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The CFO Agenda 2020: Getting Ready for the Digital Age

2014

Worldwide

EXECUTIVE SUMMARY

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About this report

Digital technologies, such as social media, mobile apps, analytics, or cloud, are revolutionizing the way in which businesses interact with their customers, their suppliers and their partners. Companies in all industries are challenged to adapt their business and technology strategies, as well as their operational processes, to these fundamental changes – they have to undergo a ‘digital transformation’. Cloud, mobile, social and analytics/big data technologies are important drivers and enablers of this change.

This also affects the finance function and will change operations, processes and structures within this business unit over the next few years.

It will not only have an impact on the way in which the finance function operates and interacts with other parts of the business, but will also change the role of the CFO – and the way external finance & accounting service providers are being used.

To analyze these effects – and the way they are being approached by organizations, PAC – commissioned by HP – conducted a survey among 300 finance decision-makers (CFOs or their direct reports) in mid-sized and large companies of all industry sectors around the globe.

2014 The CFO Agenda 2020 - Executive Summary 2

The survey addresses the following questions:

●  What are the key challenges and strategic priorities for the finance function and how will these change over the next years?

●  How are the importance and impact of different digital technologies for the finance organization perceived, and how well are organizations prepared to take advantage of these technologies?

●  To what extent are different digital technologies perceived as enablers for the finance function to achieve its key objectives?

●  What capabilities are required within the finance function to achieve its key objectives, and how well can organizations fulfill these capabilities?

●  How will the role of the CFO change and what are the implications for decision processes and cooperation with other parts of the business?

●  Which role do external business process service providers play and how is this expected to change? In which areas are they being perceived as adding benefit? How can they support digital transformation initiatives?

This Executive Summary highlights the key findings of a recent independent global survey of 301 CFOs. The full report, as well as regional analyses (for the Americas, Europe and AsiaPac) and a number of Spotlight Analyses, will be published over the coming weeks.

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Survey of 301 CFOs in companies with more than US$ 1bn turnover, around the world and across all industries

2014 The CFO Agenda 2020 - Executive Summary 3

8%#

8%#

9%#

8%#

8%#

8%#8%#

8%#

8%#

8%#

8%#

8%#

Composition of sample by country US Canada Mexico Brazil UK France Germany Spain Hong Kong Japan Singapore Australia

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#2014#

Share#in#percentage#of#all#companies,#n#=#301#

Americas

Europe

APAC

31%$

7%$

5%$8%$

18%$

4%$

26%$

Composition of sample by industry

Manufacturing

Banking & Insurance

Public Sector & Health

Telecom & Utilities

Retail & E-Commerce

Transportation

Services

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$2014$

Share$in$percentage$of$all$companies,$n$=$301$

17%$

47%$

37%$

Composition of sample by number of countries in which business is conducted

1 country

2-10 countries

10 countries and more

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$2014$

Share$in$percentage$of$all$companies,$n$=$301$

41%$

32%$

27%$

Composition of sample by number of employees in the finance function

Less than 100 people

100-299 people

300 people and more

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$2014$

Share$in$percentage$of$all$companies,$n$=$301$

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Strategic priorities for the CFO

●  Strategic priorities for CFOs in mid-sized and large companies around the world center on strategic, business-oriented topics, such as the provision of financial information for decision-support, business risk management or greater control and transparency. However, operational tasks such as efficiency improvements and cost reduction are also increasingly important.

●  Consequently, the key challenge for CFOs is to successfully master the balancing act between necessary cost reduction and effective support of strategic business activities. Furthermore, the demands on the finance function are increasing over time, thus putting greater pressure on CFOs: more than 50% of CFOs see the provision of financial information for decision support and the efficient handling of operative processes as rising in importance over the next 5 years.

●  Improvements to business outcomes and the management of business risk are considered highly important capabilities required in the finance function. Most CFOs are confident that their finance function is effective in achieving these capabilities, and more than 80% of CFOs are also satisfied with the operational capabilities in their finance function

2014 The CFO Agenda 2020 - Executive Summary 4

Top priorities for CFOs globally include risk management and the provision of financial information for strategic decision support

39%

49%

48%

50%

53%

47%

44%

51%

33%#

30%#

34%#

32%#

30%#

37%#

40%#

36%#

0%# 20%# 40%# 60%# 80%# 100%#

Support for business activities (growth) in new geographies or new markets

Fulfilment of Compliance requirements

More efficient handling of operative processes and transactions

Achieving greater control and transparency across finance processes

Management (and reduction) of business risk

Cost reduction within the finance function

Measurement / surveillance of business performance

Provision of financial information for strategic decision-support

Which are the key priorities for the finance function in the coming year?

