Transform to survive – FDE Roundtable

31 July 2015

The digital revolution does not wait for stragglers. That was the view of the eminent speakers at Finance Director Europe’s recent KPMG-supported dinner at London’s Dorchester Hotel, which focused on how CFOs can steer their businesses into the next phase of digital transformation. Christian Doherty reports.

The challenges and opportunities presented by digital change are becoming more urgent by the day, no matter what industry you're in, according to Ashton Dallsingh.

"Digital transformation and disruption is part of the journey every company is going through and in 20 years' time, many organisations won't exist in their current format," Cisco Systems' CFO EMEAR explained, in his capacity as keynote speaker at Finance Director Europe's most recent round-table discussion.

"They may exist, but they will exist very differently. We are seeing organisations transforming every day. A great example is Google's recent announcement in the US that it would set up a mobile network to challenge the ATT and the Verizons of the world."

Dallsingh painted a picture of an increasingly fractured and dynamic market place, in which businesses that fail to harness and exploit the new digital opportunities and the growing volume of data will be left behind, while those that can put it to use will gain significant competitive advantages.

Sensory information

"90% of the world's data was created in the last two years," he said. "Just think: more was generated in 2012 than the previous 5,000 years," he continued, reminding guests that, by 2020, 40% of data will come from sensors.

Citing the 2.5 petabytes of information gleaned every hour by US retailer Walmart from customer transactions, Dallsingh asked those present to think how they could use such a resource to their advantage.

He was at pains to point out that digital disruption in the form of "the internet of everything" is happening everywhere - not just in the tech space. This was highlighted by the finance director of a food and beverage hospitality chain, who outlined how new coffee machine technology had allowed his business to embrace the opportunities offered by digital transformation.

"Handmade coffee from a barista presents a challenge of maintaining standards; the machine can get the perfect brew every time," he explained. "We use thousands of machines to deliver coffee, and despite the common misconception, the coffee is freshly ground inside. The latest machine is a quantum leap in the standard we can offer our customers.

The FD explained that a digital link- up enabled hundreds of machines scattered across the country to communicate with the centre, informing managers at base if they were running out of syrup or milk, and allowing staff to take the appropriate action.

Coffee isn't the only disrupted sector. "Look at financial services," Dallsingh said. "We have seen great examples of technology making a real difference. We work with a well-known mortgage lender that cut costs by 66%, boosted mortgage sales by more than 60%, improved compliance under the new financial services regulations in the mortgage market and recorded a double-digit improvement in customer engagement scores. Its mortgage advisers now work through screens in branches, and that has helped cut costs and improve customer service."

Cloud-based services are central to the ongoing transformation so many businesses are now embarking on. From its beginnings under the software as a service umbrella, the cloud is set to play a vital role in migrating businesses away from unwieldy and unresponsive back-end systems to a more responsive and agile approach.

John Doel and Patrick Fenton of KPMG outlined how cloud technology was set to advance rapidly and increase the need for businesses to explore other ways of running various finance processes. KPMG has recently partnered with Oracle to develop an innovative, cloud-based service it calls Powered Finance.

This pre-built, next-generation finance operating model is built on an Oracle platform and combines KPMG's know-how across finance, technology, tax, controls and audit.

It is geared towards medium and large businesses, and promises advantages including: certainty of outcome, lower risk; faster process; and significant cost savings, at implementation and in the longer term.

Clouded thinking

Fenton presented several studies that predicted a steep adoption curve on cloud technologies, with a growing number of companies moving to a cloud-based model.

"A recent KPMG survey asked executives whether parts of their back office, including operations like BI and transaction processing, were ready to be delivered through the cloud: around 35% said 'yes', and the numbers are growing."

Another independent survey was quoted that forecast that 52% of organisations would use the cloud to perform more than half of transactions by 2016, rising to "81% in 2017 or later".

"The cloud has transformed in the last 18 months," said Fenton. "Just a year ago, people were asking 'why would we go to the cloud?' Now, that has changed to 'why wouldn't we?' Having a strategy on how you're going to use the cloud is now a must-have. The depth to which your finance system is integrated into your manufacturing, or other operational systems, will be a factor in early adoption."

Fenton went on to explain that a key aspect to adopting a cloud-based system will be the extent to which processes can be standardised, and argued that companies were looking to the cloud as a catalyst for change.

For CFOs facing the prospect of an expensive upgrade, or for whom the finance system no longer supports the business, the cloud is starting to look like a compelling alternative. Naturally, given their inherent scepticism, some CFOs pressed the speakers on whether the cloud could really deliver the instant impact promised by some vendors.

Doel was clear that the evolution of cloud based services - particularly in relation to analytics - still had some way to go. "Twenty years ago, most big ERP systems had no analytics angle at all," he says. "Now, the reality is the only investment for back and front office systems is going to be focused on the cloud, whether you like it or not.

"Part of that investment will involve business process analytics, and we are seeing that that is a lot easier to deploy via the cloud."

Looking ahead, Doel believes the challenge lies in getting to true enterprise analytics. "That's a big investment for the vendors: the goal of delivering meaningful insight," he adds. "That's the goal but we're not there yet."

Now, with cloud companies very keen to encourage businesses onto the cloud, uptake is on the rise. For those with high support costs from their providers, for example, the increasingly competitive nature of cloud services is a real boon.

Another survey Fenton shared revealed that nearly half of those asked saw the cloud as primarily a way of reducing costs, while 37% that believed adopting cloud services would improve alignment with customers and partners.

The next step is the mid-office, where more processes are being squeezed into standardised, cloud-ready formats able to help the business towards adoption. For finance leaders, the benefits are clear: standardised processes, more functions and increased responsiveness.

The main lesson learned from the session was that the current wave of disruptive technologies, including finance delivered via the cloud, presented many opportunities. The modern CFO therefore needs to seek a competitive edge by paying attention to the various products on offer, and when appropriate, invest.

Other participants

Linda Barker - corporate applications director, Atkins
Rob Collie - director of finance delivery, BSkyB
Mitchell Singer - deputy finance director, Gala Coral Group
David Forth - interim finance director, Costa Coffee
Javier Echave - business finance director, Heathrow Airport
Stephen Goodluck - group commercial financial controller, Home Retail Group
Simon Lloyd - finance director, digital savings, Legal and General
Andrew Punter - programme director, Lloyd's Register
Ian Irving - Macmillan Publishers, head of finance and reporting solutions
Derek Forbes - chief financial officer, Royal London Asset Management
James Cotton - group planning and consumer finance director, Talk Talk
James Davenport - group finance director, Innocent Drinks
Adrian Griffiths - partner, financial management UK, KPMG
Divya Gupta - director, KPMG

Patrick Fenton (third from right) and Ashton Dallsingh (second from right) share a joke.
Ashton Dallsingh, CFO EMEAR, Cisco Systems – keynote speaker.
Patrick Fenton, head of financial management, UK, KPMG – co-host and speaker.