2019 Finance Trends Report - Microsoft Dynamics 365 - Axdata
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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. Orga-
nizations that fail to evolve find themselves in a grow-
ing 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 liga-
ments that connect technology across the organization,
the muscle that fights risk, the brains that drive innova-
tion, and they are the heart that’s embracing a new gen-
eration of workers.
To thrive in today’s business environment, in a world
with growing complexity, organizations 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 creat-
ing 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 cor-
porate 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 revolutionizing 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’s 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 im- Finance and the role of the Chief
pacts the bottom line, it’s the CFO’s responsibility, and 2) everything impacts the Financial Officer (CFO) have been
bottom line. From staffing and employee engagement to product development elevated and broadened in the past
and mergers and acquisitions, businesses increasingly rely on the financial and several years, a trend that will continue
strategic prowess of their most senior financial leaders whose growing influence moving forward.
can be felt throughout the organization.
Highlights
Finance’s involvement in IT grows • Global IT spending is projected to
Over the past decade, one of the most visible additions to the CFO’s responsibil- reach $3.7 trillion in 2018, a 4.5%
ities has been the management of technology across the business. This should increase from 2017.
come as no surprise given the growth of technology in all aspects of the corpo- • Sixty-four percent of CFOs
rate world. Global IT spending is projected to reach $3.7 trillion in 2018, a 4.5% reported being asked to take on
increase from 2017,1 and this growth is projected to continue into the foreseeable broader operational leadership
future.2 Today’s businesses spend an average of 3.28% of their annual revenue roles beyond finance.
on IT, and in some industries, such as banking and securities, this rate can be as
• Nearly 70% of CFOs reported plans
high as 7.16%.3
to increase investment in digital
transformation in 2018.
Due to the financial demands technology has created, both as a major expense
and as a capital asset, it is more important than ever for CFOs to have a com-
prehensive 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 organizations,
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 organization, finance has taken a more significant role in managing
technology, particularly in the areas of risk management and investment.
Global IT
Global ITspend
spend is projected to
is projected to reach
reach $3.7 trillion in 2018.
$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 fail-
ures or data breaches. Beyond the
many unquantifiable costs to a data
breach—from customer trust to em-
ployee morale—the direct financial
cost of a technology failure is signif-
icant. 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 re-
cent survey by IBM, 48% of CFOs list-
ed 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; fifty-seven percent
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
Sixty-four percent 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
Today’s industry leaders are leverag- disappear
ing technology in exciting new ways Finance leaders are increasingly in-
70%
to transform their business models. volved in operations. In a recent sur-
This trend has been exemplified by vey by EY, 64% of CFOs reported being
the upsurge in Anything as a Service asked to take on broader operational
(XaaS) offerings and on-demand ser- leadership roles beyond finance.9 This
vices, which grew 7.3% in 2017.7 transition has been partially driven by
the decline of the Chief Operating Of-
With technology leading this transfor- ficer (COO). Today, only 29% of For-
CFOs planning to increase mation, their newfound role as tech- tune 500 and S&P 500 companies still
investment in digital nology leader has also pushed CFOs have COOs, a decrease of 40% from
transformation in 2018. into the role of transformation leader, 2000.10
evaluating technology investments,
overseeing product development, This COO decline can be primarily at-
and leading strategic planning for the tributed to the fact that the CEOs of
organization. Accordingly, nearly 70% many major corporations were pro-
of CFOs reported plans to increase in- moted from within and had previously
vestment in digital transformation in served as COO, as is the case at 48%
2018, with 40% planning an increase of Fortune 500 and S&P 500 compa-
of more than 10%. And with 56% of nies.11 Subsequent to these promo-
senior leadership identifying digital tions, many companies opted to elim-
transformation as critical to long-term inate the COO role and divide these
success, CFOs’ involvement in this responsibilities between the CEO and
area will continue to grow.8 the CFO. While the distribution of
tasks between these two executive
leaders varies by company, often the
CEOs, with their strong operational
backgrounds, assume responsibili-
ty for manufacturing and the supply
chain, while CFOs take over procure-
ment 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 factor be able to code a website or set up a investments are
driving this shift has been technolo- database, like technology, CFOs have
actually controlled by IT
gy’s proliferation across all aspects of also become ubiquitous throughout
business. Where technology spend- the organization. Because CFOs pos- departments.
ing was once primarily consolidated sess a deep understanding of both
in the IT department, today’s technol- the organization’s technology and its
ogy budgets are generally distribut- operational units, they are a natural fit
ed across the entire organization. In to drive corporate strategy. And with
fact, an early 2018 survey found that a background in finance, CFOs pos-
only 54% of technology investments sess a unique ability to apply a sys-
are actually controlled by IT depart- temic and objective lens to business
ments.12 With software and analytics decisions. While CFOs remain saddled
solutions making up an increasing with a reputation for being penny
percentage of technology spend,13 pinchers and number junkies, the shift
the average CMO now wields as much to a more quantified management
technology spending power as a CIO. 14 approach provides an essential coun-
terbalance to the gut 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
$0 continue into the foreseeable future.
