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  • 1. Shaping the Finance Function of Tomorrow FINANCE’S STRATEGIC MANDATE—AND THE INNOVATIONS THAT WILL HELP THEM MEET IT CFOresearch A report prepared by CFO Research
  • 2. Contents Executive Summary 3 About this Report 5 Finance’s New Role: Driving Growth, Providing Business Leadership 6 Driving Profitable Growth Through Better Planning and Predictive Analysis with Big Data Analytics 9 Extending Finance’s Reach Anytime, Anywhere for Better Business Support with Mobile Technology 14 Lowering Costs, Increasing Flexibility with Cloud Computing 16 Conclusion: Finance Is Finding the Right Tools to Drive Profitable Growth 18 Sponsor’s Perspective 20 © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 2
  • 3. Executive Summary The role of the finance executive has inarguably grown more complex over the years. Granted, finance executives must remain expert in fundamental subjects such as financial regulation, international accounting, capital structures, and cost control. But to be fully successful, now they must also layer onto those capabilities a deeper understanding of business operations, the drivers of performance, and ultimately, the company’s overarching strategy. These days, it’s not enough for senior finance executives to understand the cost of large-scale investments; they must also assess the value. When it comes to technology spending, for example, finance leaders can’t simply “sign off” on major outlays. They need to stretch their skills, making sure that they understand the capabilities that new technological innovations will bring to the business and how those capabilities move the company forward. To better understand how CFOs are managing their ever-expanding horizons, CFO Research, in collaboration with SAP, conducted a global survey of 331 senior finance executives at companies with more than US$500 million in revenue. These finance executives, representing a broad range of industries, were based in Asia/Australia, Europe, Latin America, and North America. Even as their roles are changing, CFOs haven’t eased up on their fundamental task: managing the bottom line. About one-third of respondents (32%) say that their top priority remains controlling costs and improving profitability. But the second-largest number of finance executives (23%) see supporting and funding the company’s growth objectives as their top priority, ahead of compliance and other more traditional finance pursuits. Over the next two years, three-quarters of respondents (73%) expect long-term strategic planning to absorb more of their attention, along with planning, budgeting, and forecasting (72%). A large number of finance executives also envision providing additional analytical support to operational decision makers (70%). Throughout the study, finance executives express a desire to shift their functions more toward higher-value, analytical activities, spending less time on transactional matters that do little to contribute to profitability or growth. Increasingly, according to our survey, finance executives see their ability to make that transformation as tied not only to bolstering their own skills, but also to making shrewd use of a trio of advances: cloud computing, mobile technology, and big data analytics. Ever realists, CFOs see the appropriate resources and tools as necessary to their ability to expand their scope beyond narrowly-focused fiduciary oversight to visionary strategy. Cloud computing, for instance, can enable finance executives to automate low-value, transactional activities while also reducing IT costs. In response to an open-text © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 3 •EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 4. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 4 question, for example, one construction company executive cites the potential for “easier collaboration and faster innovation” through cloud computing. Three-quarters (76%) of finance executives responding to the survey report a growing need to work more closely with their companies’ operational units in guiding the business. With data residing within the cloud, information can be accessible anywhere and anytime. This, in turn, can allow finance functions to disseminate information more easily to help drive day-to-day decision making at the business-unit level. Finance executives also view mobile technologies as valuable in extending their reach across large enterprises, enabling them to provide targeted information and analysis across the organization. Furthermore, mobile communication and access allows for two- way conversation: finance executives can use devices to gather real-time financial and operational information from widely disbursed business units, as well as to disseminate analysis and results back across the enterprise. Big data analytics is another area of wide interest among survey respondents, with 86% acknowledging that they need to improve their ability to provide predictive analytics and simulations. Eight out of ten finance executives say that the use of big data analytics could improve their ability to analyze profitability. Survey respondents also agree that big data analytics can afford deeper insight into the drivers of performance. Although respondents recognize the promise of these new technologies, many survey- takers admit that their companies have not yet realized that potential. About one-third of respondents acknowledge that they need to understand cloud computing and mobile technologies better, and nearly half (48%) are not fully comfortable with the best application of big data analytics. Big data analytics, mobile technologies, and cloud computing all can help finance move beyond number-crunching. Once