By Simon Edwards is Chief Financial Officer for ServiceMax
UK Government turmoil, warnings from the IMF, rising inflation, the war in Ukraine and spiralling energy costs continue to have a big impact on the global economic outlook, compounding an already difficult overhang created by the COVID-19 pandemic. Meanwhile, central banks are scrambling to reverse the impact of over a decade of of fiscal stimulus, while talent shortages and logistics constraints are disrupting supply chains, resulting in multi-year inflation highs.
Gartner’s recent forecast shows CFOs believe technology is at the very heart of competitiveness and viability, with 78% planning to maintain or increase technology spend – even if inflation persists through 2023. Admittedly, it can be tempting to cut tech spend in the face of global retraction. Yet scaling back on digital transformation initiatives in the face of inflation is the wrong approach. Leading digital organisations have a lower cost of doing business and thus a significant competitive advantage in the current inflationary environment. There’s a strong argument that now is the time to invest in technology as it helps businesses to do more with less.
Technology is now so fundamental to enterprises that how CFOs and CIOs manage tech spend and implementation over the next year could significantly impact success or failure.
As the CFO remit expands, we can and should do more than simply keep the lights on in the face of current inflationary trends. I’ve outlined five key technology strategies below from the CFO perspective.
Workforce Empowerment and Enablement
More traditional CFOs may feel a little uneasy about the post-pandemic trend of hybrid working but the reality is that talent models are evolving quickly. Skills gaps in increasingly digital organisations can lead to inefficiencies and poor productivity. Understanding that a workforce, now attracting older, tech-savvy Gen Zers has a different view on how they want to work and how they use technology at work.
Every organisation will need to navigate working flexibility and empowerment, to address shortages but also to drive performance. Collaboration tools, remote access, cyber security and centralised customer and product data capabilities will be crucial to enabling employees regardless of location and role.
As McKinsey said recently in a blog; “successful organizations deliberately create a flexible culture by developing leaders who foster outcome-oriented performance, trust and togetherness, and team engagement and problem solving.” Insisting employees are physically in the office and working strict office hours runs counter to the realities of today’s reality.
Data Creation and Retention
Data is crucial to enterprise costs, value creation and staff retention. Whether it’s structured or unstructured, it is essential for understanding customers, managing supply chains and inventory and providing intelligence on the business and its key markets. Smart use of data models can lead to increased operational efficiencies, personalization of products and services and opportunities to unlock growth.
The challenge for CFOs is to understand where to focus. As futurist Bernard Marr suggests, every organisation needs to evaluate its data use through different lenses. Does your data help your firm improve evidence-based decision-making, understand your customers and markets better, enable smarter products and services, improve internal processes and add additional revenue by monetising data?
It’s also worth noting that for many CFOs, data problems lurk beneath the surface. Accuracy and compatibility Are paramount when it comes to measuring performance across different departments and sources. It’s a common problem and needs addressing before it does material harm to the business.
Scale the Cloud
As the cost of capital rises, increasingly CFOs want to be able to point to a near-term payback for net new investments. Organisations need to look to retire on-premises environments and scale their cloud operations based on demand to reduce capital expenditure burden and also to ensure the most bang for their buck.
The trend towards cloud infrastructure is well documented – research firm Forrester claims over half of European IT decision makers see cloud modernisation as a top priority – and the cost benefits, although occasionally criticised due to rising monthly costs, still outweigh the capital investment required for physical internal infrastructures. In short, scaling cloud investment makes a lot of sense for growing businesses or those looking to enable a more distributed workforce.
Software-as-a-Service is a Must
As McKinsey says in a recent article, “there’s a lot to like about SaaS. For one thing, the asset-light nature of SaaS means it has lower overhead and logistical costs than physical products. Second, it frees traditional companies from doing some of the most complicated technical work by themselves—they can partner with major cloud service providers. And third, since software at its core is a series of 1s and 0s, it’s easy to scale, especially when combined with the cloud’s extensibility and elasticity.”
Of course, it’s even better if that software is actually built for use in the cloud. Cloud-native applications can take full advantage of the scale, resiliency and flexibility the cloud provides. For CFOs looking to maximise impact for minimum outlay, that is surely a must.
It makes sense for any organisation, if not doing so already, to explore how automating some functions in the back office can help improve processes, cover skills gaps and increase efficiencies. Using technologies, such as Robotic Process Automation (RPA) and AI-enabled data analytics will provide enterprises with more intelligence for forecasting and planning, more efficient and transparent transactions and more effective use of employee skills and time. It should enable employees to focus on creating more business value.
Gartner’s Finance practice cites automation of back-office workflows as being key to achieving efficiency gains across finance areas, such as accounts payable, accounts receivable and internal IT services, such as helpdesk support. When margins are under pressure in a cash-constrained environment, the urgency to improve productivity in these areas is heightened even more.