Digital transformation for modern finance
DXC Eclipse
2
DXC Eclipse
Digital transformation for modern finance
The term ‘digital transformation’ has reached buzz word status over the last few
years. In 2019 an online search for the term ‘digital transformation’ quickly returns
more than 440 million results.
It is no surprise, then, that digital transformation initiatives consistently rate
among the top five priorities of most executive teams around the world. Yet, while
the strategic benefits of digital transformation are clear to most organisations,
some functional areas still lag transformation efforts. Often, this includes back
office and non-customer facing departments, and notably, the finance function.
A 2018 McKinsey study found that many companies are “still in the early stages
of applying digital technologies to finance processes in ways that will create more
efficiencies, insights and value”1.
Hallmarks of this lag for finance teams appear in the persistent use of tools such
as spreadsheets, key business outcomes remaining reliant on manual work, siloed
data and disconnected enterprise resource planning (ERP) systems. Also common
is a heavy dependency on legacy systems, slow responsiveness to business
requests and finance teams working 24x7 at month and quarter end.
Challenges for finance and drivers for change
Regardless of industry or organisational size, finance teams commonly face similar
challenges in today’s business environment. These include:
• surging data, legacy systems and static reporting
• manual, inefficient and error prone processes
• inadequate tools to react to growing business complexity
• increasing regulations, risks and threats.
White Paper
A 2018 McKinsey study found that many companies are “still in the early stages of applying digital technologies to finance processes in ways that will create more efficiencies, insights and value”.Source: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/memo-to-the-cfo-get-in-front-of-
digital-finance-or-get-left-back
3
DXC Eclipse
These broad challenges translate into specific use cases, which are drivers for
finance to change. Research shows legacy systems can significantly constrain
digital transformation efforts, suggesting that an average of 60 to 80 per cent of
IT budgets are spent on maintaining legacy applications2.
Many finance teams are familiar with the time pressure that comes from the need
to customise many and varied reports for stakeholders. While organisations might
hold a lot of data, it is often housed in multiple systems, again requiring manual
workarounds. Challenges accessing data can force reporting to become linear,
one-dimensional and retrospective.
Lack of standardisation and inconsistent definitions of data, hierarchies, metrics
and key performance indicators can combine to tangle reporting outputs. Often
reporting is customised by one team using data sources unavailable to other
teams. The result is discussions intended to focus on next steps for the business
devolve instead into debate around data accuracy and sourcing.
Every finance team around the world experiences surges of work around
non-negotiable cyclical requirements. Examples include quarter end processing
and forecasting cycles, whether weekly, monthly, quarterly or annually.
Outdated infrastructure and data silos have forced finance teams to adopt
backward-facing perspectives while, increasingly, business stakeholders demand
forward-facing perspectives.
Growing requirements for compliance, privacy and data governance present
increasingly high standards for finance teams to meet with inadequate
infrastructure, manual processes and data silos.
Despite these challenges creating drivers for change, McKinsey research shows
CFOs still spend less time on digital activities than they do on traditional
finance operations3.
Goals for modern finance transformation
There are a few common reasons CFOs spend less time on digital initiatives than
on daily operations. Many CFOs are uncertain about where to begin digital
transformation. Technology is moving faster than ever, the challenges to solve can
quickly become overwhelming and budget isn’t always readily available.
Some CFOs live the reality of having to “change the wheels without slowing the
car”, meaning that the time needed to maintain daily operations leaves limited
time in which to architect a different future.
4
DXC Eclipse
Other CFOs fall into believing two core myths around digital transformation.
The first is that there is a requirement to be digitally literate themselves. The
reality is that there are many digitally literate organisations that can help with
the technological evolution. What is more critical for CFOs is to maintain curiosity
around how their function can become more efficient, faster and relevant to
the business.
The second myth is that digital transformation will be big, expensive and time-
consuming. In fact, many digital initiatives that ultimately transform finance
organisations begin with small scale pilots using few team members, based on
technology already owned by the company.
