For the first time in 10 years, finance executives predict an uptick in technology spending in 2020, according to new Finance Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT). By accelerating cloud migration and the adoption of RPA, data visualization and advanced analytics solutions, finance is seeking to optimize cost efficiency while driving enterprise growth. Most finance executives expect to see an increase of 5-10% in the share of the finance operating budget dedicated to technology in 2020, the research found, despite a projected 3.4% decline in the overall budget.
Technology spend as a percentage of the finance budget has been flat or declining since 2009, but finance is prepared to make incremental investment to advance its digital transformation agenda. Our research shows that executives are setting aggressive year-over-year targets for digital technology adoption. At the end of 2019, our study respondents projected that in 2020 they would see a rise of 26% in the adoption of data visualization tools, 24% in RPA implementations, 20% in migration to next-gen cloud-based core finance applications, and an 18% increase in the adoption of advanced analytics solutions.
The research recommended that finance must go digital, faster, in order to support companies’ two biggest objectives for this year: Optimize the cost structure to become more agile in preparation for economic volatility and continue to invest in product and services innovation to maintain competitive advantage. For finance functions, that also means addressing internal cost inefficiencies and working with the business to identify and execute on revenue growth opportunities.
This research is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/20keyfin1912sm. Note – The full research piece includes 10 charts containing nearly 60 complete metrics.
According to Jim O’Connor, North American Practice Leader, The Hackett Group, “Finance has an aggressive agenda for 2020, with analytics and technological advancement as the top two transformation priorities. Finance executives realize that in the intensely competitive digital economy companies cannot arbitrarily cut cost at the expense of sustainability. It is finance’s job to ensure intelligent cost reduction through smart automation and the use of analytics to help management decide where to cut and where to invest.
According to Nilly Essaides, Senior Research Director, Finance & EPM, The Hackett Group, “Without advanced analytics, management cannot make fully informed decisions, or make them quickly. So, there’s a tremendous need for finance to improve its data and analytics competencies, adopt new tools, and enhance the business value it provides directly.”
Finance’s transformation progress, however, faces several critical hurdles. The biggest is overcommitment, followed by skills deficiencies, capacity constraints, and technology and process complexity.
Because finance is asked to juggle multiple projects, the function must find ways to prioritize. Our research identified six critical development areas, defined as those with the largest gaps between the importance of its objectives and finance’s ability to deliver on business expectations. They are: redeploying capacity to value-added work; improving performance measurement; improving agility; aligning skills and talent with business needs; improving analytical capability; and leveraging new technologies. It’s imperative that finance organizations narrow these gaps, allowing them deliver value beyond lowering cost and transition into their new role as provider of actionable insight to support tactical and strategic management decisions.
The study found that finance must take a holistic approach to addressing its critical development areas across all elements of its service delivery model. Finance must be clear how services will be delivered, and must focus on improving human capital, according to Essaides. “The low prioritization finance has placed on human capital, including upskilling and reskilling of staff, is one of the most concerning elements of this year’s findings. It’s towards the bottom of the ranking of service delivery model elements and isn’t even on the top 10 list of finance key issues for 2020. This suggests that not only does finance need to address the skills needed for the future, but it must also clearly design how services will be executed along with defining both new and old roles within finance to deliver on business expectations. Finance must focus its attention in these areas, because without the right service delivery model, the right roles, people, and skills, even the best technologies will likely fail to produce the results.”
Many finance organizations are still in the early stages of digital transformation, and continue to rely heavily on legacy financial applications, the study found. However, such legacy systems have the lowest rate of meeting business expectations. Finance organizations are hoping to improve realization of business objectives of their technology investment through strong growth in adoption of next-generation cloud-based systems and RPA.
“Our data shows, for example, strong growth in the adoption of cloud-based core finance applications,” said Essaides. “And the encouraging news is that more than 70% of the finance function that have adopted cloud-based solution have been able to realize or exceed their business expectations.”
Looking ahead, The Hackett Group recommends that finance keep a keen focus on optimizing service delivery and addressing the skills gap that it is facing in order to support not only finance but also the enterprise. Driving cost efficiency and supporting growth strategies are the top priorities in 2020 for the enterprise. Finance has an opportunity to become more of a strategic advisor to support the enterprise growth strategies while also generating the expected cost efficiency improvements. This will require finance to prioritize building the right analytic capabilities, the right technology for efficiency improvement, and aligning skills and talents with business requirements.
The Hackett Group’s 2020 Finance Key Issues research, “Balancing Cost Reduction with Adding Value,” is based on results gathered from nearly 200 executives in finance, HR, IT, and procurement at a global set of midsized and large enterprises.