Call it the “innovation gap,” a yawning space between two parallel universes. In one, companies operate more effectively than ever before, powered by a rash of new technologies that tackle every aspect of financial management, from the mundane (if complex) processing of invoices and payments right up to strategic planning and long-term forecasting. Software companies promote an endless array of appealing new products that promise to save CFOs time and money, put companies in compliance with new financial rules, and turn reams of data into actionable intelligence. A stream of conferences, roundtables, and Webcasts explore the latest innovations and profile the forward-thinking companies that have deployed them, with the obligatory touting of astounding returns on investment.
In the other universe, new technologies don’t fare as well. This universe could be labeled “reality.” In a recent survey of 168 finance executives, CFO IT asked about the state of IT as used by corporate finance departments. Out of a list of 14 finance-specific technologies, we found that only 2 are widely used: spreadsheets and basic budgeting and planning systems (see “What’s Hot, and Not,” at the end of this article). The others — from portals and dashboards to treasury and tax software — have thus far largely been ignored. “Spreadsheet hell,” a term often invoked by software companies — and, occasionally, by customers — is not, as of yet, driving many CFOs to make substantial investments in newer forms of IT. Nor have the demands of regulations from the Sarbanes-Oxley Act of 2002, even though many of the more-complex rules focus on internal controls, an aspect of corporate operations often inextricably tied to technology.
Why the gulf between expectations and reality? It’s not that finance departments are uneasy about deploying new technologies — the great majority of survey respondents expressed satisfaction with their department’s ability to absorb new IT (see “Finance IT: The Big Picture,” at the end of this article). Instead, the two main factors appear to be the slump in overall IT spending and the lingering hangover from the Y2K-inspired wave of ERP implementations. According to our survey, cost and integration problems remain the top barriers to implementing new finance technologies. “Although there is renewed interest, we still haven’t seen a big pickup in finance IT spending,” says John Van Decker, a vice president at Meta Group Inc.
Ironically, Sarbanes-Oxley may be slowing the pace of new technology adoption further. It’s not that IT won’t be important for companies’ compliance efforts; on the contrary, CFOs say that having a well-integrated system that accurately and transparently reports results is a definite advantage when executives have to sign their name to financial statements. Instead, the problem is that compliance requires such a major effort that many CFOs don’t want the disruption of a large systems implementation.
“While we’re in the middle of Sarbanes-Oxley, we have an embargo on new systems,” says J.T. Fisher, CFO of Delta Connection, a unit of Delta Air Lines in Atlanta. “You don’t want to have internal-control attestations driven off of audits and process reviews that are linked to systems that are unstable. Once the process is bolted down, we can start adding new IT.” Our survey suggests that many finance executives are taking a similarly cautious approach. Of the public companies that responded, only 10 percent are spending much more on technology as a result of Sarbanes-Oxley, 50 percent are spending somewhat more, and the rest see no change.