Remember what life was like in the mid-1980s? Some of our more seasoned readers likely do. Just in case, here’s a quick flashback: The most popular movies were “Top Gun,” “Platoon,” and “Crocodile Dundee.” The Bangles, Culture Club, and The Pet Shop Boys topped the music charts. Everyone watched “Hill Street Blues” and “Cheers” at their scheduled times, on TV sets with commercials!
At this point you’ll either be mistily reminiscing, or you’re of an age where you can’t even imagine a world without Netflix on your mobile device. Regardless, we can all agree that the world has changed a great deal in the last 30 years and that a big driver of that change has been technology.
Businesses have had to deal with a lot of change, too, and many have successfully embraced change to create whole new industries and many billions in new value. Yet other businesses literally vanished: Nearly 50 percent of the companies that were part of the Fortune 500 and FTSE 100 in 2000 no longer appear in those rankings today.
So, what happened? Well, some were the result of the global merger and acquisition spree that has taken place over the last 30 years and continues today, and others fell victim to the financial crisis and Great Recession earlier this century. But many were simply overcome by the forces of digital disruption. In the face of technical evolution, their inaction allowed innovative start-ups and more agile competitors to win with newer, faster, and more-efficient ways of doing business.
With that in mind, it seems crazy that technology itself should be a barrier to change, but for many businesses that is precisely what happened and continues to happen today. Companies struggle because much of the technology they currently have in place to run their businesses was not designed to help them adapt and excel in this era of digital disruption. It was created in the Culture Club era when business requirements (and, certain musical tastes) were simply not the same as today.
Technology originally designed to automate transactions and financial accounting is now preventing finance from being a better business partner.
A good example of this in practice is how financial organizations have approached technology over the last 30 years. As a self-confessed recovering financial accountant and auditor, I’ve been living in the finance world since the early ‘80s. In my experience, the technology that was originally designed to automate transactions and financial accounting is now preventing finance from realizing its ultimate goal: To be a better business partner.
Consider that today’s financial function has three main areas of responsibility: Transaction processing and accounting, compliance and control, and business partnership. Finance leaders are frustrated because their teams spend too much time dealing with the first two, leaving little time to be the strategic partners their companies truly need.
What does this strategic partnership look like? It requires finance to deliver data that goes way beyond the general ledger information that legacy systems were designed to record. With a wider set of stakeholders and a business landscape that is continually evolving, finance is being asked to provide the broader company with contextual information that can actively influence decision-making and, for the most part, they’re struggling in this mission.
As technology has created many new business opportunities, so too has it created opportunities to rethink how financial systems should be built and what they should offer.
In short, finance needs to undergo a transformation. They need faster access to relevant data, better reporting, and stronger built-in internal controls. And because older financial systems were not created with this vision in mind, businesses and their legacy vendors have attempted to fill the void by bolting on missing capabilities. As a result, finance technology has become a complex mix of acquisitions, custom integrations, and middleware.
The bolt-on approach may address specific functional gaps, but it can’t support the complete transformation that finance requires. Very simply, systems resulting from this complex architecture cannot adapt and change. Scaling or changing these systems to meet the needs of a growing, changing business is slow, costly, and in some cases, virtually impossible.
But as technology has created many new business opportunities, so too has it created opportunities to rethink how financial systems should be built and what they should offer. The emergence of cloud computing, increased processing power, falling storage costs, the rise of mobile devices, and the advent of the consumer internet have led us to a new, more economical, powerful, and agile foundation for finance. Those willing to take advantage of these changes are fulfilling the long held, but seldom realized, vision of transforming finance into a powerful business partner.
At Workday, we saw the opportunity to build a system from the ground up to take advantage of this new technology foundation, enable transformation and business agility by combining planning, transaction processing, governance, accounting, reporting, and analytics into a single, easy-to-manage system. Companies can quickly and efficiently bring together actionable information about their people and money in a system that can evolve with them as their business changes.
Financial transformation by definition is not something you can bolt-on—it requires a willingness to question long-held assumptions and envision where you want to go and a total technology rethink. In the next blog, we’ll take a closer look at how one, unified, cloud-based system can create the perfect environment for finance to handle transaction processing and compliance and control while delivering the answers the business needs.
Read part two in the series, “How the CFO Can Take Control of Transaction Processing.”