The truth is, almost every finance digital transformation maps to one, or more,
four common goals. Microsoft has designed the following framework to represent
those goals:
• optimising operations, by reducing inefficiencies and improving simplification,
frequency, accuracy and accountability of reporting
• empowering employees, by moving teams up the value chain and empowering
them to work on tasks that make a difference to the business
• transforming products, by evolving traditional finance business models into new
business models while adhering to privacy and compliance standards
• engaging customers, by adding meaningful insights to help business
stakeholders and partners make decisions and take actions.
5
DXC Eclipse
Some good news for CFOs is that the rapid rate of technological change actually
makes it easier than ever to transform. Over the last decade, technology to
streamline finance, accounting and operations has gone through much
iteration to become strong, robust and ready to support rapid, innovative
cost-effective change.
Similarly, tools and systems to capture, manage and visualise large data sets have
transformed the ability to develop accurate and actionable insights. Improvements
in connectivity tools have resulted in better integration of disparate data sources
and systems.
Within this four-part goal framework, finance teams pursuing digital
transformation are frequently architecting change across financial analysis
and reporting models, strategy and forecasting frameworks, business process
automation and risk management.
Image courtesy of the Microsoft Corporation
6
DXC Eclipse
Getting started with the transformation to modern finance
Feedback from organisations already experiencing benefits from digital
transformation across finance, suggests there are six core steps to take to prepare
for the path to transformation.
1. Identify areas of opportunity and start small. Most successful digital
transformations don’t happen all at once and don’t deliver widespread change
across systems, people and processes with the flick of a switch. The most
effective transformations start on a small scale where new ideas can be tested
quickly and cost effectively. The first step to transformation involves identifying
opportunities for change. Candidates for change are unique to every business;
however, may include the more generic tasks and actions such as reducing time
taken to compile data, improving accuracy in forecasting and data quality, or
creating common visualisations to drive a universal reporting framework.
2. Partner with the business. Business partnering is essential for the
transformation of the finance function. When business partners explain their
needs to pursue new initiatives such as modelling for growth, metrics and
competitive attack, finance has a powerful position from which to deliver
insights, based on the vast amounts of data at their fingertips.
The voice of business stakeholders is often highly persuasive in influencing
investments in technology to deliver future benefits. When finance functions
team with the business to articulate those future benefits, the business case
for digital transformation of finance suddenly becomes more compelling
for decision-makers. With investment flowing to transform finance to better
support the business, finance has the opportunity to evolve from a back-office
support role to a strategic, future-facing business partner.
“Our partnership with the business moved us more in 12 months than we were able to move on our own in the previous decade,” Source: Justin Le Roux, Finance Director and FP&A, Microsoft Australia and New Zealand.
7
DXC Eclipse
White Paper
3. Foster a growth-mindset culture. The success of digital transformation
requires alignment of technology, people and processes. Transformation brings
change, which can trigger resistance across teams if the prevailing mindset is
fixed. Much research suggests that, if a person believes their brain can grow,
learn and create, they behave differently. And, if a person can be shifted from
a fixed to a growth mindset, motivation and achievement increase.4
It is critical for organisations on the path to transformation to nurture a
culture that embraces a growth mindset. Rather than resist change and hold
on to fixed ways of doing things, teams are guided to be curious about future
possibilities, to think about concepts in new ways and understand that failure
delivers learning, not punishment. When hiring new employees, balance hiring
for curiosity and an open mind with hiring for specific functional skill. Often
functional skill can be taught whereas the right attitude and mindset cannot.
4. Embrace disruption. Disruption is a norm of the digital economy. The
lightning fast pace of globalisation and technological advancement is
disrupting traditional business models everywhere. Organisations that choose
to ignore disruption in their market or within functional teams do so at their
peril. Disruption is leading to progressively more sophisticated efficiencies,
cost savings, customer experiences, competitive actions and product releases.
Organisations that don’t transform will simply be left behind.
The only way to keep pace with disruption is to embrace it. Encourage teams
to forget the past while imagining the future. Motivate teams to experiment,
to create solutions as if there were no limits and to express brave ideas.
Ask everyone in the organisation for solutions to recognised problems.
Sometimes it’s the people closest to the data that have the most ground-
breaking suggestions.
It is critical for organisations on the path to transformation to nurture a culture that embraces a growth mindset. Rather than resist change and hold on to fixed ways of doing things, teams are guided to be curious about future possibilities, to think about concepts in new ways and understand that failure delivers learning, not punishment.
