Some people live in the past, but Mike Kaelin is preoccupied with the year 2017. That’s because the CFO of RTI International tries to evaluate the company’s finance systems from the perspective of five years from now. “Historically, I wouldn’t say we had that forward-thinking view on things,” says Kaelin. “Because of the financial pressures and because of the competitive landscape that we’re in, we’ve had to be a lot more strategic.”
RTI, a global nonprofit research-and-development firm, uses a diverse set of finance systems, including a project-based finance system and a project-management forecasting tool developed in-house. In recent years, the firm has been improving the systems so that users can get the performance insights they need faster and more easily. For example, RTI’s addition of a data warehouse in 2009 lets finance managers pull project-level performance information daily if needed, as opposed to monthly before. This has given managers more time to perform higher-value analysis and support decision making at all levels of the organization.
Kaelin wants to push finance’s decision-support role further, with the help of finance technology. “I’d like to get us to the point where we are involved in every critical business decision the company makes” he says.
Indeed, RTI has big decisions ahead. Its largest customer, the federal government, is trying to shrink a trillion-dollar-plus budget deficit, which in turn threatens to reduce funding for the types of work the firm performs. Compounding matters, competition in RTI’s core markets is heating up. As a result, RTI anticipates that funding from the federal government will be flat at best. In response, it is striving to diversify its customer base by expanding into newer commercial and international markets — which will require new levels of support from finance.
Kaelin says that thinking further ahead will be central to this effort. “We’ve got to be more creative and more strategic in what things we invest in, and that includes systems,” he says.
Taking a Longer View
Kaelin is far from the only finance executive in North America interested in future-proofing his or her company’s finance systems, according to a recent study conducted by CFO Research and underwritten by Workday, a vendor of cloud-based systems for financial and human-capital management. In an electronic survey of 202 senior financial executives at North American companies and a series of nine in-depth interviews, executives endorsed taking a long-term view when considering the value of their current and future finance systems (that is, their enterprise resource planning system or closest equivalent).
Most respondents to the survey (65%) confirmed that a long-term view of the cost of maintaining systems is more appropriate than a short-term view. They agreed that although the costs of a short-term approach to system fixes may be tolerable at first, in the long run they add up. Almost no respondents saw value in being an early adopter of new finance technology or in implementing new technology purely for the sake of keeping up with competitors. Close to one-third (31%) saw value in making the most of opportunities to replace their systems, while 33% agreed with the notion that company maturation and growth demands more-standardized and more-capable systems to meet changing needs.
Taken together, these results suggest that considering a finance-system replacement is neither about being first to adopt new technology nor about avoiding being last. The best approach seeks to measure the value that such systems will offer far into the future.
The study results also suggest, however, that most companies address problems in their finance systems only as they arise. Sixty-two percent of the finance executives surveyed said they take a reactive approach to making changes to their systems. Only 29% strive to anticipate and preempt changing circumstances. More than half of companies (55%) do not look further than two years into the future when considering plans to alter, upgrade, improve, or replace systems. Thirty percent develop strategies for the next two to five years, and only 10% of companies plan at least five years ahead.
In interviews, finance executives said that their companies’ often-reactive approach to systems planning is a problem that they are addressing (or at least trying to address). RTI, for one, recently pushed its time horizon for planning systems changes from one year to three years, with the ultimate goal of being able to look five years ahead. In a challenging business environment, Mike Kaelin and his team are racing to reach 2017 long before the calendar, or RTI’s rivals, get there.
To download the full report on the study, “CFOs on Managing Finance Technology,” go to cfo.com/research.