At the Same Time, Finance Faces New Budget
Constraints
Faster adoption of digital tools is critical if finance is to
deliver on its key mandates in 2018 -- to help companies drive
growth while holding down cost, according to new Finance Key Issues
Research from The Hackett Group, Inc. (NASDAQ:HCKT).
Finance also faces significant budget constraints of its own in
2018, which can also be addressed in part through digital
transformation, the research found.
Unlocking the value of digital transformation is emerging as a
strategic imperative for the enterprise in 2018. The Hackett
Group’s research identified four “must dos” for finance: balance
investments to improve performance; improve analytics to better
support the enterprise; leverage digital strategy to improve
efficiency, effectiveness, and agility; and reshape the service
delivery model to improve customer service and reduce cost.
Almost all finance organizations now understand that digital
transformation will radically reshape their ability to add value to
the enterprise and reduce cost. The research found that more than
half now have a digital transformation strategy in place,
significantly more than in 2017. But only 35 percent say they have
the capabilities to execute on this strategy, and this number has
not increased over last year.
Despite this capability gap, finance organizations are set to
rapidly increase their adoption of both mainstream and emerging
digital technologies over the next two to three years, with the
fastest growth expected in areas such as robotics process
automation, cloud-based applications, advanced analytics, and
master data management technologies.
A complimentary version of the research is available for
download, following registration, at this link:
http://go.poweredbyhackett.com/keyfin1801sm
“Smart automation and other digital transformation approaches
are critical if finance is to accomplish its goal of lowering costs
and headcount, while at the same time driving greater value through
improved insight to support management decision making,” said Nilly
Essaides, The Hackett Group Finance Advisory Program’s senior
research director.
“But before finance can fully realize the potential benefits of
digital transformation, it has to close the gap between its
strategies and its ability to execute,” said Essaides. “This is a
significant challenge at present. Finance must find ways to
attract, develop and retain new talent, and offer new learning and
experiential opportunities to allow existing staff to develop the
skills and competencies most valued by the business.”
Balance Investments
According to The Hackett Group’s research, finance must balance
cost and performance in 2018, with a significant productivity gap
being driven by a combination of a 1.3 percent projected reduction
in operating budget and revenue growth of 3.6 percent. The cut to
finance budgets is the smallest in the past three years, but it is
significantly larger than those expected for other business
services functions in 2018. While IT budgets are expected to rise
slightly in 2018, both procurement and HR are expecting smaller
reductions.
One reason that finance costs will drop by less than in recent
years is that automation initiatives and organizational changes
have already driven out significant process inefficiencies, making
additional cost cutting more challenging.
Support the Enterprise with Improved Analytics &
Insight
Supporting enterprise information/analytics needs is finance’s
top enterprise objective in 2018, closely followed by supporting
enterprise digital transformation, The Hackett Group’s research
found. It is also the area where finance intends to focus more of
its improvement efforts in 2018. The goal of the analytics focus is
to enable finance to more effectively provide insight so management
can make smarter decisions about investments and capital
allocation.
Most finance organizations are undertaking a number of
technology, process, and people-related initiatives to improve this
capability. But at the same time, the combination of analytics,
modeling, and reporting is one of several areas where a dramatic
capability gap exists in finance. While it is of the highest
importance, it is also ranked as among the most challenging to
address.
An important part of this challenge is finding the right talent.
While finance can access new technologies, it has a very hard time
finding the right people to implement and use them. Talent is
another area where finance sees high importance but low ability to
address.
Leverage Digital Strategy
Nearly all finance organizations now expect digital
transformation to bring step-change improvement to performance and
alter the function’s operating model. A total of 56 percent now
have a digital strategy in place, up from 44 percent last year. But
only 35 percent believe they have the resources and competencies in
place to execute in their digital transformation strategy, and this
number has not increased in the past year.
Senior finance management is now aware of the importance of
digital transformation, and is beginning to reallocate additional
resources to drive fuller adoption. The research examined current
and projected adoption rates for more than a dozen digital
technologies, and identified several interesting trends.
Cloud-based tools are already gaining momentum for applications
such as EPM, expense reporting, and account reconciliation. A
cloud-first policy is also emerging for applications that extend
the functionality of core transactional finance system.
The research found that the percentage of finance organizations
that have broadly adopted advanced analytics is expected to grow by
more than 8X over the next two to three years. A similar trend is
expected in several other areas, including master data management
technologies, where a 5.4X growth in broad adoption is expected,
and data visualization tools, where a 4.5X growth is expected. High
growth rates are expected for the adoption of an array of emerging
digital technologies, including 12.7X increase for robotic process
automation and 6.8X growth for cognitive computing.
Robotic process automation, which is projected to be the
fastest-growing of all the digital technologies considered in the
study, can help finance automate transactional processes, replacing
staff with automated solutions that can provide the link between
disparate systems, enter data from one system to the other, and
substantially reduce cost and error in processes like accounting.
Robots are best suited for rule-based processes. But with the
addition of cognitive computing, another strong growth area, they
can do even more.
Reshape the Service Delivery Model
Virtually all research respondents also agreed that digital
transformation is expected to significantly alter finance’s service
delivery models. The research found that this is already taking
place, with reallocation of finance headcount and workload from
business units to global business services and centers of
excellence expected to occur over the next few years.
“The pace of growth for digital technologies in finance is
rapidly increasing,” said Tom Willman, associate principal and
Finance Executive Advisory Program leader, The Hackett Group. “It’s
no longer enough to simply understand the potential impact of
digital technologies. Finance must move beyond readiness, move
beyond exploration, to fuller adoption in those areas with the
greatest impact. You must have a strategy in place, a robust
business case, a roadmap, and the people and resources to support
it. If you’re still just preparing to move forward, you’re likely
to be left behind.”
The Hackett Group’s 2018 Finance Key Issues research, “CFO
Agenda: Finance’s Four Imperatives to Accelerate Business Value,”
is based on results gathered from more than 160 executives in the
US and abroad, most at large companies with annual revenue of $1
billion or greater. A complimentary version of the research is
available for download, following registration, at this link:
http://go.poweredbyhackett.com/keyfin1801sm
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm to
global companies, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management and global
business services. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information
technology, including its award-winning Oracle and SAP
practices.
The Hackett Group has completed more than 15,000 benchmarking
studies with major corporations and government agencies, including
97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of
the DAX 30 and 59% of the FTSE 100. These studies drive its Best
Practice Intelligence Center™ which includes the firm's
benchmarking metrics, best practices repository and best practice
configuration guides and process flows, which enable
The Hackett Group’s clients and partners to achieve world-class
performance.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by
calling (770) 225-3600.
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The Hackett GroupGary Baker, 917-796-2391Global Communications
Directorgbaker@thehackettgroup.com
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