Q & A

Finance Leaders Challenged to Prove Value of Digital Investments

As finance leaders explore investments in data analytics and other digital tools, demonstrating the value of those technologies remains elusive for many.

Nearly half of finance and accounting executives are not satisfied with the benefit of digital technologies, and only 9 percent believe they achieve optimal performance from their current processes, according to the Finance in the Digital Age study from the Genpact Research Institute and HfS Research.

According to Shantanu Ghosh, senior vice president, CFO Services and Consulting at Genpact, more than three-quarters of respondents agree digital technologies are fundamentally changing the finance function, but many executives struggle to achieve real transformation.

FEI Daily spoke with Ghosh about the state of digital transformation in the finance function today.

FEI Daily: As you’re talking to clients, how do you define “digital?”

Shantanu Ghosh: With every client, we go through a phase of describing digital as leveraging new and agile technologies including analytics capabilities within those technologies, to drive business performance change. It’s not about one specific technology, whether it’s cloud, machine learning or cognitive intelligence, it’s about driving significant change.

FEI Daily: Within that context, what did your research tell you?

Shantanu Ghosh: The first takeaway is that finance executives are becoming converts to the potential of digital being transformative for their organizations. They have gone through a cycle of huge excitement and interest —  and a cycle of saying it’s a bit of  smoke and mirrors — to now where they are seeing examples of change, whether that’s in their organizations or their lives as consumers.  They’re seeing how digital can have a fundamental transformative impact on what they do in finance and, more importantly, how finance can be a stronger business partner across the gamut of business activities.

The second point is, there is a sense of frustration about the lack of tangible proof points of digital’s potential. Finance executives are looking for evidence that shows how robotic automation, for example, can take up to 70 percent of the work out of a process, or where cognitive intelligence is driving fundamental change in a forecasting model. While they are seeing bits and pieces of it, there is also some impatience and frustration as they aren’t seeing a multitude of proven examples to show how digital can fundamentally change end-to-end processes.

FEI Daily: Where are financial leaders making those digital investments?

Shantanu Ghosh: Many companies, especially those in the Fortune 1000, are switching their investments toward approximately 60-to-70-percent on agile technology, and 30-to-40 percent on legacy technology, such as their core ERP. Technology budgets aren’t growing overall, but the mix is changing pretty dramatically in terms of new digital work versus legacy.

A large part of digital spend is moving from owning to subscribing and investing in on-demand solutions. It’s matured in areas like CRM, or in niche areas like payroll or T&E, but it’s now catching up in areas like order management, supply chain control, payment platforms and invoicing platforms, reconciliation platforms, financial planning and analysis and other functions.

FEI Daily: You mentioned earlier a sense of frustration with being able to see demonstrable benefit. Are there other issues that executives are dealing with?

Shantanu Ghosh: The key for real results is a fundamental transformation of processes enabled by the possibilities of digital; not just implementing new technology.  Any approach that leads with technology is bound to have suboptimal results.

On digital, another challenge is the ability to determine the best solution. If you look at core legacy technologies, for all practical purposes, you are down to two choices and, depending on your industry and where you are, you could make a good choice quickly. If you consider the hardware world, or switches and routers, you are down to similar deterministic choices.

With digital, there’s a need to blend different technologies very well. If you think of a finance process, a vendor may say you can eliminate 80 percent of the work when you put in general purpose robotic automation software, but you may actually end up only eliminating 20 or 25 percent. Why? Because even the most clerical work has nuances that you have to keep on doing at the edges, that can drive down applicability that creates too many exceptions. The exception handling then takes a life of its own.

To get to the full power of digital transformation, you often need to mash up robotics, machine learning, and some amount of analytics and visualization to drive the full benefit. And this is a new field. There aren’t many people roaming around with that kind of expertise and experience to make it happen easily.

Increasingly there are purposefully configured solutions for specialist areas combining different technologies, for order management, supplier portals, and other areas, for example. You have to find a way to evaluate what is right for you, and how you mash a solution up with other technologies.

Like any new technology cycle, this is really the application of a bunch of technologies that are becoming commercial and a little more ubiquitous. We are possibly at the upswing cycle of the initial stage.

FEI Daily: When you have to blend these various technologies to get to your end goal, how challenging is the integration part of that?

Shantanu Ghosh: It is very challenging, but technology is becoming much more flexible with the APIs and the ability to correspond among them. There are cases where it is very tough, but there also are more standard formats and data exchange and reporting. One of the technologies we use on the supplier side can take in 25 different formats of data and can integrate dozens of protocols. Therefore, it is much easier to integrate with other pieces because all of them work on those more flexible integrations. So it’s challenging, but it’s nowhere close to what all of us experienced just three years back.

FEI Daily: If you think about those different tools, how important is the quality of the underlying data?

Shantanu Ghosh: When you are finally running any algorithm, or any analytics, data quality becomes paramount. What is changing, and what is the most interesting part of where technology is going today, is that we’re moving away from companies having to build an often elusive strict and static data hierarchy and a master data process, to technologies that can get data in a more heterogeneous format, cleanse it, and make it fit for use for the analytics piece.

That is fundamentally changing the potential of what you can do with data, because you can get data from many different sources, including external sources, and have cleansing and governance technologies built in that make it more effective for analytics tools. That’s creating the potential to use data from outside, because you can never mandate data structures outside your own system.

FEI Daily: Are companies seeing digital technology as a source of competitive advantage?

Shantanu Ghosh: They are, and as we talk with existing or potential customers, there’s a very large portion of the business case being predicated on driving fundamentally different outcomes. For example, if it’s order management data, it’s about driving up customer satisfaction, which obviously should have a positive correlation to your revenue and sales, as opposed to just cutting the cost of order management or getting efficient in terms of cycle time. Productivity continues to be a driver, but technology now goes beyond that into customer satisfaction, leakage prevention and therefore revenue impact. And that is core competitiveness — it’s not just about risk prevention, it’s about better outcomes.

I think the big change that has happened with customers is the appreciation of the fact that technology is only going to deliver value when you do fundamental process transformation. If you put the latest and greatest technology on bad processes, it actually only complicates life and makes it worse.