High#priority# Some#priority#

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#2014#

Share#in#percentage#of#all#companies,#n#=#301#

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Impact of digital technologies on the finance function

● There is high awareness among CFOs that digital technologies, particularly automation and mobile, as well as the cloud, analytics and social media, are having a major impact on the finance function. 59% of CFOs see digital technologies as having a “quite significant” or even “disruptive” impact on the finance function.

● The majority of CFOs recognize that digital technologies bear value for the finance function to achieve its strategic objectives – and they feel well prepared to make use of such technologies. Not surprisingly, process automation is valued highly by 84% of CFOs, although it is interesting to note that mobility is also a highly rated technology (77%) – implying that the use of mobile devices and mobile access to data is rising in importance.

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The majority of CFOs see digital technologies as having a major impact on the finance function. This will also imply a change in the role of the CFO.

53%

Disruptive

Quite significant

6%

Minor 30%

No impact 11%

How do you rate the impact of new digital technologies on the finance function?

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201

4

Share in percentage of all companies, n = 301

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The changing role of the CFO

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“The CFO has to work more closely with the sales, marketing and customer service lines of business to support a positive customer experience.”

“The CFO has an ever greater role in supporting and enabling sustainable, profitable revenue growth for the enterprise.”

91% of CFOs fully agree or agree with this statement.

91% 89%

“The CFO has to collaborate more closely with the CIO on technology investment decisions.” “The CFO has to focus

more on analytics for effective decision support than on transaction processing.”

85% “Managing and mitigating risk for the enterprise is becoming an increasingly important task for the CFO.”

83%

● The role of the CFO is changing towards business-oriented priorities: more than 80% of CFOs – across all regions – see a need to enable revenue growth, ensure risk management and support a positive customer experience.

● Technology will act as an important enabler in this, requiring the CFO to collaborate more closely with the CIO on technology deployment decisions, but also with other parts of the business, such as sales and marketing or customer service.

The role of the CFO is changing towards business-oriented priorities, enabled through technology.

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Current and planned use of external service providers

● Experience with external service providers, such as consultants or F&A outsourcing providers in the finance organization is still limited. One in three companies currently works with external service providers. While the share is higher in the Americas and Europe, it is particularly low in AsiaPac.

● When external service providers are used today, they are primarily called upon for consulting projects, such as process optimization. Only 14% of the companies surveyed have outsourced finance processes.

● However, the majority of CFOs are planning to increase their use of service providers within the next 2-3 years. 65% of CFOs plan to start, continue or expand their work with external service providers. Outsourcing F&A processes is a focus for an increasing number of CFOs –especially in AsiaPac.

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The large majority of CFOs plan to increase their use of external service providers, as these are considered a means to help reach strategic objectives as well as support deployment of digital technologies.

External service provider already in use*

33%

37% Plan to increase usage

How do you plan to increase the use of external service providers in the next 2-3 years?

68%

57% Plan usage No external service

provider in use**

18% Plan to decrease usage

45% Plan to keep it the same

33%

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201

4

Share in percentage of all companies, n = 301 *Share in percentage of all companies that use external service providers, n = 100 **Share in percentage of all companies that do not use external service providers, n = 201

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CFOs benefit from service providers when deploying digital technologies

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High benefit

Some benefit

22%

55%

Little benefit 20%

No benefit 3%

How beneficial are external service providers in helping your finance function take advantage of digital technologies?

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201

4

Share in percentage of all companies, n = 301

CFOs acknowledge not only the importance of digital technologies for the finance function, but also the fact that service providers have the know-how and capability to help them deploy such technologies.

● The survey illustrates that F&A service providers have reached a high level of acceptance. 80% of the CFOs surveyed stated that service providers can help them achieve their key priorities. 77% confirm that service providers can help take advantage of digital technologies.

● PAC believes that the increasing penetration of digital technologies will drive the use of external service providers – initially for topics around process automation or analytics for operational improvements, before progressing to broader approaches towards a comprehensive digital transformation of the business, too.

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Analyst Conclusions

2014 The CFO Agenda 2020 - Executive Summary 9

The finance organization is of critical importance for businesses. In today‘s economic environment, which is characterized by uncertainty and volatility in increasingly global markets, CFOs are under increasing pressure to support business performance and effectively manage business risk. At the same time, being a “back-office” function, there is constant cost pressure and little investment available. Technology is becoming an increasingly important enabler to help fulfil the growing demands on the CFO. However, new digital technologies also have a broader impact on the business as a whole: they enforce a digital transformation, with changes to business models, organizational structures and decision-making. This survey shows that CFOs have understood the value that technology can bring towards their strategic objectives – and they believe they are well prepared to make use of this. However, the wider impact of digital transformation is still gradually emerging. The role of the CFO is changing away from operational tasks and towards business-oriented objectives. Technology acts as a key enabler. However, to assume a truly driving role in ensuring business success, CFOs will also have to change the way in which they collaborate with other parts of the business, such as IT, sales & marketing or customer service, if they are to overcome the increasing challenges of digital transformation. External service providers can be of valuable help. It has been seen that their technology and business process expertise are well acknowledged. The analysis also reveals that they are increasingly sought by CFOs to support them in reaching their strategic objectives, as well as to help master the challenges arising from digital transformation. The stakes are high for the CFO, but a proactive approach towards digital technologies and transformation will not only help to fulfil the requirements of the business, but will also position the CFO as a key driver and enabler for the future competitiveness of the organization.

