2019 Finance Trends Report - Microsoft Dynamics 365 - senergy services ag
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Microsoft Dynamics 365
2019 Finance
Trends Report
Page 1
Introduction
It’s a new era. We’re ten years removed from the peak of
the financial crisis, a new generation has transformed the
workplace and every business is now a ‘technology’ business.
The rules of the game have changed. Organisations that fail to
evolve find themselves in a growing graveyard of companies
that were out-innovated by young, forward-thinking
businesses. And now, the role of finance must evolve, too.
Today, the stereotype of suit-wearing, number-crunching
finance personnel is being replaced by a new breed of finance
professionals. These finance leaders are the ligaments that
connect technology across the organisation, the muscle that
fights risk, the brains that drive innovation and they are the
heart that’s embracing a new generation of workers.
To thrive in today’s business environment, in a world with
growing complexity, organisations are increasingly relying
upon the technological and strategic prowess of their
financial leaders. Today’s finance professionals must navigate
a range of new challenges and responsibilities, reporting on
the past, managing the present and creating the future.
The following will explore six emerging trends in finance
that we believe will help empower finance professionals to
better evaluate and manage risk, build innovative corporate
strategies and grow their businesses.
Page 2
Trends
4
The role of finance grows
Finance leaders take on more responsibility
10
Changing customer demands disrupt industries
Empowered customers force companies to evolve
20
Technology makes finance smarter and faster
New technologies are revolutionising finance
28
Living in the age of uncertainty
Uncertainty puts a strain on businesses
34
Businesses adapt to an evolving workforce
A new generation enters the workforce
42
Companies face new risks and challenges
Business leaders navigate new challenges
Page 3
The role of finance grows
• The CFO role continues to grow
• Finance’s involvement in IT grows
• Finance takes on technology risk management
• CFOs lead business transformation
• The COO role continues to disappear
• Finance leaders become strategy leaders
• Expectations from Wall Street evolve
Page 4
The role of
finance grows
The CFO role continues to grow Executive summary
The role of the CFO can be summed up in two simple truths: 1) if something Finance and the role of the Chief
impacts the bottom line, it’s the CFO’s responsibility, and 2) everything Financial Officer (CFO) have been
impacts the bottom line. From staffing and employee engagement to product elevated and broadened in the
development and mergers and acquisitions, businesses increasingly rely on past several years, a trend that will
the financial and strategic prowess of their most senior financial leaders whose continue moving forward.
growing influence can be felt throughout the organisation.
Finance’s involvement in IT grows Highlights
Over the past decade, one of the most visible additions to the CFO’s • Global IT spending is projected to
responsibilities has been the management of technology across the business. reach $3.7 trillion in 2018, a 4.5%
This should come as no surprise given the growth of technology in all aspects increase from 2017.
of the corporate world. Global IT spending is projected to reach $3.7 trillion in • 64% of CFOs reported being
2018, a 4.5% increase from 2017,1 and this growth is projected to continue into asked to take on broader
the foreseeable future.2 Today’s businesses spend an average of 3.28% of their operational leadership roles
annual revenue on IT and in some industries, such as banking and securities, beyond finance.
this rate can be as high as 7.16%.3 • Nearly 70% of CFOs reported plan
to increase investment in digital
Due to the financial demands technology has created, both as a major transformation in 2018.
expense and as a capital asset, it is more important than ever for CFOs to
have a comprehensive view of these large financial line items. But technology
is now more than just a number on a balance sheet, it’s the lifeblood of
many organisations, presenting new risks and revenue opportunities that
will determine the future of the business. As technology becomes a critical
component in the financial success of an organisation, finance has taken a
more significant role in managing technology, particularly in the areas of risk
management and investment.
Global IT spend is projected
to reach $3.7 trillion in 2018.
Page 5
In 2017, the average
cost of a data breach
was $3.62 million.
Finance takes on
technology risk
management
You don’t need to look hard to find
examples of companies who have
been impacted by technology failures
or data breaches. Beyond the many
unquantifiable costs to a data breach
– from customer trust to employee
morale – the direct financial cost of
a technology failure is significant.
In 2017, the average cost of a data
breach was $3.62 million; and with an
average cost of $141 per lost or stolen
record, this number escalates quickly
for large businesses.4 In a recent
survey by IBM, 48% of CFOs listed
cyber risks as a major rising trend
transforming the business landscape.5
As a result, finance leaders are taking
on greater responsibility in helping
their businesses better manage this
large financial risk; 57% of CFOs
report that risk management will
become a critical part of their role in
the future, a number that jumps to
66% among CFOs of companies with
over $5 billion in revenue.6
Page 6
64% of CFOs reported
being asked to take on
broader operational
leadership roles beyond
finance.
70+30+J
CFOs lead business The COO role
transformation continues to disappear
Today’s industry leaders are Finance leaders are increasingly
leveraging technology in exciting involved in operations. In a recent
70%
new ways to transform their survey by EY, 64% of CFOs reported
business models. This trend has being asked to take on broader
been exemplified by the upsurge operational leadership roles beyond
in Anything as a Service (XaaS) finance.9 This transition has been
offerings and on-demand services, partially driven by the decline of
which grew 7.3% in 2017.7 the Chief Operating Officer (COO).