8
DXC Eclipse
5. Grow your technological capabilities. A clear reality of managing talent
and skills through digital transformation is that the future will require different
skillsets to the past. And, the gap between future and past skills grows wider
every month as new technologies arrive. Some skills are clearly in demand,
now and for the future. Those span data mining, analytics, visualisations
using business intelligence tools and statistical and predictive modelling.
Other skills are gaining in prominence to significantly help finance teams,
including machine learning, artificial intelligence, blockchain and robotic
process automation.
Finance teams can navigate the skills evolution by staying closely aligned to
the requirements of the business and using their own curiosity about future
possibilities to guide which technologies are most relevant to deliver the
outcomes they need.
6. Take action. Finance leaders might be tempted to wait until a detailed, long-
term plan for transformation can be designed and costed. The reality is that
there is no perfect plan for transformation. A strategic framework is necessary
to define the goals, and desired outcomes, for the transformation. Once
execution begins, the path forward is continually defined, and refined, with
each phase of action.
Teams that wait on development of the perfect plan are likely to never
transform. Technology is moving so fast that if transformation initiatives aren’t
started sooner than later, finance teams risk being overtaken by events and
becoming a reason the broader business falters.
White Paper
9
DXC Eclipse
Case studyMicrosoft Finance
As a global household name and a technology company, it is difficult to fathom
Microsoft would need digital transformation in any areas of its business. Yet a series
of targeted transformations are exactly what the Microsoft finance team has pursued
over the last few years.
Before assuming Microsoft is a massive company with enormous resources and,
therefore, their finance transformation is irrelevant to your organisation, pause for a
moment.
The size of the finance team in Microsoft Australia that embarked on this digital
transformation was 20 people.
Drivers for change included significant challenges around accessing immense
amounts of data in disconnected legacy systems. One example was forecasting.
Forecasting required manual data pulls from 350 decentralised data sources. 80 per
cent of analyst time was spent collecting and compiling data. Data extracts were
cut and pasted into Excel for modelling and insights were then cut and pasted into
PowerPoint slides.
Meetings with dozens of people to review forecasts were run on 50 standard
PowerPoint slides supported by another 150 pages of information in size eight font.
Due to inconsistent definitions, processes and reports, confidence in the data was low.
Annual forecasting took an average of two months to complete.
In 2014, the CFO and VP of Machine Learning launched a proof-of-concept (POC)
with two goals: to improve the accuracy and frequency of forecasting using machine
learning. The POC started with one data scientist. After two years of refining, machine
learning is now used in all revenue forecasting and as an input to analyst calls.
Forecasting results are now 98.4 per cent accurate with machine learning versus 97.1
per cent accurate using traditional methods.
“The machine-learning forecasts from the Cortana Intelligence Suite let us combine
core financial data with additional sources of information including macroeconomic
factors, product launches, promotions and Bing search trends. With the improved
machine-learning forecast accuracies it is becoming an integral part of our financial
planning and budgeting process,” Amy Hood, Chief Financial Officer, Microsoft.
Other results from the finance digital transformation at Microsoft include:
• reduction in time on budgeting cycles from three months to three weeks
• replacing Microsoft Excel and PowerPoint by delivering targets in Microsoft Power BI
• improved cross-team collaboration using OneNote, Teams and Skype.
10
DXC Eclipse
Lessons learned
The lessons experienced by the Microsoft finance team are similar to those
experienced by finance teams in other organisations, large and small.
1. There are no data shortcuts. However large or small the transformation, all
roads lead to data. Data definitions, data sources, data governance, data
accuracy and how to access, and integrate, data held across and beyond the
finance department.
2. Early wins matter. Early wins are integral to the long-term success of digital
transformation initiatives. Early wins show that change is possible, create
momentum for change and signal milestones of progress to celebrate.
3. Celebrate progress and risk takers. Change is notoriously difficult and
not everyone will happily embrace it. Acknowledge the teams and individuals
who step forward with ideas to evolve according to the transformation vision.
Celebrating progress, however small, highlights improvements are being made
towards a future that is different to the past.
