloud technologies in the enterprise, but the adoption has been accelerating, first within mid-market companies and subsidiaries of large enterprises, but gradually to large enterprises as well. Several Finance on-premise implementations in the past often were slow in rolling out subsequent innovations leaving the users behind with an outdated functionality and user experience. Cloud deployment drastically reduces this friction by ensuring constant consumption of the latest innovations every quarter instead of forcing customers to maintain and upgrade their system. Cloud deployment also makes it easier to integrate with other cloud solutions, especially if the same vendor provides both solutions, by using pre-packaged content.

In a nutshell, it's time for CFOs to start using today's digital technologies to drive digital transformation within Finance functions. It gives them the opportunity to expand their focus on efficiency and compliance while reimagining a new Finance function that drives strategy and new business models as a strategic partner to the business. Stay tuned for more.

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