Today, only 29% of Fortune 500 and
CFOs planning to increase With technology leading this S&P 500 companies still have COOs,
investment in digital transformation, their newfound role a decrease of 40% from 2000.10
transformation in 2018. as technology leader has also pushed
CFOs into the role of transformation This COO decline can be primarily
leader, evaluating technology attributed to the fact that the CEOs
investments, overseeing product of many major corporations were
development and leading strategic promoted from within and had
planning for the organisation. previously served as COO, as is the
Accordingly, nearly 70% of CFOs case at 48% of Fortune 500 and S&P
reported plans to increase investment 500 companies.11 Subsequent to
in digital transformation in 2018, these promotions, many companies
with 40% planning an increase of opted to eliminate the COO role
more than 10%. And with 56% of and divide these responsibilities
senior leadership identifying digital between the CEO and the CFO. While
transformation as critical to long- the distribution of tasks between
term success, CFOs’ involvement in these two executive leaders varies by
this area will continue to grow.8 company, often the CEOs, with their
strong operational backgrounds,
assume responsibility for
manufacturing and the supply chain,
while CFOs take over procurement
and IT oversight.
Page 7
Finance leaders
become strategy
leaders
CFOs increasingly find themselves Technology is ubiquitous in modern
serving as strategic advisors within businesses, and while CFOs may not Only 54% of technology
their companies. One primary be able to code a website or set up a investments are
factor driving this shift has been database, like technology, CFOs have
technology’s proliferation across also become ubiquitous throughout actually controlled by IT
all aspects of business. Where the organisation. Because CFOs departments.
technology spending was once possess a deep understanding of
primarily consolidated in the IT both the organisation’s technology
department, today’s technology and its operational units, they are a
budgets are generally distributed natural fit to drive corporate strategy.
across the entire organisation. In And with a background in finance,
fact, an early 2018 survey found CFOs possess a unique ability to
that only 54% of technology apply a systemic and objective lens
investments are actually controlled to business decisions. While CFOs
by IT departments.12 With software remain saddled with a reputation for
and analytics solutions making up an being penny pinchers and number
increasing percentage of technology junkies, the shift to a more quantified
spend,13 the average CMO now management approach provides an
wields as much technology spending essential counterbalance to the gut
power as a CIO.14 instinct style of previous decades.
Worldwide IT Spending Growth
5+41312282850518585+413305488+514315792+515325994+416346097+4173563100
$4,000
$3,500
$3,000
$2,500
USD (Billions)
$2,000
$1,500
$1,000
Global IT spending is projected to reach
$500 $3.7 trillion in 2018, a 4.5% increase from
2017, and this growth is projected to con-
$0 tinue into the foreseeable future.
2015 2016 2017 2018 2019 2020 2021
Data Center Systems Software Devices IT Services Communication Services
Page 8
Expectations from
Wall Street evolve
Before the mid-1980s, managing a report by Deloitte,15 today’s CFOs
company’s investors was relatively should plan on spending at least 20%
easy for CFOs. Shareholders were of their time on investor relations.
generally an easily defined group with
clear motivations and expectations.
But with the growth of sophisticated Of the emerging roles of the CFO, this
private equity firms in the mid-1980s, new public persona is frequently one
coupled with a transformation of of the largest challenges for many of
share registers, CFOs suddenly had to today’s finance leaders, who are often
deal with institutionalised investors, known more for their discretion than
which comprised the majority of their yearning for the spotlight. This
shareholders at large firms by the challenge can be compounded by
mid-1990s. While the CFO’s influence
the competing interests of different
had been growing internally for
decades, this shift in stakeholder investors; counter to the quarterly
relations pushed many CFOs into the pressures of the past decade,
public spotlight for the first time. companies like Amazon and Tesla are
now shifting some investor mindsets
Since the growth of institutionalised towards accepting short-term losses
investing in the mid-1980s, CFOs with the prospect of more substantial
have played an important role in long-term gains.16 Thus, it is the job
managing relationships with private
of the CFO to set the strategy for
equity firms. And as demands from
Wall Street increase, so will the need the business, both short and long-
for CFOs to directly engage with term, and to manage shareholder
investors. According to a CFO Insights expectations.
Get more done
CFOs and finance professionals are moving from number crunchers to strategic leaders. To make this transition,
finance teams must work faster and smarter. At Microsoft, we are empowering finance professionals to do more
with tools that streamline processes, provide greater visibility into operations and deliver actionable insights.
Streamline operations Get greater visibility Be more proactive
Transitioning to strategic To effectively guide their To grow their businesses, finance
work requires that finance organisations, finance leaders leaders must look beyond the
professionals spend less time require visibility into all areas of past and into the future. Microsoft
on routine accounting tasks. their business. By combining unified empowers leaders with tools
From productivity tools, like data in the cloud with powerful data to help them identify emerging
Office 365, to workflow visualisation tools, like Power BI, trends, predict outcomes and
automation capabilities in Microsoft provides finance leaders automatically optimise workflows
Dynamics 365, Microsoft is with a single source of visibility into so that organisations can become
helping finance teams get more their organisation – from a high level less reactive and more proactive
done, freeing them up so that down to a transactional level – so they with their business strategies and
they can spend more time on can make more informed decisions. operations.
high-value strategic work.
Page 9Changing customer
demands disrupt industries
• Innovation raises customer expectations
• Millennials evolve
• Gen Z gains influence
• Corporate responsibility gains momentum
• The new X-economies disrupt industries
• A-commerce (anywhere) becomes the new reality
• Businesses try to take back margins
Page 10Changing customer
demands disrupt industries
Innovation raises customer expectations Executive summary
Stating that technology is changing customer demands feels like stating Driven by technology and
the obvious. Innovation – from the printing press and combustion engine demographic shifts, today’s customers
to computers and wireless internet – has always been a driver of demand, are more empowered than ever and
unlocking new possibilities and raising expectations. Today, we find ourselves expect more from the businesses with
at the intersection of rapid innovation and a new generation of consumers which they interact.
who have grown up empowered by technology.