they master these and other innovations, finance executives expect that they will be in a good position to improve the speed and depth of fact-based decision making at their companies—which, in turn, will drive their businesses forward in an increasingly complex, competitive, and global marketplace. •EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 5. About this Report In 2013, CFO Research conducted a survey among senior finance executives at large companies to explore the key challenges that finance departments will face in the years ahead. We investigated finance executives’ new priorities and looked into the ways that technological innovations, including big data analytics, mobile technology, and cloud computing, are transforming finance functions around the world. We gathered a total of 331 complete survey responses. Respondents represent a broad range of company segments, as follows: TITLE Director of finance 18% Chief financial officer 18% Finance manager 15% Controller 14% CEO, president, or managing director 11% Vice president of finance 8% EVP or SVP of finance 6% Other senior finance executive 6% Treasurer 5% REVENUE US$500 million – US$1 billion 21% US$1 billion – US$5 billion 33% US$5 billion – US$10 billion 21% US$10 billion – US$20 billion 10% US$20 billion or more 15% REGION Europe 32% United States/Canada 32% Asia/Australia 18% Mexico/South America/ Central America 18% INDUSTRY Financial services/Real estate/ Insurance 23% Auto/Industrial/Manufacturing 11% Wholesale/Retail trade 10% Business/Professional services 9% Chemicals/Energy/Utilities 7% Hardware/Software/Networking 7% Transportation/Warehousing 6% Food/Beverages/ Consumer packaged goods 5% Telecommunications 5% Construction 5% Public sector/Nonprofit 4% Pharmaceuticals/Biotechnology/ Life sciences 3% Media/Entertainment/Travel/ Leisure 3% Health care 3% Aerospace/Defense 1% Note: Percentages may not total 100%, due to rounding. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 5 EXECUTIVE SUMMARY •ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 6. FIGURE 1 Over the next two years, what will be the priority for the finance function at your company? 15% 14%12% 4% 32% 23% #1 Costs and profitability #2 Growth #6 • Shared services #5 • Compliance and risk #3 • Finance function efficiency #4 • Funding and capitalization Finance’s New Role: Driving Growth, Providing Business Leadership Finance functions are expanding their purview outside of traditional finance concerns. Although senior finance executives are still deeply concerned with improving cost management, their top challenges are, increasingly, their organizations’ top challenges—and finance’s top priorities are the broader organization’s top priorities. This is a central finding of a study conducted by CFO Research in collaboration with SAP, in which we surveyed 331 senior finance executives at large companies in Asia/Australia, Europe, Latin America, and North America. The survey findings deliver a clear message: supporting profitable growth is becoming a core part of finance’s mission. Finance functions are increasingly looking for ways they can contribute to their companies’ strategic growth objectives, even as they remain committed to controlling costs and improving their companies’ profitability. A plurality of respondents (32%) selects controlling costs and improving profitability as their top priority for the next two years. However, the second-largest proportion of respondents—23%—say that their finance functions’ top priority will be to support and fund their companies’ growth objectives. No other priority attracts more than 15% of the total responses. (See Figure 1.) © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 6 Supporting profitable growth is becoming a core part of finance’s mission. EXECUTIVE SUMMARY ABOUT THIS REPORT •FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 7. 39% 54% 49% 37% 53% 29% 47% 25% 49% 20% 40% 38% 71% 15% 46% 22% © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 7 Long-term strategic planning is also identified by the largest share of respondents (73%) as an area in which companies will demand more from their finance functions, reflecting companies’ growing imperative to seek business expansion. Since the recent economic downturn, companies have most often focused on battling for market share in their existing markets—many of which have not expanded substantially since the downturn began. Now, however, as companies increasingly perceive opportunities to extend themselves into new markets, they are working to develop their strategic-planning capabilities in order to take advantage of new growth paths that they have identified. Finance teams are eager to contribute to this effort. Finance teams will have plenty of opportunities to put their growth- seeking skills to work, survey results predict. Around the world, most large companies (81%) now expect to grow domestically over the next two years, with a quarter of respondents (26%) saying their companies will grow substantially and an additional 55% saying they will grow moderately. Finance executives from the rapidly expanding Latin American economies are by far the most optimistic about their prospects, with more than half (54%) anticipating substantial domestic growth. Respondents from the other regions are more likely to anticipate moderate growth in their domestic businesses. (See Figure 2.) The companies represented in the survey have also set their sights on international expansion, with 75% of respondents overall saying they will extend their reach into foreign markets either substantially (30%) or moderately (45%) over the next two years. Finance executives from European companies, in particular, are looking for growth externally more than