Dr. Katharina Grimme Principal Consultant Pierre Audoin Consultants (PAC)

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Disclaimer, usage rights, independence and data protection

Disclaimer The content of this study has been compiled with the greatest possible care. However, no liability for its accuracy can be assumed. Analyses and evaluations reflect the state of our knowledge in July 2014 and may be subject to change at any time. This applies in particular, but not exclusively, to statements made about the future. Names and designations that appear in this study may be registered trademarks.

Usage rights This study is protected by copyright. Any reproduction or dissemination to third parties, including in part, requires the prior explicit authorization of HP. The publication or dissemination of tables, graphics etc. in other publications also requires prior authorization.

Independence and data protection This study was produced solely by Pierre Audoin Consultants (PAC). HP had no influence over the analysis of the data and the production of the study. The participants of the study were assured that the information they provided would be treated confidentially. No statement enables conclusions to be drawn about individual companies, and no individual survey data was passed to HP or other third parties. All participants in the study were selected at random. There is no connection between the production of the study and any commercial relationship between the respondents and the sponsors of this study.

2014 The CFO Agenda 2020 - Executive Summary 10

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About HP Business Process Services

HP is a world leader in business process services (BPS), with 45,000 professionals serving more than 300 enterprise and government clients and nearly 700 small/medium businesses in 26 countries. We provide strategy, solutions, services, and products designed to solve complex business issues and achieve better business results. Our comprehensive portfolio includes a variety of industry-tailored business services, including finance & administration, business analytics, customer engagement management and HR/payroll services. Supplemented by applications and IT experience and in-depth, industry-specific knowledge, our services provide business-focused solutions tailored to your strategic goals. Our scale is vast and we serve clients around the globe:

•  We serve F&A clients across all major industries with 10,500+ F&A professionals from over 20 global F&A BPS centers.

•  We annually process over 42 million pay slips and maintain over 25 million employee data and eligibility profiles.

•  We deliver contact center services in 51 languages and 42 countries.

•  We print more than 4.6 billion images annually for clients.

Our services address your most pressing challenges, including increasing your operational agility, providing process standardization and visibility, and gaining timely access into your ever-increasing store of enterprise data. We have the global expertise, technology advantage and process leadership to help improve your business results.

hp.com/services/bps

2014 The CFO Agenda 2020 - Executive Summary 11

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HP Business Process Services – Finance & Administration Services: HP F&A Services can improve your business outcomes and increase enterprise agility. These services range from high-resource, low-complexity transaction processing activities to complex decision-making and analytics support. Our services help you decrease operational costs, achieve operational excellence, improve information for decision-making, and increase cash flow. Through our leading technologies and process expertise, we have helped clients improve cash flow by more than 50%.

•  HP Finance and Administration Services address four key areas for CFO organizations:

•  Source-to-pay – Strategic sourcing, procurement operations, supplier invoice processing, and payment recovery services

•  Order-to-cash – Sales and credit management, billing, collections management, cash application

•  Record-to-report – General accounting, financial planning, analysis and reporting

•  Business analytics – Management dashboard, performance and trend analysis, and predictive modeling

The services are delivered through our global industrialized delivery network – an integrated group of off-shore, near-shore, and on-shore leveraged centers. We work collaboratively with clients to develop a transformation roadmap that meets their business objectives and timelines. Our offering drives improvements across client organizations and provides the business insights required to deliver better business results.

2014 The CFO Agenda 2020 - Executive Summary 12

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From strategy to execution, PAC delivers focused and objective responses to the growth challenges of Information and Communication Technology (ICT) players. PAC helps ICT vendors to optimize their strategies by providing quantitative and qualitative market analysis as well as operational and strategic consulting. We advise CIOs and financial investors in evaluating ICT vendors and solutions and support their investment decisions. Public institutions and organizations also rely on our key analyses to develop and shape their ICT policies. Founded in 1976 and headquartered in Paris, France, PAC is part of the CXP Group, the leading European research & advisory firm in the field of software and IT services. For more information, please visit: www.pac-online.com PAC’s latest news: www.pac-online.com/blog

About us!

2014

Dr. Katharina Grimme Principal Consultant

+49 (0)89 23 23 68 43 k.grimme@pac-online.com

Melanie Flug Analyst

+49 (0)30 285 296 24 m.flug@pac-online.com