Highlights
Millennials evolve • Millennials make up roughly a
The number and influence of Millennials continue to grow. Today, Millennials quarter of the US population and
make up roughly a quarter of the US population,17 and according to the will overtake Baby Boomers as
Pew Research Centre, they will overtake Baby Boomers as America’s largest America’s largest population in
population in 2019 (73 million versus 72 million).18 On the surface, Millennials 2019 (73 million vs. 72 million).
look very different from their predecessors: they are more diverse,19 better
• Purchases via contactless
educated and more likely to be never married than any other adult generation
payments are projected to
was at the same age.20
increase to $1.3 trillion globally in
2019 and over $2 trillion by 2021.
They are also a generation who entered adulthood facing a strong headwind.
They have been crippled by student loans, with over 60% of students taking
out loans to pay for college.21 The average student loan debt for Millennials
graduating in 2017 was nearly $40,000.22 To compound this, many graduated
in the midst of the 2008 recession. As a result, they have been pressured to
take lower paying jobs and have lower employment rates compared to workers
of the same age in past generations.23
The average student
However, despite these challenges, Millennials are smart and savvy. They have loan debt for
become a generation that is fiscally responsible, with 63% of Millennials setting
savings goals and 59% reporting feeling financially secure, higher rates than Millennials graduating
Boomers or Gen X.24 73% of Millennials stick to their budgets every month and in 2017 was nearly
16% have saved over $100,000.25 $40,000.
Page 11While their financial burdens have Gen Z’s purchasing behaviours
led to lower rates of home and precisely, but what’s clear is that
auto ownership,26 Millennials do they already wield great spending
spend in other areas; however, influence. There was $829.5 billion
they remain thrifty when they do. spent on Gen Z in 2015, accounting
Case in point: Amazon accounts for 6.8% of total consumer spending
for the largest volume of online that year.28 Furthermore, over 70%
apparel sales for Millennials, nearly of parents said their Gen Z children
17%, more than double that of the influenced their buying decisions on
next largest seller, Nordstrom.27 clothes and food.29
This shift to thrift has also played
a role in the growth of on-demand Gen Z is even more diverse than
services, sharing marketplaces their Millennial predecessors and will
and online consignment stores. become the nation’s first majority By 2020, Gen Z will
non-white generation.30 With this be the third largest
Gen Z gains influence diversity comes a much more generation in the US.
As the size and influence of the tolerant and inclusive generation.31
Millennial cohort grow, they Additionally, growing up with the
are proving themselves to be a internet gave them much greater
generation of tech-savvy individuals. visibility into global issues. As a result,
But where Millennials were digital they are a very globally and socially-
pioneers, helping make technology minded population. 26% of 16-to-
mainstream, Gen Z is the first 19-year-olds currently volunteer and
generation of digital natives, never 60% reported that they want their
having experienced life before jobs to impact the world.32
computers and pervasive internet.
70+30+J
Like Millennials, Gen Z is made up
of savvy shoppers. According to a
recent report by Interactions, 89%
of Gen Z considers themselves
price-conscious shoppers and listed
price as the top factor in making
70%
a purchase.33 According to the
report, 72% said they would switch
from their favourite brand if they
found a similar product at a lower
price. Members of Gen Z also value
community, with 59% preferring
local stores over large retailers and
Parents who said their Gen 72% saying they would be more
Z children influence their willing to shop at national chains if
buying decisions. they had more of a local presence in
their community.
By 2020, Gen Z will be the third-largest The profile of Gen Z is lengthy and
generation in the US, just behind Gen we have much to discover about
X and they are already accumulating them as they mature. But for now,
significant purchasing power. With one thing is sure: Gen Z will have a
their oldest members only in their significant impact on both business
early twenties, it is difficult to predict and the world.
Page 12Corporate to share positive opinions about
companies doing good (87%), are
Should companies
responsibility gains more likely to protest to support help address social
8983+87++
momentum a cause they care about (58%)
issues?
Over the last decade, there has been and are more likely to buy from a
substantial buzz about Corporate company which addresses social or
Social Responsibility (CSR), yet for environmental issues (90%).35 94%
89% 87%
many companies, the financial costs 83%
of change initially outweighed the In response, businesses are investing
benefits. But as Millennials and Gen more resources in corporate
Z become more influential, both as responsibility initiatives. According
employees and consumers, they are to PwC’s Global CEO survey, 64% of
pushing businesses to behave more CEOs now feel that CSR is central
responsibly. to their business, rather than a
standalone programme.36 Even
While 86% of general consumers feel institutional investors are getting
that companies should help address on board, pushing firms to make
social issues, 94% of Gen Z believe more responsible decisions.37 And as
that companies have a responsibility Millennials and Gen Z assume roles
to do so.34 When compared to of power in the corporate world, the
members of other generations, impacts of CSR will only become Boomers Gen X Millennials Gen Z
members of Gen Z are more likely more pronounced.
Page 13The new
X-economies disrupt
industries
Millennials, burdened by high Sharing economy
unemployment, low wages and high The sharing economy – where The sharing economy
debt, have rapidly embraced new consumers “share” products and is projected to grow to
business models that offer them the services directly instead of purchasing
latest products with greater flexibility via a retailer or distributor – is another 86.5 million US users
and lower costs. In today’s market, business model that has grown in by 2021, up from 44.8
start-ups have led the way with these popularity over the last several years. million in 2016.
new offerings, but large businesses Perhaps the most commonly known
– either through acquisitions or example of a sharing economy
internal development – are beginning business is Airbnb, where travellers
to evolve their business models to can rent rooms and homes directly
the needs of the modern consumer. from other individuals. The sharing
These models fall into one of a few economy is projected to grow to
categories: 86.5 million US users by 2021, up
from 44.8 million in 2016. 39
On-demand services
Projected to grow to nearly $57 Subscription box services
billion in 2018, on-demand services Subscription box services have
represent perhaps the largest become incredibly popular due to
of these categories.38 A model their highly targeted nature and ease
popularised greatly by Uber, on- of use. Companies like Birchbox, Winc,
demand businesses are launching Stitch Fix and NatureBox are just the
for just about every category tip of the iceberg when it comes to
imaginable, from printing and dog the subscription box market, which
walkers to babysitters and massages. now provides services for dog owners,
coffee lovers, mountain climbers,
gold miners and sock enthusiasts.