internally—this is the only region in which the expectations for international growth (78%of European respondents) are higher than for domestic growth (69%). Most large companies now expect to grow—both domestically and inter- nationally. FIGURE 2 Over the next two years, how much can your company expect to grow? North America Europe Asia/ Australia Latin America Domestically Domestically Domestically Domestically Internationally Internationally Internationally Internationally Grow Moderately Grow Substantially EXECUTIVE SUMMARY ABOUT THIS REPORT •FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 8. To achieve this kind of growth, finance functions will play increasingly prominent roles in business leadership, both pursuing strategic goals and overcoming strategic challenges. Survey results show that finance organizations expect broad, external pressures to pose the greatest challenge to their organizations over the next year. These pressures include economic uncertainty, a combination of intense competition and increasing inflation (which together are creating increasing pressure on margins), and greater risk exposure. As a result, respondents anticipate that strategic planning; planning, budgeting, and forecasting; and analytical support—in addition to cost management—will place “much greater demands on finance” in the future. To step up their contributions to strategy, planning, and operational support, finance teams will need to find ways to redirect resources from low-value manual activities to high-value analytical activities. Currently, very few finance teams (19%) manage to spend a majority of their time on analysis. The largest share (42%) lose more than half of their time to low-value activities, and a slightly lower proportion (36%) split their time evenly between manual and analytical activities. However, 45% of respondents worldwide think that their teams should be spending more time on high- value planning and analysis than on low-value manual or transactional activities. (See Figure 3.) As our survey shows, to help them make this shift from transactional efficiency to analytical value, finance executives hope to make increasingly better use of newer technologies: Big data analytics, mobile technology, and cloud computing. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 8 Finance teams will need to redirect more resources to higher-value activities. FIGURE 3 What percentage of your finance function’s time is allocated to low-value manual or transactional activities, compared with high-value planning or analytical activities? What percentage should be allocated? 10% transactional / 90% analytical 30% transactional / 70% analytical 50% transactional / 50% analytical 70% transactional / 30% analytical 90% transactional / 10% analytical n Current n Desired 3% 16% 36% 36% 6% 18% 27% 31% 18% 4% HIGHER VALUE EXECUTIVE SUMMARY ABOUT THIS REPORT •FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 9. Driving Profitable Growth Through Better Planning and Predictive Analysis with Big Data Analytics Most respondents (86%) confirm that their finance functions will need to improve their capabilities for predictive analytics and simulations in order to provide the most value to their companies. Big data analytics can directly boost finance teams’ contribution to high-level strategy development, survey respondents confirm. Finance executives have a strong sense of the potential for big data. In the survey, we defined “big data analytics” as the practice of using sophisticated, computer-dependent analytical techniques to derive real-time business insights from data sets that are extremely large, complex, and/or unstructured. Throughout their responses to open-ended questions, finance executives in the survey cite the ability to support better analysis and better decisions among the best uses of big data by the finance function. (See Figure 4.) According to one EVP of finance at a large European transportation/warehousing company, the key benefits of big data analytics include “gaining insight for more detailed, precise financial planning” and being able to provide “more meaningful strategy recommendations to management.” © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 9 Big data analytics can help finance “provide more meaningful strategy recom- mendations to management,” writes one finance executive. FIGURE 4 In your opinion, what are the best uses of BIG DATA for your finance function? EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP •DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 10. A controller at a large chemicals/energy company explains the benefits of big data analytics for a complex global enterprise. The company—which has more than 100 locations all over the world and operates nine different divisions—has completed about 85% of a global ERP implementation, the controller estimates, but they “have not yet developed a proper tool to analyze profitability and sales markets regionally or across the globe.” The controller says that seeking a way to conduct analysis at that scale “is the best opportunity for big data in my company. Educating the Executive Management Committee on the pros and cons of big data is an important step as a new CFO takes the helm.” Most respondents (82%) say that finance teams can improve their access to rich and detailed sets of financial and operational data through the use of big data analytics, and nearly as many (79%) agree that big data analytics have the potential to improve finance’s ability to analyze profitability in real time. One EVP of finance at a large business/professional services firm based in the Asia/Australia region notes that “improving our ability to develop more accurate profitability analysis in real time” is