Video: Why some companies won't succeed on their digital transformation journey
One of the common complaints from IT executives is how difficult it is to get funding for innovative technology projects. But the desire to digitally transform businesses for competitive reasons has changed things, and finance executives are loosening up the purse strings considerably.
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A recent survey of more than 300 CFOs and financial leaders by audit, tax, and advisory firm Grant Thornton LLP in partnership with CFO Research shows that more than two-thirds (69 percent) plan to increase their investment in technologies that speed business change in the coming year. About 40 percent of the executives plan a spending increase of more than 10 percent in the next 12 months.
"Historically, CFOs have said they struggle with the cost of maintaining their IT infrastructures, which has derailed digital transformation at their companies," said Srikant Sastry, national managing principal of advisory services at Grant Thornton. "This year's survey shows something of a sea change taking place."
The key factor driving the spending increase is competition, with 41 percent of the financial leaders saying their companies' digital transformation investments are designed to help them be more competitive through greater differentiation. More than three-quarters of the executives surveyed agree that digital transformation is critical, 23 percent in the short-term and 56 percent in the long-term. Technology investment strategies have traditionally been influenced by the need to improve operational performance and cut costs, Sastry said. But the study indicates future investment will shift to more strategic opportunities such as enhancing customer experience.
More than three-quarters of the executives surveyed said digital transformation is critical for their company. One thing that has them concerned, however, is their organizations' readiness for transformation. Many are concerned about whether their companies will be able to staff teams once automation technologies become more widespread.
More than half (52 percent) said they would prefer to retrain the existing staff, while 20 percent said they would rather recruit new staff, and 17 percent prefer to outsource functions to a third party. The financial executives themselves doubt their own ability to change with the times, with nearly 90 percent admitting that they need to gain much stronger skills in data analytics than they currently have.
In addition, many organizations are struggling to measure the payback of technology investments. Just over 40 percent of the finance executives said they don't have good financial metrics that show the return on investment (ROI) in IT efforts. Only 12 percent said they have an effective system of measuring financial performance associated with technology deployments.
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"Showing the ROI of IT investment is a mercurial challenge," Sastry said. "Companies should start by better integrating the CFO's efforts with the CIO's efforts. Together, they can create metrics showing if their organization is transforming and overtaking the competition."
Digital transformation is already having an impact on organizations, however, including within the finance function itself. About one-quarter of the respondents said their finance team is adopting advanced analytics and another 24 percent expect to do so within 12 months. Another quarter expect to adopt advanced analytics within two years.
The finance executives are also intrigued by the potential of artificial intelligence (AI) technology, with 20 percent expecting to adopt AI in some fashion within five years. Also getting attention from the finance leaders are technologies such as distributed ledger technology, machine learning, robotic process automation, and optical character recognition.