$57
Online consignment
When eBay and Craigslist launched
in the mid-1990s, they provided
individuals with the opportunity to
use the internet to sell used goods.
billion
Nearly two decades later, a new
set of online consignment stores
has emerged to help streamline
this process. Sites like thredUP,
Projected size of the on- Swap and TheRealReal allow
demand economy in 2018. shoppers to sell and purchase
used clothes, jewellery, toys and
luxury fashion accessories online.
Page 14XaaS
As cloud computing becomes
more ubiquitous, Anything as a
Service (XaaS) business models
are also becoming more popular.
The principle behind XaaS is that
businesses can provide better, more
cost-effective solutions to customers
via subscriptions or pay-as-you-
go models than via traditional
software licensing models. The
most commonly known XaaS model
is Software as a Service (SaaS),
which provides individual software
applications and services through the
cloud; however, Platform as a Service
(PaaS) and Infrastructure as a Service
(IaaS) models have also gained
traction as a way for technology
companies to expand their footprint.
While XaaS has historically referred
to cloud computing, it is increasingly
being used to define all service-
based business models, from
Transportation as a Service (Uber and
Lyft) to Shopping as a Service (Trunk
Club and Stitch Fix). Regardless
of what you call it, it’s clear that
customers’ needs are evolving, and
businesses must adapt accordingly.
Page 15A-commerce Today, idea-collection site Pinterest
has 175 million users and 93% of
products on their posts. When
clicked, a tagged product takes the
(anywhere) becomes them use the site to plan purchases. user directly to the product page.
the new reality More than half of them also use the The programme has since expanded
Technology has granted customers site to shop for products.41 Pinterest’s to thousands of businesses and
access to a dizzying array of products, ‘Shop the Look’ feature employs the results have been promising.44
and customers expect to be able to computer vision and human curation Industry leader Nike has announced
purchase on their terms, whenever to allow users to shop for Pinned that it will sell certain products via
and wherever they want. From social products on the web and their Instagram in what they describe
buying on Instagram to v-commerce mobile devices. Early tests showed as a ‘seamless’ experience for
with Alexa, businesses are no longer that users visit a company’s website customers.45
forcing customers to their websites two to three times more frequently
to make a purchase; instead, they when ‘Shop the Look’ Pins are One issue brands face in expanding
are turning every platform into a deployed.42 Additionally, Pinterest social media sales is that many
purchase platform. for Business offers a ‘Buyable Pins’ customers are not aware that they
Social media selling option, which allows customers to can shop directly via social media
Social media continues to grow purchase a company’s products sites; in a recent survey, 26.4% of
in popularity; globally, 482 million directly on Pinterest with a credit respondents said they had never
people became new active users in heard of social commerce.46 However,
card or Apple Pay.
2016. Today, a total of 2.789 billion if social media platforms and retailers
social media users are spending an can generate better awareness – and
Instagram continues to explore ways
average of 40 minutes to four hours remove barriers to purchasing with a
on social media sites each day.40 While to turn its 700 million users into
smoother transition from browsing
customers have consulted social regular consumers of its business
to buying – social media users will
media sites for purchase inspiration partners.43 In 2016, Instagram piloted
readily become in-app consumers.
or research for years, we are only now its Shopping Tags programme,
seeing the potential of these channels allowing companies to upload a
to translate into direct sales. product catalogue and tag specific
Page 1620+80+J
Voice-first conversational
commerce
In 2016, nearly half of US smartphone
users consulted virtual personal
assistants (VPAs) – such as Microsoft’s
20%
Cortana, Apple’s Siri, Amazon’s Alexa
and Google Assistant – and Gartner
predicts that by 2019, 20% of all
smartphone interactions will take
place via VPAs.47 While the shopping
capabilities of voice-enabled VPAs
are still nascent, as they evolve, they
will offer a powerful new platform Smartphone interactions that
through which businesses can reach will take place via VPAs in
customers directly. 2019.
In addition to living on mobile
devices and computers, VPAs now
Microsoft’s Cortana, Amazon Alexa
exist on household devices like
and Google Assistant are working
the Harman Kardon Invoke, Apple
toward developing better user
HomePod, Amazon Echo and
experiences for their voice-first
Google Home. A VoiceLabs report
merchant ecosystems, adding skills
estimated that by the end of last
and features that make the checkout
year, 33 million voice-first devices
process easier and more accessible.
would be in circulation,48 and these
In early 2017, only 28% of US
devices are beginning to drive sales:
residents indicated that they would
Amazon Echo owners make 6% more
use a VPA to buy goods and that they
purchases on Amazon than they
did prior to owning the device.49 were more likely to use their VPAs to Amazon Echo owners
Shopping capability on Google play music, give weather information make 6% more
or provide search results.51 As users
Home launched in February 2016
increasingly rely on their VPAs, the
purchases on Amazon
and 18 months later, predicting the
growth of voice shopping, Walmart trend towards voice interactions will than they did prior to
partnered with Google to offer continue alongside the development owning the device.
hundreds of thousands of products of other artificially intelligent systems
for sale via Google Assistant, with a – based on gestures, biometrics and
vision that customers will use Google more – that will make these types of
Home devices to reorder frequently interactions easier and more natural
purchased items.50 for users.