among the best uses of big data analytics. Similarly, a director of finance at a large North American media/entertainment company says that big data analytics is suited particularly well to “uncovering correlations between behaviors and profitable results (e.g., increased sales, client retention).” Finance executives also say they must improve their ability to support business planning by providing a holistic view of performance, and big data analytics can help them meet this goal. Most respondents (80%) confirm that big data analytics allows finance to provide better insight into the drivers of performance. A finance manager at a large North American manufacturing company writes that big data analytics “would allow for better consolidation of ‘internal’ and ‘external’ data to better forecast operating results and make better decisions, specifically in the area of pricing and promotions.” A majority of respondents (77%) say that big data analytics improves their finance functions’ ability to make use of unstructured data, expanding the range of information that can be mobilized for planning purposes. “It will underpin new waves of productivity and growth and reduce fraud and errors,” says one associate director at a large European financial services firm. “It will enable a more thorough analysis of information.” Finance executives in Asia/Australia are especially ambitious about using big data analytics to get a better handle on performance information. “Big data can unlock significant value by making information transparent and usable at a much higher frequency,” says the CFO of a large financial services firm based in that region. “As organizations create and store more transactional data in digital form, they can collect more accurate and detailed performance information on everything from product inventories to sick days, and therefore expose variability and boost performance.” In addition to improving their own analytical capabilities, finance functions will also need to do a better job of providing self-service analysis that supports day-to-day decision making, say 83% of survey respondents. Big data is being mobilized for this purpose, as it allows finance to provide more useful information for business decision making, according to 82% of respondents. Most (73%) also agree that big data analytics can accelerate decision making throughout the company. A director of finance at a large Latin American wholesale/retail trade company says that big data analytics help finance teams “have information available in a shorter amount of time—through statistics, percentages, or charts that help you have a simplified overall [picture] of the company, either globally or individually.” © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 10 EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP •DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 11. Given respondents’ strong recognition of the benefits of big data analytics, it comes as little surprise that most companies have already found business applications for the innovation. (See sidebar, “Trends in Technology Adoption.”) Furthermore, nine out of ten finance executives (87%) agree that changing business needs or behaviors will pressure the finance function to make even greater use of big data over the next two years. All of this translates into improved competitiveness, which 78% of respondents select as a benefit of big data analytics. A director of finance in the food/beverages/consumer packaged goods sector in North America says that the company is deploying big data analytics to allow “better profitability analysis and a better view of the competitive arena.” At a financial services firm in the Asia/Australia region, the CFO has an even more ambitious view of big data, hinting that it represents a new chapter in business intelligence. “Big data takes ‘large’ to an entirely new level: volume, variety, velocity,” this CFO says. “As [online] information is growing, [big data] is certainly a thing of another level.” WHAT FINANCE EXECUTIVES SAY ABOUT BIG DATA ANALYTICS “Improving our ability to develop more accurate profitability analysis in real time.” “Uncovering correlations between behaviors and profitable results (e.g., increased sales, client retention).” “Better consolidation of ‘internal’ and ‘external’ data to better forecast operating results and make better decisions, specifically in the area of pricing and promotions.” “Underpin new waves of productivity and growth and reduce fraud and errors.” “Better profitability analysis and a better view of the competitive arena.” “Big data takes ‘large’ to an entirely new level: volume, variety, velocity.” © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 11 EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP •DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 12. Trends in Technology Adoption A solid majority of survey respondents (81%) say that their companies make either widespread use (27%) or selective use (54%) of big data analytics—and cloud and mobile adoption rates among large companies are even stronger. One-third of companies (35%) already make widespread use of cloud computing, and an additional 47% use the technology selectively throughout their organizations. Mobile technology sees the highest adoption rates worldwide, with fully half of companies already making widespread use of mobile technology and an additional 42% using the technology selectively. Finance executives consider deploying these innovations—big data analytics, cloud computing, and mobile technology—to be a priority. For each innovation, nine out of ten respondents say that their finance functions will need to make much greater use of it in response to pressure from the business over the next two