2015 2016 2017 2018 2019 2020 2021
Data Center Systems Software Devices IT Services Communication Services
Page 8
Expectations from cording to a CFO Insights report by
Deloitte,15 today’s CFOs should plan
Wall Street evolve on spending at least 20% of their time
Before the mid-1980s, managing a in investor relations.
company’s investors was relative-
ly easy for CFOs. Shareholders were Of the emerging roles of the CFO, this
generally an easily defined group with new public persona is frequently one
clear motivations and expectations. of the largest challenges for many of
But with the growth of sophisticated today’s finance leaders, who are often
private equity firms in the mid-1980s, known more for their discretion than
coupled with a transformation of their yearning for the spotlight. This
share registers, CFOs now had to deal challenge can be compounded by the
with institutionalized investors, which competing interests of different inves-
comprised the majority of sharehold- tors; counter to the quarterly pres-
ers at large firms by the mid-1990s. sures of the past decade, companies
While the CFO’s influence had been like Amazon and Tesla are now shift-
growing internally for decades, this ing some investor mindsets toward
shift in stakeholder relations pushed accepting short-term losses with the
many CFOs into the public spotlight prospect of more substantial long-
for the first time. term gains.16 Thus, it is the job of the
CFO to set the strategy for the busi-
Since the growth of institutionalized ness, both short- and long-term, and
investing in the mid-1980s, CFOs have to manage shareholder expectations.
played an important role in managing
relationships with private equity firms.
And as the demands from Wall Street
increase, so will the need for CFOs to
directly engage with investors. Ac-
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 work To effectively guide their organiza- To grow their businesses, finance
requires that finance profession- tions, finance leaders require visi- leaders must look beyond the
als spend less time on routine ac- bility into all areas of their business. past and into the future. Micro-
counting tasks. From productivity By combining unified data in the soft empowers leaders with tools
tools, like Office 365, to workflow cloud with powerful data visualiza- to help them identify emerging
automation capabilities in Dy- tion tools, like Power BI, Microsoft trends, predict outcomes, and au-
namics 365, Microsoft is helping provides finance leaders with a sin- tomatically optimize workflows
finance teams get more done, gle source of visibility into their or- so that organizations can become
freeing them up so that they can ganization—from a high level down less reactive and more proactive
spend more time on high-value to a transactional level—so they can with their business strategies and
strategic work. make more informed decisions. operations.
Page 9
Changing 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 the ob- Driven by technology and
vious. Innovation—from the printing press and combustion engine to computers demographic shifts, today’s customers
and wireless internet — has always been a driver of demand, unlocking new are more empowered than ever and
possibilities and raising expectations. Today, we find ourselves at the intersection expect more from the businesses with
of rapid innovation and a new generation of consumers who have grown up which they interact.
empowered by technology.
Millennials evolve Highlights
• Millennials make up roughly a
The number and influence of Millennials continue to grow. Today, Millennials
quarter of the U.S. population
make up roughly a quarter of the U.S. population,17 and according to the Pew Re-
and will overtake Baby Boomers
search Center, they will overtake Baby Boomers as America’s largest population
as America’s largest population in
in 2019 (73 million vs. 72 million).18 On the surface, Millennials look very different
2019 (73 million vs. 72 million).
from their predecessors: they are more diverse,19 better educated, and more
likely to be never married than any other adult generation was at the same age.20 • Purchases via contactless payments
are projected to increase to $1.3
They are also a generation who entered adulthood facing a strong headwind. trillion globally in 2019 and over $2
They have been crippled by student loans, with over 60% of students taking out trillion by 2021.
loans to pay for college.21 The average student loan debt for Millennials grad-
uating 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
However, despite these challenges, Millennials are smart and savvy. They have The average student
become a generation that is fiscally responsible, with 63% of Millennials set- loan debt for
ting savings goals and 59% reporting feeling financially secure, higher rates than
Millennials graduating
Boomers or Gen X.24 Seventy-three percent of Millennials stick to their budgets
every month, and 16% have saved over $100,000.25 in 2017 was nearly
$40,000.
While their financial burdens have led to lower rates of home and auto own-
Page 11ership,26 Millennials do spend in oth- Gen Z’s purchasing behaviors precise-
er areas; however, they remain thrifty ly, but what’s clear is that they already
when they do. Case in point: Amazon wield great spending influence. There
accounts for the largest volume of on- was $829.5 billion spent on Gen Z in
line apparel sales for Millennials, near- 2015, accounting for 6.8% of total con-
ly 17%, more than double that of the sumer spending that year.28 Further-
next largest seller, Nordstrom.27 This more, over 70% of parents said their
shift to thrift has also played a role in Gen Z children influenced their buy-
the growth of on-demand services, ing decisions on clothes and food.29
sharing marketplaces, and online con-
signment stores. Gen Z is even more diverse than their
Millennial predecessors and will be-
Gen Z gains influence come the nation’s first majority non-
white generation.30 With this diversi- By 2020, Gen Z will
As the size and influence of the Mil-
ty comes a much more tolerant and be the third largest
lennial cohort grow, they are prov-
ing themselves to be a generation of
inclusive generation.31 Additionally, generation in the U.S.
growing up with the internet gave
tech-savvy individuals. But where Mil-
them much greater visibility into
lennials were digital pioneers, helping
global issues. As a result, they are
make technology mainstream, Gen Z
a very globally and socially-mind-
is the first generation of digital na-
ed population. Twenty-six percent
tivists, never having experienced life
of 16-to-19-year-olds currently vol-
before computers and pervasive in-
unteer, and 60% reported that they
ternet.