Page 17Brands go direct-to-consumer Gillette recently initiated its own Globally, $590 billion was spent using
In order to pursue bigger profit shaving subscription club, Gillette contactless payments in 2017, and
margins and retain control of On Demand. The new service allows purchases via contactless payments
the customer experience, some customers to order refills via text.58 are projected to increase to $1.3
brands are bypassing traditional trillion in 2019 and over $2 trillion
retail channels and going straight Since the cost of entry is minimal to globally by 2021.65
to the consumer. Cutting out the existing retailers, the marketplace is
middleman allows retailers to build already saturated with subscription As mobile wallets become more
relationships with customers and services; as of early 2018, broadly adopted, businesses are
collect more accurate data. This shift, subscription box aggregator My looking to capture a piece of the
in turn, enables brands to develop Subscription Addiction indexed mobile payment market, which is
more personalised experiences, roughly 3,000 boxes.59 And now, projected to grow to $112.29 billion
something that 75% of customers even major retailers – including by 2021.66 The list of mobile payment
prefer.52 Starbucks, Amazon, Macy’s, Walmart providers is growing and now
and Nordstrom – are joining in with includes PayPal, Intuit GoPayment,
their own subscription box services. Barclaycard bPay, Chase Pay, Visa
75% of customers To succeed in this sector, subscription Checkout, Walmart Pay, CVS Pay,
services must feature an offering that Target Wallet, Starbucks, Kohl’s Pay,
prefer personalised has the ability to surprise and satisfy Square, Stripe, Venmo, LevelUp,
brand experiences. customers on a recurring basis. PayAnywhere, and more.
Having achieved a valuation of $1.2 Mobile payments go mainstream Further pushing mobile payments
billion, Warby Parker has succeeded Apple Pay launched to great fanfare into the mainstream is the broader
with direct-to-consumer (D2C) sales, in October 2014, but the public has adoption of mobile wallets as a
initially via e-commerce platforms been slow to adopt this technology. whole. An increasing number of
and now with physical locations In 2016, a study by Auriemma businesses, from stadiums to airlines,
as well.53 Major multi-channel Consulting Group reported that only are leveraging mobile wallets for
retailers Nike and Adidas have 27% of users with an eligible device paperless ticket distribution. As
doubled down on their D2C efforts. had used contactless payments.60 adoption increases around the world,
Nike announced a new company At the time, 39% said they would it seems clear that mobile wallets are
alignment, the Consumer Direct use mobile payments more if stores the way of the future.
Offense, that includes the creation of accepted it, but the study found that
a Nike Direct organisation, which will even when a store did accept mobile
strategise ways to deepen one-to- payments, less than a third (31%)
one relationships with customers.54 of users consistently used mobile Number of Apple
1+83211452+1740100
In 2016, Adidas launched Avenue pay, most frequently citing that they
A, limited-edition boxes that ship simply forgot.61 Pay, Samsung Pay
150 million
curated selections of women’s apparel and Android Pay
and footwear to subscribers.55 Despite its slow start, mobile
payments may finally be reaching Contactless
Direct-to-consumer subscription a tipping point. Apple Pay is now Users
services have grown significantly available in 20 markets around
in popularity; visits to subscription- the world, works with 4,000 card
box websites increased 3,000% from issuers and is available at 50%
2013 to 2016.56 Arguably one of the of US retailers.62 This increased
most successful D2C practitioners availability has driven growth in the
20 million
is Dollar Shave Club. The men’s market; Apple Pay, Samsung Pay and
grooming company disrupted its Google Pay currently have a user
sector, retaining nearly half of its base of roughly 150 million and are
customers for one year after their expected to exceed 500 million users
first subscription, and was purchased by 2021.63 And these numbers don’t
for $1 billion by Unilever in 2016.57 To even account for China’s leading
compete with Dollar Shave Club and mobile payment provider, Alipay, 2015 2016 2017
online market competitor Harry’s, which boasts 520 million users.64 Android Pay Samsung Pay Apple Pay
Page 18After a decade of downslide,
many businesses have cut and
optimised as far as they can.
Businesses try to take businesses were forced to become
lean and mean, cutting costs and
back margins streamlining operations wherever
Over the past decade, traditional possible. This quickly created a race
retailers have seen their profit margins to the bottom, with companies
slowly disappear. Online retailers, competing on price while trying
namely Amazon, are able to offer to optimise operations enough to
a wider variety of products than a stay profitable. After a decade of
bricks-and-mortar retailer can, while downslide, many businesses have
simultaneously avoiding the overhead cut and optimised as far as they can;
costs involved in running a physical now, in a change of strategy, they are
store. To stay competitive, retailers looking to increase profit margins,
were compelled to slash prices to building value for customers through
match those offered on Amazon. improved offerings, superior service
and delivering amazing customer
This price slashing necessitated some experiences.
drastic changes on the back end:
Deliver amazing experiences
Driven by new technologies and changing demographics, today’s customers demand more from brands than ever
before. Businesses must be more responsive to new trends and deliver the seamless experiences customers now
expect. At Microsoft, we’re helping companies meet changing customer demands with the tools and technology to
better understand customer needs, become more agile and deliver amazing experiences for their customers.
Understand customers Improve agility Exceed expectations
As customer behaviours and Businesses must work with greater As the baseline for service
expectations evolve, businesses precision and agility to meet today’s continues to climb, companies
must gain visibility into their users’ rapidly changing customer and must rely on technology to
needs to get ahead. Microsoft market demands. By connecting deliver the amazing experiences
Dynamics 365 enables companies data from across the value chain, that customers expect, at
to track product usage and Microsoft Azure and Dynamics 365 scale. Microsoft is empowering
performance so they can predict help organisations improve organisations with the tools and
and prevent potential issues and communication between business technology to create innovative,
create better, more engaging units, predict and respond more frictionless experiences that
experiences for their customers. rapidly to trends and better manage delight customers and exceed
changes on the fly. expectations every time.
