A New Series: Digital Transformation for CFOs and Finance Departments
Today’s digital transformations pose a number of challenges, or certainly major changes, for finance professionals in enterprises. Yet finance is a critical player in these transformations and in the “transformed” enterprise. Enterprises must make decisions about what IT and digital capabilities to invest in, how to fund and account for those capabilities, how to budget for digital spending and how to control that spending, how to manage risks, and how to impose controls, especially those that answer to compliance regulations. The burden of overseeing these decisions usually falls to the CFO and his or her organization.
Some of these concerns are directly related to the importance of the cloud in digital transformation. For example, pricing in the cloud is variable, based on usage, so how can finance predict and control those costs? Some capital costs will become operational costs, so how does that affect valuation and shareholder value?
But the concerns go much broader than just the cloud and its economics. With technical processes that are increasingly automated and certainly very fast-moving, how can enterprises satisfy auditors and themselves that appropriate controls are in place? How can they oversee IT projects as they become more agile, and how can they rely less on fixed scopes of requirements?
In meeting with AWS customers and interacting with people at the conferences where I speak, I hear these sorts of questions a lot. In some cases, I hear misconceptions, misunderstandings, or mis-statements about them. In this upcoming series of blog posts, we will delve into some of these areas, and I’ll propose ways of thinking about them that I hope will be helpful to CFOs, other CXOs, and finance and accounting professionals.
To begin with, let’s quickly look at the admittedly over-hyped term “digital transformation”—what it involves and why it is important. In many ways, digital transformation represents the intersection of a new set of business imperatives with a new set of technologies and processes that happen to support them. That these are coming together is no coincidence: the technologies allow competitors to disrupt markets, thereby requiring enterprises to become nimble, thereby requiring the technologies for nimbleness, and on and on in a powerful cycle.
The chief business imperatives of the day are to be fast, flexible, and innovative. Even longstanding, traditional, stable…err, slow moving…enterprises are feeling this need. Startups are disrupting industries because they have these qualities, but even traditional enterprises are beginning to catch on and up their competitive games. At the same time, companies use technology to communicate with customers more and more and must therefore meet ever-increasing customer expectations for the digital services they provide.
Fortunately, these imperatives have been matched by new technologies and ideas about how to manage technology processes. In the early 2000’s, Agile IT techniques were introduced; these later grew into Lean and DevOps approaches that reduced the risk and time required for deploying or trying out new capabilities. The cloud made it possible to provision infrastructure virtually instantaneously, to expand it as scale required, and—importantly—to de-provision it when it was no longer necessary. The cloud also made it possible for enterprises to quickly acquire high-level services that would otherwise take time to build—artificial intelligence, analytics, and internet of things, for example.
Yes, your company needs to move quickly and nimbly, and technological advances make this possible. But remember that your competitors have access to these same possibilities, and the game will go to whoever uses them best.
In this environment, CFOs might feel pressured to take risks and support such transformations, even if they don’t feel prepared to do so. But I come bearing very good news. These new approaches have the additional advantage of supporting virtually all of the goals of the CFO. The cloud and DevOps practices, in fact, help enterprises to establish controls and governance, to document these controls for auditors, to reduce costs, to control IT investments, and to help enterprises earn good returns on their assets. Most of all, this transformation is tremendously risk-reducing—even if on the surface it appears to bring the risk of the new and the unknown.
Some of the topics I plan to cover in this series include how the cloud (and related DevOps practices) affect:
- Risk management
- Governance and controls
- Security and privacy
- Costs and cost management
- Financial accounting issues
- Merger integration
Please let me know what else would be useful! Since I am not a CFO myself, I would appreciate hearing feedback on what topics are on your minds and what concerns you have.
Note: This post is the first in a series discussing transformation-related issues relevant to CFOs and finance organizations.