A growing number of CFOs expect IT spending to grow in the coming year, but some feel dragged down by clunky legacy systems.
Nearly half (46%) of CFOs believe their IT platforms inhibit their organisation’s ability to operate effectively, according to a Grant Thornton survey.
Spending forecasts related to IT spending have risen four consecutive quarters amongst finance decision-makers in a survey by the American Institute of CPAs. In the first quarter of 2016, CPA executives expected spending on IT to increase 2.3%. By the first quarter of this year, that number had risen to 3%.
“CFOs are prevented from focusing resources on growth and digital transformation initiatives by the need to invest in costly legacy IT systems’ maintenance,” said Sri Sastry, Grant Thornton’s national managing principal for advisory services. “Most CFOs believe that managing IT costs will be the greatest barrier to future growth as a result.”
The ability to operate more efficiently is the chief investment area amongst the 404 US executives Grant Thornton surveyed, mainly from companies with annual revenue of less than $1 billion. The top four areas of investment focus for 2017 are:
- Operational improvement, 70%
- Sales and marketing, 46%
- IT, 42%
- Customer experience, 41%
Responses varied on some top investment areas based on company size. For instance, just 14% of companies with revenue of more than $1 billion plan to focus on investment in sales and marketing. Smaller companies continue to grow sales and marketing efforts, while sales and marketing at large companies is a fairly defined process, the Grant Thornton report said. Also, 61% of the largest companies plan an investment focus on IT, compared with 40% of small companies.
“The larger companies have large data sets, but they’re not in useful formats,” Sastry said. “The legacy systems don’t support many kinds of information needs that larger-company CFOs now have.”
Attention to strategy, operations
CFOs are still prioritising the finance department’s focus on increasing cash flow and cutting costs, but they also are being counted on to take part in company-wide strategic planning.
“There’s a bigger focus on strategy,” Sastry said. “It goes hand in hand with the need for predictive information. They need it in order to advise where the company should be going. … If you don’t have the right predictive information, then strategy is reduced to looking at a crystal ball.”
The CFOs’ focus on operations could be tied to another trend, addressed in another report: the number of COOs is declining, and CFOs are being asked to handle those operational duties. In 2000, 48% of large US companies had COOs; in 2016, just 29.5% of them did, according to research by Crist|Kolder Associates, which puts together a twice-a-year study measuring turnover of executives.
Related CGMA Magazine content:
- “Why CFOs Are Embracing Technology as Never Before”: Tech-savvy finance chiefs are becoming advocates for digital initiatives because they’re more comfortable with technology, they see quicker paths to value, and they see career value in understanding technology.
- “6 Disruptive Forces for Boards to Tackle”: The EY Center for Board Matters and the WomenCorporateDirectors Foundation list six change factors boards should focus on to help them address technological advances, geopolitical developments, and a changing workforce.
—Neil Amato (Neil.Amato@aicpa-cima.com) is a CGMA Magazine senior editor.