Page 19Technology makes finance
smarter and faster
• Finance drives technology advancements
• Blockchain becomes more than just a buzzword
• Businesses establish a culture of data
• AI and ML deliver instant intelligence
• Automation streamlines operations
Page 20Technology makes
finance smarter and faster
Finance drives technology advancements Executive summary
Finance professionals have long been technology pioneers, a fact for which Finance professionals have a history of
they rarely receive credit. The expansion of the telegraph in the US – from a embracing cutting-edge technology,
single 40-mile line connecting Baltimore and Washington, D.C. in 1844 to over leading the charge to adopt the tools
23,000 miles spanning the United States just a decade later – was driven by that have revolutionised the business
exchange traders who needed a way to share market information faster. In world. Today’s CFOs proudly follow in
1865, the pantelegraph, an early form of the fax machine, was originally used their footsteps.
to verify signatures in banking transactions between Paris and Lyon, France. In
1918, the Fedwire Funds Service – a Morse code system sent via telegraph – was
established in the United States to transfer funds between the 12 connected Highlights
Federal Reserve Banks, the Federal Reserve Board and the US Treasury. • The global blockchain market is
projected to reach a value of $20
In 1958, Bank of America issued the BankAmericard, the first modern credit billion by 2024.
card, which would change financial transactions forever. The 1960s brought • 85% of CEOs reported that their
the ATM and the first electronic systems that could provide up-to-the- CFO’s ability to gather and analyse
minute stock market information through desktop terminals. The 1970s saw data was key to profit growth.
the launch of the Nasdaq electronic bulletin board, SWIFT and MIDAS, all of
which simplified, standardised and secured the way financial information was • Businesses will generate $2.9
distributed around the world. trillion in business value from AI
by 2021.
The 1980s gave us electronic trading platforms, cash machine networks and
in 1984, Jane Snowball made the world’s first online purchase. Companies like
eBay and Amazon pioneered e-commerce in the 1990s, while direct trading,
Chip and PIN systems, contactless payment systems and the first version of
Bitcoin launched in the 2000s.
Finance professionals
Finance has long operated on the cusp of technology, and from digital have been pioneering
spreadsheets to accounting software, finance professionals have pioneered
digital technology in the workplace for decades. Today, finance professionals
digital technology
are driving the adoption of new analytics tools and techniques to help improve in the workplace for
operations, better forecast business performance and help their organisations decades.
strategically plan for the future.67
Page 21Blockchain becomes A recent study from Accenture
reported that blockchain could help
more than just a cut costs and deliver savings of more
buzzword than 30% across the middle and back
First described in 1991 by Stuart office. This includes an estimated
Haber and W. Scott Stornetta,68 70% saving on central finance
23+77+J
blockchains are decentralised, reporting and 50% savings on
shared ledgers where all transactions compliance, centralised operations
are recorded securely by encryption and business operations.75 Many of
in near real-time and are immutable these savings are due to streamlined
(incapable of being altered or processes, optimised data quality,
deleted). Blockchain technology improved transparency and better
23%
sparked a revolution in 2009 when internal controls.
Satoshi Nakamoto leveraged
blockchain to provide the data While blockchain has become popular
structure for a novel peer-to-peer due to its efficiency in processing
electronic cash system, Bitcoin.69 financial transactions, companies
are already looking to blockchain
Despite blockchain being nearly to solve other business problems.
three decades old, we are still A number of blockchain solutions
in the early adoption phase, but now enable companies to build anti- Businesses currently using
blockchain technology is expected counterfeit databases, track stolen blockchain technology.
to grow rapidly over the next six products, or track items with specific
years,70 with the global blockchain qualities, such as diamonds from
market projected to reach a value conflict zones or luxury products
of $20 billion by 2024.71 Even today, that rely on product authenticity.76
attitudes are changing fast. In AFP’s One promising application of
2017 MindShift Survey, only 1% of blockchain is with contract and
organisations had implemented document management – digitising
blockchain, while 51% reported no and moving the governance of
plans to do so.72 By their 2018 report, paper certificates, warranties and
23% said they were currently using contracts into a blockchain – which
blockchain technology,73 a huge can automatically update the
year-over-year leap. documents when a triggering event
occurs. And testing has already been
Businesses are discovering implemented in the food safety
revolutionary applications for industry, where blockchain allows
blockchain technology across many food to be granularly tracked, so
industries, including a number of when a producer identifies an issue –
areas impacting financial operations. like a tainted batch of spinach – they
For example, a blockchain can connect can contain the problem by isolating
ledgers from across an organisation’s the source and issuing a recall for
supply chain (supplier, manufacturer, only the affected products.
distributor, shipper, retailer and
end consumer) to make tasks like Other potential benefits of employing
tracking a product’s journey much blockchain technology include
more accurate and efficient. Tracking reduced risk of fraud, reduced time
a product’s journey via blockchain to complete transactions, better
can turn a manual process that once networked loyalty programmes and
took days into an automated process increased customer trust. Today’s
that takes only seconds.74 finance leaders must understand
blockchain and the possibilities
Businesses are poised to see offered by this disruptive technology.
significant returns from blockchain.
Page 22Priorities of the future
finance function
12% 13% 14% 17% 22% 23%
Drive efficiency Refine risk Reduce finance Make significant Meet the need for new skills Improve big data and analytics
improvements management function costs changes to the finance by transforming how finance capabilities to transform
through capability, through new tech, function skill set. talent is recruited, retained and forecasting, risk management
offshoring, including cyber. such as robotics developed. and understanding of value
shared services and process drivers.
and outsourcing. automation.