years. When it comes to improving finance technology, respondents are especially interested in deploying new financial applications or analytical tools, ranking it as one of their top priorities. (See Figure A.) The fact that finance executives put new financial applications on par with integrating existing systems is highly meaningful, given that finance executives have, in recent years, prioritized systems integration far more than other possible technological improvements. Increasingly, finance teams are recognizing the value of deploying new technologies in addition to fine-tuning the systems they already have. This trend is also evidenced by the fact that one-third of finance executives (36%) indicate that making greater use of cloud computing will be a top source of finance- technology improvement for them. Nearly as many respondents (35%) say the same of mobile technology. In general, finance executives’ willingness to select these specific innovations more frequently than a number of broad technological improvements (such as upgrading systems, boosting processing power, and adding data-storage capacity) demonstrates how much stock they put in the power of new technologies. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 12 FIGURE A Which of the following changes in finance technology will be most important for improving the finance function’s ability to deliver services effectively? Better integrating the company’s existing information systems Acquiring or deploying new financial applications or analytical tools Increasing our use of cloud computing Using mobile technology more effectively Increasing data storage and warehousing capacity of our financial systems Upgrading to a newer version of our existing financial systems environment Increasing the processing power of our financial systems Deploying in-memory processing capabilities for real-time analysis of data Other None of these; our existing finance technology is adequate 46% 43% 36% 35% 28% 25% 22% 22% 1% 1% Respondents were asked to select up to three responses. EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP •DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 13. Respondents’ eagerness to take advantage of big data, cloud, and mobile capabilities suggests that they view these new technologies as a means of overcoming their current challenges. Finance teams face a mounting imperative to improve their strategic, analytical, and planning capabilities in order to support their companies’ growth plans. Doing so will require greater finance efficiency in order to free up resources; quicker and more ready access to financial and operating information; and more-sophisticated systems and processes for generating business insights. Throughout the survey, respondents confirm that big data analytics, cloud computing, and mobile technology each has the potential to contribute significantly to these goals. But to fully take advantage of these innovations, finance executives will need to understand them better. For example, although 48% of respondents say that their finance functions understand the applications and uses of big data analytics for finance either in depth (19%) or as much as needed (29%), the same proportion (48%) believe that their finance functions need a better understanding of big data analytics. Finance teams’ familiarity with cloud computing and mobile technology is further along than their understanding of big data analytics, but survey results nonetheless indicate substantial room for improvement. (See Figure B.) Finance executives believe that making good use of big data analytics, in particular, requires several different forms of investment, including training for finance teams and changes to information systems. Majorities of respondents agree that big data analytics are likely to require new skills within finance (79%), changes to information systems (79%), increased investment in finance technology (77%), new types of processing technology (74%), and more resources from finance (70%). Most companies will implement these changes over the next two years, survey results indicate. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 13 FIGURE B How would you characterize your finance organization’s understanding of the applications and uses of these technologies for finance? Big data analytics Cloud computing Mobile technology 48% 39% 32% 29% 37% 34% 19% 18% 28% n Need to understand better n Currently understand as much as needed n Currently understand in depth EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP •DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 14. Extending Finance’s Reach Anytime, Anywhere for Better Business Support with Mobile Technology Finance executives are setting their sights on improving their teams’ ability to support operations. Most respondents (70%) say that their finance functions will need to do a better job of providing analytical support for operational decision makers over the next two years. In a separate question, three-quarters of the respondents (76%) say that their finance functions will need to be more involved in working with the business units. The benefits of this convergence of finance and operations are twofold. First, finance functions involved closely with operations have an especially strong understanding of the business activities that underlie their analysis, and they therefore tend to produce better insights that are more firmly rooted in reality. Second, by working closely with operations, these finance teams are able to communicate their analysis better and ensure it is put to good use. If operations managers have a solid understanding of the true drivers of cost and profitability, they will be able to incorporate that knowledge into