4. Partner with the CIO. With technology becoming the most powerful platform
to differentiate a company and add value, CFOs need to partner effectively
with their CIO counterparts to drive transformation. It is essential these
two leaders develop mutual understanding of how to support each other’s
functions, align IT spending and drive strategic business growth.
5. Leadership must prioritise. Typically, functional teams themselves are highly
attuned to the digital opportunities in their area of the business. In the search
to perform their role more easily and effectively, many teams will analyse
data, engage with technology vendors or, even, create their own apps. Grass
roots creativity and motivation is excellent but often the efficacy of these
initiatives is eroded because ideas are ad-hoc and disconnected from other
initiatives. Turning front-line input into revolutionary change requires crisp
prioritisation. Organisational leaders are best placed to capture the challenges
and use those as a basis to narrow prioritisation, explore cross-functional
interdependencies, define the phases of change and empower teams to
move forward.
6. Compliance focus. As volumes of data held by an organisation grow
exponentially, so do considerations for privacy, security and compliance.
All three areas have evolved materially over the last decade, creating new
technologies, processes and skillsets for organisations to adopt. Keeping
pace with the changes and updates is taxing and the cost of mistakes is high.
Organisations have no choice but to adhere to compliance guidelines as
specified by various government and industry bodies.
Case studyMicrosoft Finance
“Unless the data is right,
you’re only letting yourself
make bad decisions faster,”
Brian Foley
Group Financial Controller,
Microsoft Australia and
New Zealand.
11
DXC Eclipse
Solutions for the digital transformation of finance
Microsoft Dynamics 365 for Finance and Operations offers a comprehensive range
of out-of-the-box capabilities designed specifically to help finance teams. The
suite provides integration of data from multiple sources to create a real-time single
source of truth, the simplification of reporting with easy-to-use customisable
templates and automation of repetitive tasks to improve processing time and
accuracy of data.
Microsoft Dynamics 365 also lets organisations shift core business systems to the
cloud. Cloud-hosted applications offer cost savings through subscription-based
licensing models, reducing the requirement for expensive on-premise hardware,
and eliminating the need for costly upgrades because the platform automatically
updates in the cloud. With Microsoft Dynamics 365, businesses no longer need to
leap into a large-scale implementation. Instead, organisations have the flexibility
to implement the specific modules in the cloud that make sense to their business.
Microsoft Power BI, included in most Microsoft Office 365 subscriptions and often
used in conjunction with Microsoft Dynamics 365 for Finance and Operations, is a
cost-effective, fast and simple tool to transform reporting formats. Microsoft Power
BI business analytics software is available across a range of business applications
and can access data anywhere it is housed, in whatever format.
Using hundreds of data sources (including data from Internet of Things devices)
rich, interactive, real-time visualisations can be created with an interface simple
enough for users to drag-and-drop inputs to design their own reports and
dashboards. Reports and dashboards can be shared internally, and externally, to
improve collaboration. Apps power mobile connectivity so users can connect with
data and insights anywhere, from any device.
www.dxc.technology/au/eclipse © 2019 DXC Technology Company. All rights reserved.
Additional resources
It is important to note that digital transformation of the finance function is
not about removing or replacing finance teams. Instead, the value of digital
transformation for finance lies in empowering teams to deliver what is required by
the business more efficiently and creating scope to help align to new directions.
Partnering with Microsoft, DXC Eclipse has a strong track record of helping
organisations successfully transform their finance function. Whether the
transformation requires migration, new implementations or upgrades, DXC Eclipse
has the team to provide the best possible results.
Microsoft Dynamics 365 provides fit-for-purpose, configurable solutions that
help accelerate access to real-time, data-driven insights. DXC Eclipse provides
the expertise to guide an organisation through designing strategic objectives for
transformation, and transparent project roadmaps to achieve those objectives.
For more information around how DXC Eclipse and Microsoft Dynamics 365 for
Finance and Operations could transform your business, visit:
www.dxc.technology/au/eclipse
1 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/
our-insights/memo-to-the-cfo-get-in-front-of-digital-finance-or-get-left-back
2 https://www.itproportal.com/features/why-legacy-platforms-pose-a-risk-to-
your-business/
3 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/
our-insights/memo-to-the-cfo-get-in-front-of-digital-finance-or-get-left-back
4 https://www.mindsetworks.com/science/