Businesses establish Beyond data analysis, CFOs face
another modern-day data challenge:
% of finance leaders that chose
category as number one priority
a culture of data as they take on larger roles within
Big data has been a buzzword for the IT and analytics, CFOs are forced
past few years, so it should come as no to tackle the growing issue of data
surprise that finance leaders continue management. This includes not only
to focus efforts on data and analytics data storage, but also monitoring
programs. 85% of CEOs reported and managing data quality. These
that their CFO’s ability to gather and critical tasks not only enable CFOs
analyse data was key to profit growth,77 to do their job, but they allow other
and in a recent study by EY, “improving functions to operate more efficiently.
analytics capabilities to transform Without data quality control, CFOs
forecasting, risk management and and other business leaders risk
understanding of value drivers” was making decisions based on flawed
the top priority most commonly cited information.
by CFOs (23%).78
11+13+14172223sH
As data and analytics play an
As finance professionals move increasingly important role in
into strategic business leadership business, companies – and their CFOs
roles, the importance of having – are working to establish cultures
quality data grows, and they must of data across their organisations.
increasingly rely on their technology This means that measurement
counterparts to help them drive strategies and data collection plans
business intelligence. 73% of finance are the starting point and not an
leaders said that closer CFO-CIO afterthought, there is a high level of
alignment was important to achieving fluency in analytics across teams and
financial transformation.79 With business leaders have access to the
more intelligent and powerful cloud data they need, whenever they need it,
computing, big data is finally moving to make informed strategic decisions.
into new areas, helping finance
leaders close books faster, deliver
more accurate reporting and build
more intelligent business strategies.
Page 23AI and ML deliver definitions of AI, it can commonly
be understood as a computer that
Detection
Intelligent systems can be used to
instant intelligence performs a function that requires analyse large amounts of data and
Not long ago, artificially intelligent some form of cognitive intelligence. detect anomalies. In finance, this
machines seemed like a thing of This may include visual perception, may be used to help identify fraud
science fiction; even today, when speech recognition or decision by monitoring behavioural patterns,
people think of artificial intelligence making. Machine learning is a type of flag when a payment will arrive
(AI), many still envision human-like artificial intelligence where computers late or detect changes to market
robots. But in practice, artificially leverage new information to improve conditions. These tools are also
intelligent machines have been their outputs automatically.82 being used to help mitigate risk by
around for decades, making our lives ensuring regulatory compliance
$2.9
better, safer and more efficient. So and improving operations, flagging
why all the buzz now? abnormal changes or anomalies for
further investigation.
In short, it’s because these systems
are only now getting really good. Classification
Correction: really, really good. In Artificially intelligent systems can be
trillion
2016, Microsoft’s Artificial Intelligent used to organise and classify data
and Research team reported that their categorically. Through classification
conversational speech recognition – often referred to as segmentation
system had reached human parity, or clustering – businesses can
Business value generated
i.e. their system made the same leverage AI to reconcile transactions,
from AI by 2021.
or fewer errors when converting categorise expenses and even
speech to text as a professional evaluate interactions between
transcriptionist.80 This system, which categories to identify correlations.
boasted a word error rate (WER) of The power of these intelligent
5.9% in 2016, has since improved to computers – which are frequently Probability
a WER of 5.1%.81 As the processing cloud-based – is in their ability to These AI systems can be used to
power and accuracy of these process a large volume of information conduct probability analysis. These
intelligent systems improve – from at a speed which humans are not tools give finance teams the ability
advancements in neural networks capable of achieving. While reaching to run faster, more accurate data
to natural language processing – human parity in WER is excellent, the models. This enables them to quickly
the opportunities to leverage these true power of this artificially intelligent test how changes to specific variables
technologies increase as well. system is that it can transcribe hours will impact outcomes, such as how
of audio in seconds at that same WER. different prices will impact revenue
To understand how artificial This proficiency makes artificially or how changes to net payment
intelligence and machine learning intelligent computers extremely terms will alter cash flow.
will impact finance, it’s first useful to effective in performing four categories
understand what these terms mean. of tasks: detection, classification,
While there are many types and probability and optimisation.
Page 24Optimisation AI, Gartner predicts that businesses
Lastly, these tools can be used to will generate $2.9 trillion in business
optimise systems, processes and value from AI by 2021.85
decision making. Through real-time
data analysis, intelligent systems The merging of big data with
can calculate the probability of intelligent technology has made
various outcomes and optimise processing large data sets easier
accordingly; analytical models than ever, and from mining big
can weigh information and make data to predictive analytics, finance
optimisations based on the results. leaders are increasingly relying
In finance, this type of optimisation on these new, intelligent tools to
can be used to maximise profits by help them succeed. Today, finance
dynamically optimising prices at professionals are being asked to
different times, reduce shop floor apply their systemic approach
injuries by slowing down a machine for numbers to data that reaches
when a sensor identifies a potential far beyond the realm of finance,
issue or cut costs by automatically including assessing consumer data
optimising resource allocation across to forecast sales trends, economic
the organisation. indicators to predict market trends
and operations metrics to help Artificially intelligent
Despite its many benefits, just streamline processes and cut costs. computers are extremely
15% of businesses are currently Beyond dollars and cents, finance effective in performing four
leveraging AI, but 31% are planning leaders possess the ability to extract categories of tasks:
to implement intelligent systems knowledge from numbers and apply
over the next year.83 83% of that knowledge to make strategic
detection, classification,
companies said that AI is a strategic business decisions, and now, with AI, probability and
priority for them.84 As organisations these leaders are becoming smarter optimisation.
reap the efficiencies and insights of and more powerful than ever.
Page 2553% of companies
outsource tax functions.
Main drivers for
outsourcing all or part of
the compliance function
Need for additional
assurance on
compliance processes
Automation
Lack of in-house streamlines
operations
compliance skills
As increasing transaction volumes
and ever-changing regulations are
making finance more complex,
Cost businesses are looking to reduce
the costs of the many manual
tasks required in bookkeeping and
accounting. 53% of companies
Compliance activities in Deloitte’s most recent Global
associated with
business function Outsourcing Survey86 reportedly
outsourcing outsource tax functions and 42%
outsource certain finance functions.