their decision making. To extend their support capabilities across the enterprise, finance executives are expecting to make better use of mobile technology. Most finance executives (87%) agree that they will face pressure to make much greater use of mobile technology over the next two years. From improving remote access to information to helping finance provide rapid on-site support, mobile technology brings finance’s much-needed analytical capabilities to every part of the organization. At the same time, finance can more quickly and effectively source financial and operating information from business units separated by geographic borders, improving the granularity of data and analysis. In open-ended questions, respondents confirm these and other benefits of mobile technology. (See Figure 5.) Gaining real- time access to data increases management’s flexibility in decision making, eliminating transactional bottlenecks and allowing for faster, more-informed decisions and approvals. Around the world, finance executives say that mobile technology can help finance better support business units from on-site (77%) and empower users with better data-retrieval capabilities (76%). According to one finance manager at a large North American manufacturing company, making greater use of mobile technology for finance “would accelerate timeliness in areas that require approval (e.g., capital requests, journal entries). Additionally, financial reporting that is viewable on smartphones or tablets would provide greater flexibility for the leadership team to review key reporting.” © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 14 Finance functions involved closely with operations tend to produce better insights that are more firmly rooted in reality. EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS •EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 15. Finance executives are also interested in mobile technology’s capacity to accelerate information sharing and decision making. Most of them (85%) agree that mobile technology can enable finance and business users to share data and make better decisions in real time. They also say it can provide up-to-the-minute access to data (84%). One finance manager at a large financial services company based in Asia/ Australia explains that full use of mobile devices “would ensure key people are connected 24/7” (thereby reducing project delays), and that the innovation allows for the “sharing of information on a real-time basis to all without interruption.” Another finance executive—the CFO of a large North American chemicals/energy company— points out that “up-to-date real-time information is needed especially when dealing with overseas operations.” Mobile technology’s potential to bolster finance’s support capabilities extends even beyond better access to data. In addition to recognizing the benefits stemming from the ability to accelerate decision making, finance executives confirm that mobile technology can accelerate cycle times (72%), eliminate approval bottlenecks (71%), reduce financial risk (70%), and—ultimately—improve their companies’ competitiveness (72%). Having “quicker workflow approvals [and being able to] transmit operational data [remotely] for quicker invoicing and more accurate revenue reporting” are among the top benefits of mobile technology for finance, according to one controller at a large North American chemicals/energy company. Similarly, a VP of finance at a large North American business/professional services company puts special focus on mobile technology’s ability to “enable finance and business users to share data and make better decisions in real time anytime, anywhere.” © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 15 EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS •EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE FIGURE 5 In your opinion, what are the best uses of MOBILE TECHNOLOGY for your finance function?
  • 16. Lowering Costs, Increasing Flexibility with Cloud Computing Almost all respondents (86%) agree that their finance functions will be pressured to make greater use of cloud computing over the next two years. Many finance executives in our survey put special emphasis on the cost savings, data storage, and data access benefits of cloud computing. (See Figure 6.) In line with their continuing concerns with costs and profitability, a majority of respondents (70%) agree that cloud computing can help reduce the technology costs for the finance function, and in open-response questions, lower technology costs are among the most-frequently cited benefits of cloud computing. For example, an associate director at a European financial services firm lists “reduction in IT maintenance cost, reduced IT spend, reduced operational cost, and improved process efficiency” as the best uses of cloud computing. Others mention cloud’s cost advantages for data storage and processing, and about three-quarters of the respondents recognize the benefits of speedier implementation (74%) and easier updates (77%) that cloud technology offers. But just as often, cost savings are mentioned in conjunction with other advantages. The imperative to free up finance resources for higher-value analytical tasks is also encouraging many companies to make greater use of cloud computing. At one large © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 16 Figure 6 In your opinion, what are the best uses of CLOUD COMPUTING for your finance function? EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY •LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 17. North American nonprofit organization, a director of finance says that the best uses of cloud computing for finance include “standardizing on common finance functions that do not