Finance organizations almost universally agree that digital transformation will have a tremendous impact on how they deliver their services and their overall performance. Clearly, they are not underestimating the significance of going digital.
But the current adoption rates of even some of the mainstream digital technologies tell a different story. While the Hackett Group’s 2018 Key Issue Study reveals very optimistic forecasts about future adoption levels (perhaps overly so), mainstream adoption, even of technologies like cloud, remains low.
The story behind the cloud figures is that many finance teams adopt software-as-a-service (SaaS) solutions on a limited basis to plug holes in their ERP systems, for example for enterprise performance management or travel and expense management. Even so, cloud is projected to grow to 44% in mainstream adoption in two to three years. We’re already hearing stories about cloud ERP implementations, especially among smaller firms that do not have to replace legacy systems. It’s certainly a way to overhaul a fractured, multisystem environment that’s become too difficult to patch up.
Advanced analytics is going to grow the fastest among mainstream technologies, as The Hackett Group categorizes them. That’s in line with our other research. We found that finance teams’ number-one enterprise ask is to deliver better analytics. Master data management, or MDM, is next, with the fastest growth rate. You really can’t run a sophisticated analytics package without reliable data. MDM and data governance are there to ensure data integrity.
Way off the charts (not captured on this chart) is the growth rate for robotics process automation. It’s expected to increase 12.7x over the next two to three years, with mainstream adoption going from its current level of 6% to 38%. It’s also the technology that’s being piloted most often. RPA is helping finance automate a lot of transactional processes by replacing staff with 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 artificial intelligence, they can do a lot more.
What’s the hang-up?
What do these current low levels of adoption tell us? They tell us that finance is still holding back on fully embracing digital technologies.
There are three main reasons for this:
- Finance is stuck in the past. Many finance organizations are still entangled by legacy systems and trying to optimize what they’ve got; they are simply not ready for adopting a digital strategy that includes the implementation of new tools.
- Finance doesn’t have the money. The funding for digital technologies is very limited. According to our late 2017 Digital Transformation Study, of the 10.4% of the finance budget that’s dedicated to technology, only 5.3% is earmarked for digital solutions. That’s a very small budget for what is clearly the lynchpin of future finance transformation.
- Finance lacks the right skills. Finance organizations lack the talent they need to adopt digital tools. Our research shows that organizations that are further down the path of digital transformation identify data and technology savviness as the two most important, yet least mature, skills in their teams. The competition for such talent is fierce. Indeed, business overall is facing a talent shortage. The same 2018 Key Issues study ranks talent as the fastest-growing risk in the business environment.
All of this means that while digital transformation remains critical for the success of finance and its ability to support the enterprise in its own transformation into a digital business, the adoption rate of digital tools will take a while to pick up. What’s encouraging is our observations in our practice every day. We see more experimentation. More exploration. Finance is trying out robotics, AI, and predictive analytics solutions. While it may take a while for this exploration activity to turn into full-blown implementations, the momentum is clearly building.
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