70+30+J
want their jobs to impact the world.32
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
70%
shoppers and listed price as the top
factor in making a purchase.33 Accord-
ing to the report, 72% said they would
switch from their favorite brand if they
found a similar product at a lower price.
Members of Gen Z also value commu-
nity, with 59% preferring local stores
Parents who said their Gen over large retailers and 72% saying
Z children influence their they would be more willing to shop
buying decisions. at national chains if 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 we
generation in the U.S., just behind Gen have much to discover about them as
X, and they are already accumulating they mature. But for now, one thing is
significant purchasing power. With sure: Gen Z will have a significant im-
their oldest members only in their pact on both business and the world.
early twenties, it is difficult to predict
Page 12Corporate of Gen Z are more likely to share pos-
itive opinions about companies doing
Should companies
responsibility gains help address
8983+87++
good (87%), are more likely to protest
momentum to support a cause they care about
social issues?
Over the last decade, there has been (58%), and are more likely to buy from
substantial buzz about Corporate a company which addresses social or 94%
Social Responsibility (CSR), yet for environmental issues (90%).35 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 respon-
Z become more influential, both as sibility initiatives. According to PwC’s
employees and consumers, they are Global CEO survey, 64% of CEOs now
pushing businesses to behave more feel that CSR is central to their busi-
responsibly. ness, rather than a standalone pro-
gram.36 Even institutional investors
While 86% of general consumers feel are getting on board, pushing firms
that companies should help address to make more responsible decisions.37
social issues, 94% of Gen Z believe And as Millennials and Gen Z assume
that companies have a responsibility roles of power in the corporate world,
to do so.34 When compared to mem- the impacts of CSR will only become Boomers Gen X Millennials Gen Z
bers of other generations, members more pronounced.
Page 13The new X-economies
disrupt industries
Millennials, burdened by high unem- Sharing economy
ployment, low wages, and high debt, The sharing economy—where con-
have rapidly embraced new business sumers “share” products and services
models that offer them the latest directly instead of purchasing via a re-
products with greater flexibility and tailer or distributor — is another busi-
lower costs. In today’s market, start- ness model that has grown in popular-
ups have led the way with these new ity over the last several years. Perhaps The sharing economy
offerings, but large businesses—either the most commonly known example of is projected to grow to
through acquisitions or internal de- a sharing economy business is Airbnb,
velopment — are beginning to evolve where travelers can rent rooms and
86.5 million U.S. users
their business models to the needs of homes directly from other individu- by 2021, up from 44.8
the modern consumer. These models als. The sharing economy is projected million in 2016.
fall into one of a few categories: to grow to 86.5 million U.S. users by
2021, up from 44.8 million in 2016.39
On-demand services
Projected to grow to nearly $57 billion Subscription box services
in 2018, on-demand services repre- Subscription box services have be-
sent perhaps the largest of these cat- come incredibly popular due to their
egories.38 A model popularized great- highly targeted nature and ease of
ly by Uber, on-demand businesses are use. Companies like Birchbox, ClubW,
launching for just about every catego- Stitch Fix, and NatureBox are just the
ry imaginable, from printing and dog tip of the iceberg when it comes to
walkers to babysitters and massages. the subscription box market, which
now provides services for dogs own-
ers, coffee lovers, mountain climbers,
$57
gold miners, and sock enthusiasts.
Online consignment
When eBay and Craigslist launched in
the mid-1990s, they provided individ-
billion
uals with the opportunity to use the
internet to sell used goods. Nearly
two decades later, a new set of online
consignment stores has emerged to
Projected size of the on- help streamline this process. Sites like
demand economy in 2018. thredUP, Swap, and TheRealReal allow
shoppers to sell and purchase used
clothes, jewelry, toys, and luxury fash-
ion accessories online.