add any unique or strategic value for being in-house” and “ensuring applications are updated regularly so the latest patches and security fixes are applied.” In addition, the head of a European construction company writes that cloud computing offers the potential not just for lower cost, but also for “easier collaboration and faster innovation.” Finance executives say that cloud-based systems can boost productivity enterprise-wide by improving access to data (78%) and by providing powerful tools for data queries and retrieval (73%) throughout the organization. A VP of finance at a large North American business/ professional services firm notes that these benefits—which “allow different parts of our organization better access to common data” and also “free finance staff from maintenance activities [to] allow the finance function to provide higher-value analysis”—are actually the most valuable aspects of cloud computing for finance. With cloud technology, says one CFO, “vast amounts of information can be stored and accessed at anytime from anywhere.” These benefits can add up to an overarching increase in competitiveness, according to two-thirds of respondents (67%). Cloud computing for finance can simultaneously “improve the company’s competitiveness and reduce the cost of finance department technology,” according to one survey respondent. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 17 The leader of a European company sees the potential for “easier collabora- tion and faster innovation” in cloud computing. EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY •LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 18. Conclusion: Finance Is Finding the Right Tools to Drive Profitable Growth Business leaders’ thoughts are turning once again to growth, and finance has moved increasingly into the center of those considerations. More and more, CFOs are seeking to effectively communicate key pieces of information—the market, financial, and operating data that truly make a difference for the company’s success—to many different constituencies, including the CEO, business-unit leaders, the Board of Directors, analysts, and investors. They must be able to present and explain which data points really matter to the company’s strategic and financial goals, and why. In an era of dynamic business modeling, finance executives are increasingly becoming deeply involved in understanding, supporting, and even designing business strategy. At the same time, they can’t afford to lose sight of their core mission of monitoring financial performance and fulfilling compliance requirements. This means that finance executives are working more closely with business decision makers, providing more predictive analytics and more real-time insights into profitability that lead to better planning and decision making. In seeking to take on greater strategic responsibilities, finance executives recognize that they must find ways to make their own teams more effective, by shifting them away from lower-value, transactional activities to higher-value analysis and planning. To help them make this transition, finance executives aspire to make increasingly better use of an emerging trio of tools and capabilities: big data analytics, mobile technology, and cloud computing. Finance executives see the potential in big data to make better use of broader and deeper sets of market and performance data for planning and predictive analysis. They are exploring the use of new tools not only to collect more detailed data from a wider range of sources, but also to help them structure data in ways that yield more insightful analysis into the drivers of performance. Finance executives expect that big data analytics will help them understand how individual behavior can translate into profitable results—increased sales, better customer retention, a better match between a company’s offerings and its customers, and greater operational efficiency and effectiveness. They are taking steps to analyze profitability drivers in real time, accelerating decision making throughout the company. As one respondent writes, rigorous analysis of big data helps finance teams “have information available in a shorter amount of time [and] have a simplified overall [picture] of the company, either globally or individually.” Finance teams are also striving to make more effective use of mobile devices in order to accelerate on-the-spot decision making across the enterprise. Mobile technology can © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 18 Finance functions are taking steps to analyze profit- ability drivers in real time, accel- erating decision making through- out the company. EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING •CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 19. © CFO PUBLISHING LLC SHAPING THE FINANCE FUNCTION OF TOMORROW 19 break communication logjams for decisions and approvals, accelerating the growth of the business and providing the flexibility companies need to remain nimble in an ever- changing business environment. Finance executives in our study also emphasize the ways that cloud computing can contribute to the company’s competitiveness: reducing the cost of information technology for the finance function and for the company; providing more scalable and cost-efficient data storage; increasing the speed of decision making; and reducing the cost and time-to- implement for technology updates and enhancements. In the end, one respondent writes, cloud computing can deliver “easier collaboration and faster innovation.” However, putting these innovative tools into practice requires a firmer grasp on their specific applications, both for finance and for the enterprise. Nearly half of the executives in our survey admit