Digital Transformation » CFOs and digital transformation – what do you really need to know?

There was a time when anything even remotely related to tech – from servers to telephony, and apps to integrations – didn’t fall anywhere near a finance department.

Yes, a conversation will have undoubtedly taken place in the boardroom to agree budgets for the upcoming financial year, and due diligence surrounding chosen suppliers and their terms would have been inevitable.

But beyond that, IT – and/or the department most affected by the tech investment – would have traditionally taken the lead.

Now, savvy CFOs and financial directors are playing a more integral role in tech projects. But why? And when it comes to ‘digital transformation’, what does it actually mean for businesses?

In the simplest of terms, digital transformation sums up an organisation’s implementation of new technologically-driven solutions to become slicker, more efficient, more robust, more flexible, or more compliant. In truth, the list of benefits goes on and on.

While some tech-driven projects are relatively quick and easy to execute, digital transformation exercises – by their very definition – often tend to require a little more planning, usually because the outcome(s) of the delivery are significant. The right supplier will ensure the process is as pain-free as possible.

However, the move from a legacy on-premise telephony system, for instance, to a Unified Communications solution hosted in the cloud and integrating voice, video, SMS, instant messaging and social media, with inbuilt disaster recovery resilience and a wealth of remote working potential, naturally requires some thought!

But how much of that thinking time needs to lie with the head of finance?

Considering these projects holistically, it is important to realise that the economic landscape is constantly changing. Businesses generally don’t have as much cash, so the C-Suite is increasingly working with IT to evaluate where companies can become leaner and meaner.

In some instances, the implementation of tech means a reduction in headcount, but at the other end of the scale, it can also unlock the key to growth that inevitably fuels a recruitment drive. These numbers matter.

Yet the pace of change and the need to compete means that some organisations aren’t necessarily setting a tech budget anymore – certainly not for digital transformation projects that will act as a business support service.

So, in these instances, IT directors or CTOs will instead deliver a compelling business case for a programme of works, and it will be signed off according to ROI projections – providing it aligns with the company’s wider strategy.

A workforce optimisation project that can save eight hours of every colleague’s time per week – therefore freeing up the opportunity to each have 24 more conversations with customers at a typical conversion ratio of 3:1 – will soon catch the attention of the board for example, irrespective of whether the C-Suite knew this was even possible before the conversation took place.

If the project has nothing to do with what the business is trying to achieve in the given period, however, or it seems merely a vanity exercise or gimmick, the proposal is likely to be challenged.

To budget or not to budget?

In other businesses, adherence to a budget is of course crucial – and understandable. But technological capabilities are now advancing so quickly, that even the most carefully considered budget may not stay true for long.

This represents a challenging mindset shift for many financiers. But the answer lies in the CFO or FD playing a slightly different role in the digital transformation agenda.

It is becoming far more common for finance professionals to have a greater involvement in the decision-making process as it unfolds, as opposed to their input being sought simply for a final yes/no answer.

The fluidity of digital transformation projects and the scope they represent for ongoing improvement. mean CFOs and FDs need to remain constantly informed. They are integral stakeholders and if they are not on board, it is unlikely such projects will fly.

CapEx vs OpEx

From a business perspective, it is also important to think about where the investment will ‘sit’. One of the most attractive things about digital transformation projects is that they are often delivered via OpEx models.

So, while cash-hungry CapEx investments may have traditionally needed to be written down over a five-year period, for example, FDs need no longer build the lump sum in.

And, to recap on the unified communications scenario outlined above, the organisation has the added advantage of continuing to benefit from all of the latest technology, in real-time, for the same fixed cost. It is therefore far easier to futureproof the investment too.

Due diligence remains as important as ever, not least because the upsurge in the popularity of cloud tech means many suppliers are professing to offer solutions that, in truth, they are not equipped to deliver. The onus to vet a vendor does not lie solely with the head of finance of course, but this responsibility is not something that an FD or CFO can relinquish.

Some finance professionals have a significant appetite to be involved in digital transformation projects whereas others have nowhere near the same interest levels.

But technology has never had such potential to revolutionise how organisations go about their business. Greater awareness of the role an FD or CFO can play, is therefore crucial.