For compliance specifically, 41% of
companies said the main reason they
Other
outsourced was due to lack of in-
house skills, while 38% cited costs.87
With the rise of AI, businesses are now
turning to robotic process automation
Lack of in-house
language skills 2016 2017
(RPA) to help reduce costs, speed up
processing, improve quality controls
and free up their employees’ time for
0% 10% 20% 30% 40% 50% 60% more strategic work. 88% of businesses
Page 26projected a moderate to high demand employee expenditures – particularly staff’s time, freeing them up to
for RPA in finance and accounting on gifts and entertainment – to help focus on more meaningful work, like
in 2018,88 while 66% reported that identify potential areas of conflict or predictive analytics and performance
automated AI applications would policy abuse. Furthermore, they can management.93 Before long, today’s
become applicable to their finance help businesses manage financial manual financial processes will be
and accounting over the next couple risk through tasks like detecting a distant memory, but automation
of years.89 changes in risk exposure and alone won’t transform finance;
helping to determine the causes successful finance departments will
Automation – enhanced by AI and for such movement, as well as in continue to need human oversight
machine learning – is streamlining evaluating customer risk and making and a knowledgeable workforce to
finance operations in many ways recommendations on credit limits or help drive strategic business growth.
and saving money by completing maximum loan amounts.
previously manual tasks faster and
40+60+J
more efficiently. RPA – artificially Companies are finding that digital
intelligent workers90 – can now be assistants are reducing operating
used for many tasks, including digital costs by as much as 80%91 and a study
invoicing, expense management, by Accenture showed that robots will
fixed-asset accounting, conducting be able to automate or eliminate up
general ledger account reconciliation, to 40% of transactional accounting
40%
evaluating customer risk and auditing work by 2020.92 But this doesn’t
expense reports. mean that automation will be the
end of the finance professional. To
Beyond faster speeds and lower costs, the contrary, automation, AI and RPA
automation is playing a larger role in are elevating the finance function,
allowing workers to spend less time
compliance. Automated, intelligent
on tedious manual tasks and more
systems can review employee
time deriving higher-value strategic Robots will be able to automate
disclosures, open accounts and
insights for their businesses. These up to 40% of transactional
paper statements to flag any trades
technologies are estimated to recover accounting work by 2020.
or transfers for the appropriate level
between 25% and 75% of financial
of review. They may also review
Work faster and smarter
From risk management to strategic planning, finance professionals are taking on new, important challenges in
the workplace. To meet these changing demands, they must leverage innovative, intelligent tools to combat new
threats while fostering growth. At Microsoft, we’re making finance smarter and safer with unified data that powers
intelligent, automated systems.
Unify business data Get predictive insights Automate workflows
Finance leaders need real- To succeed in today’s competitive As the pace of modern business
time visibility into business business environment, business accelerates, finance teams are
operations and performance to leaders need better financial looking to streamline processes
make informed decisions. From forecasts and foresight into and get more done. With Azure,
cloud-based data solutions on emerging market trends. With Dynamics 365 and Microsoft 365,
Azure to intelligent analytics artificial intelligence and machine we’re providing businesses with
tools in Dynamics 365, we’re learning embedded, Dynamics 365 tools to automate workflows
helping businesses turn data into allows companies to be less reactive and simplify communication
actionable insights so they can and more proactive and provides so they can improve efficiency,
optimise operations and make them with the knowledge to make productivity and compliance.
more strategic business decisions. smarter risk and investment choices.
Page 27Living in the age
of uncertainty
• The age of uncertainty
• Regulation changes create uncertainty
• Businesses brace for Brexit
• Leaders try to navigate a highly politicised environment
• Uncertainty takes a toll
Page 28Living in the age
of uncertainty
The age of uncertainty Executive summary
From Brexit negotiations and trade tariffs to immigration reform and In an incredibly polarised political
environmental policies, the unpredictability of today’s political and social environment, attitudes can shift on a
landscape reigns supreme among the factors concerning finance leaders.94 dime, making it difficult for companies
to plan for the future.
As the future of various regulations around the globe remains unclear in a
highly politicised environment, uncertainty is placing a great amount of
pressure on businesses; 49% of finance leaders feel that they are exposed to Highlights
more uncertainty today than they were three years ago.95 This uncertainty can • 49% of finance leaders feel
be seen in the amount of cash US businesses are accumulating, an amount that they are exposed to more
that continued to climb through 201796 despite projections of steady US GDP uncertainty today than they were
growth in 2018,97 signalling that finance professionals remain cautious about three years ago.
the economy. • 42% of global CEOs reported
over-regulation as a top concern.
Unfortunately, the waters on the horizon appear no calmer than those of
• 66% of consumers felt it was
the past year, so finance leaders need to prepare their businesses for more important for brands to take a
uncertainty ahead. public stand on social and political
issues.
Regulation changes create uncertainty
Over the last 18 months, a string of major regulatory changes has been
initiated and enacted. From GDPR to tariffs, these regulations span across a
wide range of disciplines and touch nearly every business. As business leaders
adapt to comply with the latest regulations, they remain concerned over the
impact of additional pending regulations that could upend their operations.
In 2018, 42% of CEOs globally and 50% of CEOs in North America reported 49% of finance leaders
over-regulation as a top concern,98 with 54% citing rising risk levels due to feel they are exposed to
industry-specific regulation.99
more uncertainty today
Finance regulation than three years ago.
Finance professionals continue to face an onslaught of changes to financial
regulations. Last year, new revenue recognition rules went into effect for most
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