How to future-proof your business: a CFO’s-eye view
At times of economic turmoil, chief financial officers (CFOs) are under even more pressure than usual to manage risk and drive resilience. That means managing their organisations’ profit and loss, cutting overheads, and otherwise reducing costs while planning for the future.
The way forward for getting your P&L in line is to drive revenue. However, each business is unique, and its situation depends on the company’s leadership function, ownership structure, recent financial history, CapEx and OpEx exposure, and industry-specific concerns.
While digital transformation can often be mistaken as a ‘silver bullet’, it is, in fact, the cost of doing business in today’s environment. So how should finance leaders proceed?
Balancing cost with ROI: the three biggest challenges for CFOs
There can be a temptation to make immediate cost savings at every turn. Yet by investing in digital transformation programmes now, astute CFOs:
- Can deliver a rapid return on investment with efficiency savings, thanks to automation and the cloud.
- Will future-proof their company at a time of significant technological change.
- Will make it easier to meet sustainability targets.
While senior leaders recognise the need for digital investment, they want returns quickly. According to the Gartner Global CFO Poll 2022, 69 percent of CFOs are looking to increase spend around digital transformation initiatives – but their expectations for returns are one to two years. Agility, flexibility, and speed have become more pressing.
To map out where savings can be made and how best to plan ahead, we advise considering the three most pressing, intersecting challenges faced by CFOs today – and crucially, where technology can win much-needed reprieve, helping organisations ultimately achieve more with less.
These three challenges are:
1. Cost optimisation
2. Supply chain
3. Energy
Let’s look at each factor in turn.
1. Cost optimisation
Following the global economic crisis of 2007-08, the world’s economy was fuelled by cheap money. With inflation making a return, this has become more difficult to find. Supply-side costs, including scarce affordable energy, have driven up inflation as never before. According to the UK’s Office for National Statistics, the annual rate of input inflation has lurched beyond 20 percent, while input cost inflation for manufacturers leapt 24 percent compared to the same time last year (end of 2022 data).
How to balance growth aspirations with priorities around spend
This pain may not have hit every business yet. But when companies are forced to respond to it, many will go into survival mode, and some will fail.
CFOs are having to evaluate their areas of investment to remain competitive when consumer expectations are high, but confidence is low. They also have to prioritise incremental investments designed to deliver efficiency gains.
Organisations, in turn, are under pressure to ensure every part of their business is working as well as it can – and the digital imperative is key to resolving this. Businesses need more innovation, agility and resilience, with less complexity and at a lower cost, quickly. Put simply, they need to do more with less.
Making the most of existing infrastructure and technology roadmaps
We believe organisations should look to their existing infrastructure and technology roadmaps to drive further efficiencies with the assets they already own. They can reduce operational costs by digitising based on unified platforms.
Rolls-Royce succeeded on both counts by leveraging benefits available in its existing Microsoft stack. The company trained staff to use our low-code Power Platform – including Power Automate, Power BI and Power Apps – which has since become its most popular upskilling solution. In a few months, Rolls-Royce saw a financial benefit of about 8M across the organisation, a figure that can grow organically as more staff and teams use the platform.
Retaining talent by digitising
At first, the COVID-19 crisis stalled attrition rates; later, it saw employees reassess their career priorities. Many left their roles in what was sensationally termed the ‘great resignation’. As a result, the war for talent heated up.
Retaining talent is now more pressing than ever. With employee turnover forecast to be 50 to 75 percent higher than businesses have ever experienced, they need to ensure staff are both happy and productive, with enough investment in skills to keep top talent within the organisation.
Digital investment is the only way to meet higher staff expectations. Employees want modern technology that works effortlessly, and are increasingly expecting hybrid or remote roles as a given, with all the associated technology support.
What the pandemic demonstrated to CFOs is that every business must strive to be a technology business, or fail. Those unable to swiftly pivot to digital were punished harshly.
2. Supply chain
The wider supply chain is the core of most businesses and must absolutely be on every CFO’s radar – but using history to make decisions for the future no longer works. Customer demand is constantly changing, whether it’s influenced by the economic climate or making environmentally conscious purchase decisions.
To shore up customer confidence, organisations can take advantage of intelligent automation to reduce costs, maximise operating margins and recalibrate their supply chains from ‘just-in-time’ to ‘just-in-case’.
Take the UK company Spy Alarms, for example. By switching to Microsoft Dynamics, the service team have reduced the time it takes to book a service interview from six minutes to a few seconds. Their sales operations have also benefited from a much simpler and faster quotation process for its 45,000 customers. With the seamless integration of Power BI and Microsoft Teams, all levels of the team have access to data insights – empowering data-driven decision making with incredible precision and foresight.
3. Energy
Energy is a hot topic and is central to the boardroom conversations CFOs are becoming involved in. Data centres and offices are an enormous cost factor; a more cost- and energy-efficient answer is to retire data centres and invest in the cloud.
Investing in the cloud to reduce energy consumption
At Microsoft, our customers want to use energy management tools to reduce complexities around staffing and save costs in the near to long term. Cloud-native organisations can deliver more core value, with fully managed, end-to-end Azure cloud solutions to boost developer productivity, optimise and allocate resources, and speed up the pace of innovation.
The East London NHS Trust has been a shining example of this. By taking advantage of Microsoft’s Intelligent Data Platform such as Azure Synapse Analytics and BI, staff can sense-check, monitor metrics and look at trends to see what’s happening on the ward. These insights are accessible from any device and even off the network, building a truly efficient integrated data system.
Three takeaways: simplify, unify, innovate
Every business can use technology to become more efficient and effective, whether it’s driving more value from existing platforms and assets, consolidating to reduce cost and complexity, or introducing deployments with rapid payback.
By leveraging data and AI, businesses are armed with the data and insight on how to increase agility and growth with the assets they already have.
At Microsoft, we’re working with our customers to define how they will survive, and even thrive, in a continually changing environment. If you’d like to understand more, visit The Microsoft Cloud – Trusted Cloud Platform.
Find out more
Read Microsoft Azure case studies and customer stories
Announcing Microsoft Azure Data Manager for Energy: Enable your data to do more in the cloud
Understanding Microsoft’s digital transformation
About the author
As CFO of Microsoft UK, Mark leads the Finance Organisation supporting Clare Barclay and the UK Senior Leadership team by delivering against the strategic priorities of the company, through influencing key decisions around people, business processes and performance.
Prior to this role, Mark held the position of International CFO at Adobe and Rackspace, where he was a key part of leadership teams driving growth across all markets outside the US. With a career spread across banking, the oil industry and technology, a breadth of finance experience contributes to his dynamic, objective approach as we pursue great customer outcomes with our product portfolio.
Mark returned to the UK recently after spending time in Zurich and Amsterdam in previous roles, is a trained accountant with the ACCA, studied Economics at the University of Leeds and is married with 3 children.