Page 14XaaS
As cloud computing becomes more
ubiquitous, Anything as a Service
(XaaS) business models are also be-
coming more popular. The principle
behind XaaS is that businesses can
provide better, more cost-effective
solutions to customers via subscrip-
tions or pay-as-you-go models than
via traditional software licensing mod-
els. 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 trac-
tion as a way for technology compa-
nies 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 Shop-
ping 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 15ers have consulted social media sites ular consumers of its business part-
for purchase inspiration or research ners.43 In 2016, Instagram piloted its
A-commerce for years, we are only now seeing the Shopping Tags program, allowing
(anywhere) becomes potential of these channels to trans- companies to upload a product cata-
late into direct sales. log and tag specific products on their
the new reality posts. When clicked, a tagged product
Technology has granted customers Today, idea-collection site Pinterest takes the user directly to the product
access to a dizzying array of products, has 175 million users, and 93% of them page. The program has since expand-
and customers expect to be able to use the site to plan purchases. More ed to thousands of businesses, and the
purchase on their terms, whenever than half of them also use the site to results have been promising.44 Indus-
and wherever they want. From social shop for products.41 Pinterest’s “Shop try leader Nike has announced that it
buying on Instagram to v-commerce the Look” feature employs computer will sell certain products via Instagram
with Alexa, businesses are no longer vision and human curation to allow in what they describe as a “seamless”
forcing customers to their websites users to shop Pinned products on the experience for customers.45
to make a purchase; instead, they are web and their mobile devices. Early One issue brands face in expanding
turning every platform into a pur- tests showed that users visit a compa- social media sales is that many cus-
chase platform. ny’s website two to three times more tomers are not aware that they can
frequently when “Shop the Look” Pins shop directly via social media sites; in
are deployed.42 Additionally, Pinterest a recent survey, 26.4% of respondents
Social media selling for Business offers a “Buyable Pins” said they had never heard of social
Social media continues to grow in option, which allows customers to commerce.46 However, if social media
popularity; globally, 482 million peo- purchase a company’s products di- platforms and retailers can generate
ple became new active users in 2016. rectly on Pinterest with a credit card better awareness — and remove bar-
Today, a total of 2.789 billion social or Apple Pay. riers to purchasing with a smoother
media users are spending an average transition from browsing to buying
of 40 minutes to four hours on social Instagram continues to explore ways — social media users will readily be-
media sites each day.40 While custom- to turn its 700 million users into reg- come in-app consumers.
Page 1620+80+J
Voice-first conversational
commerce
In 2016, nearly half of U.S. smartphone
users consulted virtual personal assis-
tants (VPAs) — such as Microsoft’s
20%
Cortana, Apple’s Siri, Amazon’s Alexa,
and Google Assistant — and Gart-
ner 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
through which businesses can reach that will take place via
customers directly. VPAs in 2019.
In addition to living on mobile de-
vices and computers, VPAs now exist Microsoft’s Cortana, Amazon Alexa,
on household devices like the Har- and Google Assistant are working
man Kardon Invoke, Apple HomePod toward developing better user expe-
Amazon Echo and Google Home. A riences for their voice-first merchant
VoiceLabs report estimated that by ecosystems, adding skills and fea-
the end of last year, 33 million voice- tures that make the checkout process
first devices would be in circulation,48 easier and more accessible. In early
and these devices are beginning to 2017, only 28% of U.S. residents indi-
drive sales: Amazon Echo owners cated that they would use a VPA to
make 6% more purchases on Amazon buy goods and that they were more Amazon Echo owners
than they did prior to owning the de- likely to use their VPAs to play music, make 6% more
vice.49 Shopping capability on Google give weather information, or provide
Home launched in February 2016 and search results.51 As users increasingly
purchases on Amazon
18 months later, predicting the growth rely on their VPAs, the trend toward than they did prior to
of voice shopping, Walmart part- voice interactions will continue along- owning the device.
nered with Google to offer hundreds side the development of other artifi-
of thousands of products for sale via cially intelligent systems—based on
Google Assistant, with a vision that gestures, biometrics, and more—that
customers will use Google Home de- will make these type of interactions
vices to reorder frequently purchased easier and more natural for users.
items.50
Page 17Brands go direct-to-consumer Gillette On Demand. The new service Globally, $590 billion was spent using
In order to pursue bigger profit mar- allows customers to order refills via contactless payments in 2017, and
gins and retain control of the cus- text.58 purchases via contactless payments
tomer experience, some brands are are projected to increase to $1.3 tril-
bypassing traditional retail channels Since the cost of entry is minimal to lion in 2019 and over $2 trillion glob-
and going straight to the consumer. existing retailers, the marketplace is ally by 2021.65
Cutting out the middleman allows already saturated with subscription
retailers to build relationships with services; as of early 2018, subscrip- As mobile wallets become more
customers and collect more accu- tion box aggregator My Subscription broadly adopted, businesses are look-
rate data. This shift, in turn, enables Addition indexed roughly 3,000 box- ing to capture a piece of the mobile
brands to develop more personalized es.59 And now, even major retailers payment market, which is projected
experiences, something that 75% of — including Starbucks, Amazon, Ma- to grow to $112.29 billion by 2021.66
customers prefer.52 cy’s, Walmart, and Nordstrom — are The list of mobile payment providers
joining in with their own subscription is growing and now includes PayPal,
75% of customers box services. To succeed in this sector, Intuit GoPayment, Barclaycard bPay,
subscription services must feature an
prefer personalized Chase Pay, Visa Checkout, Walmart
offering that has the ability to surprise Pay, CVS Pay, Target Wallet, Starbucks,
brand experiences. and satisfy customers on a recurring Kohl’s Pay, Square, Stripe, Venmo,
basis. LevelUp, PayAnywhere, and more.
Having achieved a valuation of $1.2
billion, Warby Parker has succeeded Mobile payments go mainstream
with direct-to-consumer (D2C) sales, Further pushing mobile payments
Apple Pay launched to great fanfare into the mainstream is the broader
initially via e-commerce platforms
in October 2014, but the public has adoption of mobile wallets as a whole.
and now with physical locations as
well.53 Major multi-channel retailers been slow to adopt this technology. An increasing number of businesses,
Nike and Adidas have doubled down In 2016, a study by Auriemma Con- from stadiums to airlines, are leverag-
on their D2C efforts. Nike announced sulting Group reported that only 27% ing mobile wallets for paperless tick-
a new company alignment, the Con- of users with an eligible device had et distribution. As adoption increases
sumer Direct Offense, that includes used contactless payments.60 At the around the world, it seems clear that
the creation of a Nike Direct organi- time, 39% said they would use mobile mobile wallets are the way of the fu-
zation, which will strategize ways to payments more if stores accepted it, ture.
deepen one-to-one relationships with but the study found that even when a
customers.54 In 2016, Adidas launched store did accept mobile payments, less Number of Apple
1+83211452+1740100
than a third (31%) of users consistently
Avenue A, limited-edition boxes that
used mobile pay, most frequently cit- Pay, Samsung Pay,
ship curated selections of women’s
150 million
apparel and footwear to subscribers.55 ing that they simply forgot.61 and Android Pay
Contactless
Direct-to-consumer subscription Despite its slow start, mobile pay- Users
services have grown significantly in ments may finally be reaching a tip-
popularity; visits to subscription-box ping point. Apple Pay is now available
websites increased 3,000% from 2013 in 20 markets around the world, works
to 2016.56 Arguably one of the most with 4,000 card issuers, and is avail-
successful D2C practitioners is Dol- able at 50% of U.S. retailers.62 This in-
lar Shave Club. The men’s grooming creased availability has driven growth
20 million
company disrupted its sector, retain- in the market; Apple Pay, Samsung
ing nearly half of its customers for one Pay, and Google Pay currently have a
year after their first subscription, and user base of roughly 150 million and
was purchased for $1 billion by Unile- are expected to exceed 500 million
ver in 2016.57 To compete with Dollar users by 2021.63 And these numbers
Shave Club and online market com- don’t even account for China’s lead-
petitor Harry’s, Gillette recently initiat- ing mobile payment provider, Ali- 2015 2016 2017
ed its own shaving subscription club, pay, which boasts 520 million users.64 Android Pay Samsung Pay Apple Pay
Page 18After a decade of
downslide, many
businesses have cut
and optimized as far as
they can.
Businesses try to
take back margins
Over the past decade, traditional re- and mean, cutting costs and stream-
tailers have seen their profit margins lining operations wherever possible.
slowly disappear. Online retailers, This quickly created a race to the bot-
namely Amazon, are able to offer a tom, with companies competing on
wider variety of products than a brick price while trying to optimize opera-
and mortar retailer can, while simulta- tions enough to stay profitable. After
neously avoiding the overhead costs
a decade of downslide, many busi-
involved in running a physical store.
nesses have cut and optimized as far
To stay competitive, retailers were
compelled to slash prices to match as they can; now, in a change of strat-
those offered on Amazon. egy, they are looking to increase profit
margins, building value for customers
This price slashing necessitated some through improved offerings, superior
drastic changes on the back end: busi- service, and delivering amazing cus-
nesses were forced to become lean tomer experiences.
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 behaviors and ex- Businesses must work with greater As the baseline for service con-
pectations evolve, businesses precision and agility to meet today’s tinues to climb, companies must
must gain visibility into their us- rapidly changing customer and mar- rely on technology to deliver the
ers’ needs to get ahead. Microsoft ket demands. By connecting data amazing experiences that cus-
Dynamics 365 enables companies from across the value chain, Microsoft tomers expect, at scale. Microsoft
to track product usage and per- Azure and Dynamics 365 help orga- is empowering organizations with
formance so they can predict and nizations improve communication the tools and technology to create
prevent potential issues and create between business units, predict and innovative, frictionless experiences
better, more engaging experiences respond more rapidly to trends, and that delight customers and exceed
for their customers. better manage 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 they Finance professionals have a history of
rarely receive credit. The expansion of the telegraph in the U.S.—from a single embracing cutting-edge technology,
40-mile line connecting Baltimore and Washington, D.C. in 1844 to over 23,000 leading the charge to adopt the tools
miles spanning the United States just a decade later—was driven by exchange that have revolutionized the business
traders who needed a way to share market information faster. In 1865, the pan- world. Today’s CFOs proudly follow in
telegraph, an early form of the fax machine, was originally used to verify signa- their footsteps.
tures in banking transactions between Paris and Lyon, France. In 1918, the Fed-
wire Funds Service—a Morse code system sent via telegraph — was established
in the United States to transfer funds between the 12 connected Federal Reserve Highlights
Banks, the Federal Reserve Board, and the U.S. 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 card, billion by 2024.
which would change financial transactions forever. The 1960s brought the ATM • Eighty-five percent of CEOs
and the first electronic systems that could provide up-to-the-minute stock mar- reported that their CFO’s ability to
ket information through desktop terminals. The 1970s saw the launch of the Nas- gather and analyze data was key to
daq electronic bulletin board, SWIFT, and MIDAS, all of which simplified, stan- profit growth.
dardized, and secured the way financial information was distributed around the
world. • Businesses will generate $2.9
trillion in business value from AI by
The 1980s gave us electronic trading platforms, cash machine networks, and 2021.
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 spread- have been pioneering
sheets to accounting software, finance professionals have pioneered digital tech- digital technology
nology in the workplace for decades. Today, finance professionals are driving
the adoption of new analytics tools and techniques to help improve operations, in the workplace for
better forecast business performance, and help their organizations strategically decades.
plan for the future.67
Page 21Blockchain becomes icant returns from blockchain. A re-
cent study from Accenture reported
more than just a that blockchain could help cut costs
buzzword
23+77+J
and deliver savings of more than 30%
First described in 1991 by Stuart Haber across the middle and back office.
and W. Scott Stornetta,68 blockchains This includes an estimated 70% sav-
are decentralized, shared ledgers ings on central finance reporting and
where all transactions are recorded 50% savings on compliance, central-
securely by encryption in near re- ized operations, and business opera-
23%
al-time and are immutable (incapable tions.75 Many of these savings are due
of being altered or deleted). Block- to streamlined processes, optimized
chain technology sparked a revolu- data quality, improved transparency,
and better internal controls.
tion in 2009 when Satoshi Nakamoto
leveraged blockchain to provide the
While blockchain has become popu-
data structure for a novel peer-to-
lar due to its efficiency in processing
peer electronic cash system, Bitcoin.69
financial transactions, companies are Businesses currently using
already looking to blockchain to solve blockchain technology.
Despite blockchain being nearly three
other business problems. A number
decades old, we are still in the early
of blockchain solutions now enable
adoption phase, but blockchain tech-
companies to build anti-counterfeit
nology is expected to grow rapid-
databases, track stolen products, or
ly over the next six years,70 with the
track items with specific qualities, such
global blockchain market projected to
as diamonds from conflict zones or
reach a value of $20 billion by 2024.71 luxury products that rely on product
Even today, attitudes are changing authenticity.76 One promising applica-
fast. In AFP’s 2017 MindShift Survey, tion of blockchain is with contract and
only 1% of organizations had imple- document management — digitizing
mented blockchain, while 51% report- and moving the governance of paper
ed no plans to do so.72 By their 2018 certificates, warranties, and contracts
report, 23% said they were currently into a blockchain — which can auto-
using blockchain technology,73 a huge matically update the documents when
year-over-year leap. a triggering event occurs. And testing
has already been implemented in the
Businesses are discovering revolution- food safety industry, where blockchain
ary applications for blockchain tech- allows food to be granularly tracked,
nology across many industries, in- so when a producer identifies an issue
cluding a number of areas impacting — like a tainted batch of spinach—
financial operations. For example, a they can contain the problem by iso-
blockchain can connect ledgers from lating the source and issuing a recall
across an organization’s supply chain for only the affected products.
(supplier, manufacturer, distributor,
shipper, retailer, and end consumer) Other potential benefits of employ-
to make tasks, like tracking a product’s ing blockchain technology include
journey, much more accurate and effi- reduced risk of fraud, reduced time
cient. Tracking a product’s journey via to complete transactions, better net-
blockchain can turn a manual process worked loyalty programs, and in-
that once took days into an automat- creased customer trust. Today’s fi-
ed process that takes only seconds.74 nance leaders must understand
blockchain and the possibilities of-
Businesses are poised to see signif- fered by this disruptive technology.
Page 22Priorities of the future
finance function
12% 13% 14% 17% 22% 23%
Drive efficien- Refine risk man- Reduce finance Make significant Meet the need for new skills Improve big data and analyt-
cy improve- agement capa- function costs changes to the by transforming how finance ics capabilities to transform
ments through bility, including through new finance function skill talent is recruited, retained, forecasting, risk manage-
offshoring, cyber. tech, such as set. and developed. ment, and understanding of
shared robotics and pro- value drivers.
services, and cess automation.
outsourcing.
Percent of finance leaders that chose
Businesses establish
category as number one priority
rate reporting, and build more intelli-
gent business strategies.
a culture of data
Big data has been a buzzword for the Beyond data analysis, CFOs face an-
past few years, so it should come as other modern-day data challenge: as
no surprise that finance leaders con- they take on larger roles within IT and
tinue to focus efforts on data and an- analytics, CFOs are forced to tackle
alytics programs. Eighty-five percent the growing issue of data manage-
of CEOs reported that their CFO’s ment. This includes both data storage,
ability to gather and analyze data was as well as monitoring and managing
key to profit growth,77 and in a recent data quality. These critical tasks not
study by EY, “improving analytics ca-
only enable CFOs to do their job, but
pabilities to transform forecasting,
they allow other functions to operate
risk management, and understand-
more efficiently. Without data qual-
ing of value drivers” was the top pri-
ity control, CFOs and other business
11+13+14172223sH
ority most commonly cited by CFOs
leaders risk making decisions based
(23%).78
on flawed information.
As finance professionals move into
strategic business leadership roles, As data and analytics play an increas-
the importance of having quality data ingly important role in business, com-
grows, and they must increasingly rely panies—and their CFOs—are working
on their technology counterparts to to establish cultures of data across
help them drive business intelligence. their organizations. This means that
Seventy-three percent of finance measurement strategies and data
leaders said that closer CFO-CIO collection plans are the starting point
alignment was important to achieving and not an afterthought, there is a
financial transformation.79 With more high level of fluency in analytics across
intelligent and powerful cloud com- teams, and business leaders have ac-
puting, big data is finally moving into cess to the data they need, whenever
new areas, helping finance leaders they need it, to make informed strate-
close books faster, deliver more accu- gic decisions.
Page 23AI and ML deliver some form of cognitive intelligence.
This may include visual perception,
used to help identify fraud by moni-
toring behavioral patterns, flag when
instant intelligence speech recognition, or decision mak- a payment will arrive late, or detect
Not long ago, artificially intelligent ing. Machine learning is a type of changes to market conditions. These
machines seemed like a thing of sci- artificial intelligence where comput- tools are also being used to help miti-
ence fiction; even today, when peo- ers leverage new information to im- gate risk by ensuring regulatory com-
ple think of artificial intelligence (AI), prove their outputs automatically.82 pliance and improving operations,
many still envision human-like robots. flagging abnormal changes or anom-
But in practice, artificially intelligent alies for further investigation.
$2.9
machines have been around for de-
cades, making our lives better, safer, Classification
and more efficient. So why all the buzz Artificially intelligent systems can be
now? used to organize and classify data
categorically. Through classification—
trillion
In short, it’s because these systems often referred to as segmentation or
are only now getting really good. clustering—businesses can leverage
Correction: really, really good. In 2016, AI to reconcile transactions, cate-
Microsoft’s Artificial Intelligent and Business value generated gorize expenses, and even evaluate
Research team reported that their from AI by 2021. interactions between categories to
conversational speech recognition identify correlations.
system had reached human parity,
i.e., their system made the same or Probability
fewer errors converting speech to text The power of these intelligent com- These AI systems can be used to con-
as a professional transcriptionist.80 puters — which are frequently cloud- duct probability analysis. These tools
This system, which boasted a word based — is in their ability to process give finance teams the ability to run
error rate (WER) of 5.9% in 2016, has a large volume of information at a faster, more accurate data models.
since improved to a WER of 5.1%.81 As speed which humans are not capable This enables them to quickly test how
the processing power and accuracy of achieving. While reaching human changes to specific variables will im-
of these intelligent systems improve parity in WER is excellent, the true pact outcomes, such as how differ-
— from advancements in neural net- power of this artificially intelligent sys- ent prices will impact revenue or how
works to natural language processing tem is that it can transcribe hours of changes to net payment terms will al-
— the opportunities to leverage these audio in seconds at that same WER. ter cash flow.
technologies increase as well. This proficiency makes artificially intel-
ligent computers extremely effective Optimization
To understand how artificial intel- in performing four categories of tasks: Lastly, these tools can be used to opti-
ligence and machine learning will detection, classification, probability, mize systems, processes, and decision
impact finance, it’s first useful to un- and optimization. making. Through real-time data anal-
derstand what these terms mean. ysis, intelligent systems can calculate
While there are many types and Detection the probability of various outcomes
definitions of AI, it can commonly Intelligent systems can be used to an- and optimize accordingly; analytical
be understood as a computer that alyze large amounts of data and de- models can weigh information and
performs a function that requires tect anomalies. In finance, this may be make optimizations based on the re-
Page 24sults. In finance, this type of optimiza- The merging of big data with intelli-
tion can be used to maximize profits gent technology has made processing
by dynamically optimizing prices at large data sets easier than ever, and
different times, reducing shop floor from mining big data to predictive an-
injuries by slowing down a machine alytics, finance leaders are increasingly
when a sensor identifies a potential relying on these new, intelligent tools
issue, or cut costs by automatically to help them succeed. Today, finance
optimizing resource allocation across professionals are being asked to apply
the organization. their systemic approach for numbers
to data that reaches far beyond the
Despite its many benefits, just 15% of realm of finance, including assess-
businesses are currently leveraging ing consumer data to forecast sales
AI, but 31% are planning to imple- trends, economic indicators to predict
ment intelligent systems over the next market trends, and operations met- Artificially intelligent
year.83 Eighty-three percent of compa- rics to help streamline processes and computers are extremely
nies said that AI is a strategic priority cut costs. Beyond dollars and cents, effective in performing four
for them.84 As organizations reap the finance leaders possess the ability to categories of tasks:
efficiencies and insights of AI, Gartner extract knowledge from numbers and detection, classification,
predicts that businesses will generate apply that knowledge to make strate-
$2.9 trillion in business value from AI gic business decisions, and now, with probability, and
by 2021.85 AI, these leaders are becoming smart- optimization.
er and more powerful than ever.
Page 25Fifty-three percent of
companies outsource
tax functions.
Main drivers for
outsourcing all or part of
the compliance function
Need for additional
assurance on
compliance processes
Automation
streamlines
Lack of in-house
compliance skills
operations
As increasing transaction volumes
and ever-changing regulations are
Cost making finance more complex, busi-
nesses are looking to reduce the costs
of the many manual tasks required
in bookkeeping and accounting. Fif-
ty-three percent of companies in De-
Compliance activities
associated with loitte’s most recent Global Outsourc-
business function ing Survey86 reportedly outsource tax
outsourcing
functions, and 42% outsource certain
finance functions. For compliance
specifically, 56% of companies said
the main reason they outsourced was
Other
due to lack of in-house skills, while
38% cited costs.87
With the rise of AI, businesses are
now turning to robotic process au-
Lack of in-house
language skills 2016 2017 tomation (RPA) to help reduce costs,
speed processing, improve quality
controls, and free up their employees’
0% 10% 20% 30% 40% 50% 60% time for more strategic work. Eighty-
Page 26eight percent of businesses projected review. They may also review em- and 75% of financial staff’s time, free-
a moderate to high demand for RPA ployee expenditures — particularly ing them up to focus on more mean-
in finance and accounting in 2018,88 on gifts and entertainment—to help ingful work, like predictive analytics
while 66% reported that automated identify potential areas of conflict or and performance management.93
AI applications would become appli- policy abuse. Furthermore, they can Before long, today’s manual financial
cable to their finance and accounting help businesses manage financial risk processes will be a distant memory,
over the next couple of years.89 through tasks like detecting changes but automation alone won’t trans-
in risk exposure and helping to deter- form finance; successful finance de-
Automation—enhanced by AI and mine the causes for such movement, as partments will continue to need hu-
machine learning—is streamlining fi- well as in evaluating customer risk and man oversight and a knowledgeable
nance operations in many ways and making recommendations on cred- workforce to help drive strategic busi-
saving money by completing previ- it limits or maximum loan amounts. ness growth.
40+60+J
ously manual tasks faster and more
efficiently. RPA—artificially intelligent Companies are finding that digital as-
workers90 — can now be used for sistants are reducing operating costs
many tasks, including digital invoic- by as much as 80%,91 and a study by
ing, expense management, fixed-as- Accenture showed that robots will be
set accounting, conducting general able to automate or eliminate up to
40%
ledger account reconciliation, evalu- 40% of transactional accounting work
ating customer risk, and auditing ex- by 2020.92 But this doesn’t mean that
pense reports. automation will be the end of the fi-
nance professional. To the contrary,
Beyond faster speeds and lower costs, automation, AI, and RPA are elevating
automation is playing a larger role the finance function, allowing workers
in compliance. Automated, intelli- to spend less time on tedious manual
gent systems can review employee tasks and more time deriving high- Robots will be able to automate
disclosures, open accounts, and pa- er-value strategic insights for their up to 40% of transactional
per statements to flag any trades or businesses. These technologies are accounting work by 2020.
transfers for the appropriate level of estimated to recover between 25%
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 intelli-
gent, automated systems.
Unify business data Get predictive insights Automate workflows
Finance leaders need real-time vis- To succeed in today’s competitive As the pace of modern business
ibility into business operations and business environment, business lead- accelerates, finance teams are
performance to make informed ers need better financial forecasts and looking to streamline processes
decisions. From cloud-based data foresight into emerging market trends. and get more done. With Azure,
solutions on Azure to intelligent With artificial intelligence and machine Dynamics 365, and Microsoft 365,
analytics tools in Dynamics 365, learning embedded, Dynamics 365 al- we’re providing businesses with
we’re helping businesses turn data lows companies to be less reactive and tools to automate workflows and
into actionable insights so they more proactive and provides them simplify communication so they
can optimize operations and make with the knowledge to make smarter can improve efficiency, productiv-
more strategic business decisions. risk and investment choices. ity, and compliance.
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 politicized 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 environ- In an incredibly polarized political
mental policies, the unpredictability of today’s political and social landscape environment, attitudes can shift on a
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
politicized environment, uncertainty is placing a great amount of pressure on
businesses; forty-nine percent of finance leaders feel that they are exposed to Highlights
more uncertainty today than they were three years ago.95 This uncertainty can • Forty-nine percent of finance
be seen in the amount of cash U.S. businesses are accumulating, an amount that leaders feel that they are exposed
continued to climb in the third quarter of 201796 despite projections of steady to more uncertainty today than
U.S. GDP growth in 2018,97 signaling that finance professionals remain cautious they were three years ago.
about the economy. • Forty-two percent of global CEOs
reported over-regulation as a top
Unfortunately, the waters on the horizon appear no calmer than those of the concern.
past year, so finance leaders need to prepare their businesses for more uncer-
• Sixty-six percent of consumers
tainty ahead.
felt it was important for brands to
take a public stand on social and
Regulation changes create uncertainty political issues.
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 over-regulation as a top Forty-nine percent of
concern,98 with 54% citing rising risk levels due to industry-specific regulation.99 finance leaders feel
Finance regulation
they are exposed to
Finance professionals continue to face an onslaught of changes to financial reg- more uncertainy today
ulations. Last year, new revenue recognition rules went into effect for most public than three years ago.
entities. These new rules, created by the FASB and IASB, attempt to simplify and
Page 29You can also read
