Planning, people and process have historically influenced technology decisions in accounting firms. After more than 20 years of tracking relevant investment and return on investment metrics, the evidence shows that the current business model is not sustainable.
Earlier in my career, I campaigned for a technology surcharge (per hour) to compensate for lost revenue due to efficiency and reduction in charging hours. Competition and reduced technology costs have leveled the playing field for all businesses. Unfortunately, some of the best practices that have proven successful in the past won’t take organizations to the next level.
One of the main challenges in tracking metrics was the quality of the data provided by the participating companies (e.g. total investment and revenue per full-time equivalent). Different organizations may have different definitions of “full-time equivalent” and different ideas of what is included in “total IT investment.”
When calculating the investment and the associated return, two different trends have prevailed. Company management’s initial approach was what we call the “peanut butter method” of accounting: spread it thin and no one will know.
Next came the debate over the definition of a full-time equivalent. We have always used 2,080 hours to calculate a full-time equivalent and included all employees. Outsourcing has also had a positive effect on the key figures. Some companies have only included paid employees in their metrics. That never made sense to me as it takes a team – not a robust individual – to meet a client’s needs and desires.
Why am I even mentioning this above? The perfect storm was brewing before the pandemic and has accelerated with rapid advances in technology — including artificial intelligence, machine learning, and robotic process automation — and the competition for talent.
The business model most companies have used in the past is unsustainable. Neither do the mindsets associated with transactional and compliance work. Digital and business transformation has accelerated more rapidly in the past two years than in the previous decade. Ray Kurzweil calls this phenomenon “the law of accelerated returns.”
The role of the chief information officer has become even more critical to the success of an accounting firm. Being strategic used to be enough; now they must also be visionaries while positioning themselves to steer the innovation process. Many larger companies have separated innovation from the traditional CIO job description. The question is not how to do more with less, but how does the profession add value?
Vision and planning have become even more important, and CIOs have a critical role to play due to the increasing convergence of technology and business capability model. Many new technologies are available and will be implemented over the next three years. Your Challenge: What is your vision, plan and schedule? And above all, who is accountable/responsible for the success? Do you have the capacity and ability to execute your vision and plan?
Now for the crystal ball. I asked Amanda Wilkie, a veteran consultant at Boomer Consulting with a computer science background and project management and Lean Six Sigma Blackbelt certifications, for her thoughts on the technologies that will most impact businesses by 2025. Here is her answer:
I believe that the most important impact on the way accountants do their jobs will be the convergence of several new technologies, starting with two that give us a tremendous amount of data:
1. The Internet of Things. The IoT includes devices that connect to the internet via Wi-Fi, Bluetooth or mobile data connections. It includes everything from toasters to fitness trackers and refrigerators to industrial machines. While chip shortages continue to impact the number of connected devices, the number of global IoT connections continues to grow. According to IoT Analytics, there were 12.2 billion active endpoints in 2021, and they predict that by 2025 there will be about 27 billion connected IoT devices. The amount of data shared by all these connected things is enormous.
2. Blockchain. Blockchain systems contain a cryptographically secure transaction book that can only be appended. Software-driven consensus ensures transactions are only added to the ledger if the system validates them. This immutable ledger, where transactions are virtually impossible to change, gives us a level of transparency and information about transactions that we never had access to.
When you take both of these data sources and throw them into cognitive systems like machine learning, artificial intelligence, and robotic process automation — truly intelligent systems — great things are possible.
I would further summarize their answer by dividing the technology into three main areas:
- The experience: employees and customers.
- Privacy and Security.
- Integration: process and workflow.
The challenge most CIOs and business leaders face is time and deciding who should be involved.
Amanda further emphasized that the project implementation season (summer) is a very short window and is over in most accounting firms for this year. Vision, planning, prioritization and budgeting season is now running through the end of April. Using a cross-functional team will yield the greatest return on investment.
Other critical success criteria are:
- Project filters to define requirements, expected results, budgets and what happens if we don’t change.
- Project management including data migration, training and termination of the use of the old technology.
- Marketing and messaging to members of the firm and clients.
- Confidence – the level of confidence determines the time and dollars invested. As author Stephen Covey says, a high level of trust leads to a dividend, while a low level of trust leads to a tax.
All companies are talking about outsourcing and automation, but many may not see better returns on their investments until 2024. What happens if you don’t invest now?
Think – Plan – Grow!