that they will need to put in the work required to use big data analytics more effectively. This is likely to require new analytical skills for the finance team, as well as new investments in systems and applications powerful enough to collect and process the growing volume of data. In addition, a third of the finance executives surveyed say that they also need to understand how to get the most out of new capabilities afforded by mobile technologies and cloud computing. To become more effective business leaders, finance executives will also need to be able to use a wider range of information tools more effectively. Larger volumes of increasingly detailed data are becoming more readily available, and the need for speed in information processing and communication is growing daily. In expanding their interests and responsibilities into more areas of the business—operations and strategy alike—the finance executive of today cannot afford to ignore the competitive advantage of advanced analytics, enabled by the effective application of big data analytics, mobile technologies, and cloud computing. To become more effective business leaders, finance executives will also need to be able to use a wider range of information tools more effectively. EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING •CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH SPONSOR’S PERSPECTIVE
  • 20. Sponsor’s Perspective Who knows what the roles and responsibilities of those entering the finance profession today will look like when they are at the peak of their careers? While it’s a safe bet that tomorrow’s finance leaders will still be applying the familiar skill sets of today in responding to needs for sourcing capital at optimal cost, managing an increasing barrage of compliance requirements, and providing ever more transparent reporting and forward-looking disclosure, their responsibility for processing financial transactions may continue to slip away as responsibility for global business services comes within the remit of the COO. At the same time, those in finance will be expected to have a thorough understanding of business operations, the drivers of financial performance, and ultimately, their company’s strategy, working alongside their peers to focus resources to those businesses that deliver sustainable returns for stakeholders. Rather than just being the rule-makers and gatekeepers of capital expenditure, they will also increasingly be held responsible for ensuring that major investments in technology and wider business initiatives really do deliver business value—a trend that we already are seeing today as the role of the CIO increasingly falls within the finance function. The findings from this important piece of research show that this transition is already under way, with about a third of CFOs surveyed saying their top priority is controlling costs and improving profitability, and nearly a quarter saying it is supporting and funding the company’s growth objectives—all ahead of compliance and other more-traditional finance activities. But frequently, we hear that finance teams are compromised in fully embracing their future roles because of constraints on their time or the lack of appropriate solutions and tools to provide value-adding decision support to their business colleagues. Finance will only break through this impasse by adopting technologies such as cloud computing, which provides rapid and flexible access to solutions that drive efficiency and adaptability while lowering IT costs; in-memory computing, which gives finance and the wider business near-instant insight into their burgeoning amounts of big data; and mobile technologies, which provide targeted information and analysis and engage colleagues in a two-way collaboration across a widely distributed enterprise. All of these technologies, along with predictive analytics and risk management which help identify likely scenarios and access how they might impact financial performance, exist in the SAP portfolio today. Indeed, forward-thinking organizations are already adopting these technologies to accelerate their own financial transformation, providing capabilities and benefits that they see as differentiating competitive advantages. That your own finance department will be transformed into a value-adding function is not open to debate; but how quickly you get there is—and the choice is yours. For more information, visit SAP solutions for Finance. SHAPING THE FINANCE FUNCTION OF TOMORROW 20 EXECUTIVE SUMMARY ABOUT THIS REPORT FINANCE’S NEW ROLE: DRIVING GROWTH, PROVID- ING BUSINESS LEADERSHIP DRIVING PROFIT- ABLE GROWTH THROUGH BETTER PLANNING AND PREDICTIVE ANALYSIS WITH BIG DATA ANALYTICS EXTENDING FINANCE’S REACH ANYTIME, ANYWHERE FOR BETTER BUSINESS SUPPORT WITH MOBILE TECHNOLOGY LOWERING COSTS, INCREAS- ING FLEXIBILITY WITH CLOUD COMPUTING CONCLUSION: FINANCE IS FINDING THE RIGHT TOOLS TO DRIVE PROFITABLE GROWTH •SPONSOR’S PERSPECTIVE
  • 21. Shaping the Finance Function of Tomorrow: Finance’s Strategic Mandate—and the Innovations That Will Help Them Meet It is published by CFO Publishing LLC, 51 Sleeper Street, Boston, MA 02210. Please direct inquiries to Linda Klockner at 617-790-3248 or lindaklockner@cfo.com. CFO Research and SAP developed the hypotheses for this research jointly. SAP funded the research and publication of our findings. At CFO Research, Celina Rogers directed the research, and Matt Surka and David Owens wrote the report. CFO Research is the sponsored research group within CFO Publishing LLC, which includes CFO magazine, CFO Conferences, and CFO.com. December 2013 Copyright © 2013 CFO Publishing LLC, which is solely responsible for its content. All rights reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission.