You may be familiar with the highly debated Gartner term, “bi-modal IT,” the practice of managing two separate but coherent styles of work: One focused on predictability; the other on exploration. Think of this as projects that keep the lights on or run the business vs. projects of innovation. Both play key roles in digital transformation and have traditionally been discussed in terms of software development, not sales tax tools buying.
Balancing the Need for Offensive or Defensive IT Technology Spend
While many IT leaders may consider these two modes of work during spending decisions with the CFO and CIO, they’re also thinking in terms of “offensive” and “defensive” technology buying decisions. The goal is balancing those technologies that may improve the customer experience and sales growth (offensive), vs. technologies that will ensure the business remains competitive and doesn’t run into any unforeseen setbacks (defensive).
According to the latest 2018 CFO Insights on New Technologies study by Grant Thornton, 69 percent of these executive respondents plan to increase investment in digital transformation in the next couple of years, and 41 percent indicated their DT investment efforts are directed at overtaking their competition through differentiation. I would put that squarely in the “offensive” camp. But while growth and innovation are on the not-so-distant horizon, current CFO goals are focused on improving operational performance and customer experience, reducing costs and improving performance management.
Top IT Challenges for Today’s Organizations
The survey also revealed that systems complexity and integration across the enterprise was a top IT challenge and executives are prioritizing new technology investments for the enterprise that will solve regulatory compliance. According to Grant Thornton, “the survey suggests that the adoption of new technologies in the finance function, now and during the next five years, is correlated with the benefits that bring the most immediate value to the company, such as:
- Better data quality and mining for strategic analysis
- Optimized processes
- Minimizing errors
- More streamlined reporting, and
- Better process scalability to match growth.”
The Shifting Role of the CFO as FinTech Gains Momentum
CFOs are under further scrutiny to assume more responsibility and have a better understanding of the transformational technologies that increasingly bring value to finance. The report also reiterates their need to better partner with the CIO.
89 percent of CFOs agree that they will require a much stronger data analytics skill set than most current CFOs have with responsibilities falling more closely in line with a data scientist, CTO or CIO and 75 percent plan to upgrade those skills in the coming year.
CFOs already assume technology-related responsibilities according to the report, with 54 percent indicating they influence technology purchases, 53 percent use data analytics to inform technology strategy, and 49 percent will increase their involvement in managing finance and enterprise technology. They also indicated having a better collaborative relationship with their executive IT counterparts than in years past and support each other to collectively make the best technology decisions for the enterprise.
As Srikant Sastry, national managing principal of Advisory Services at Grant Thornton, said, “The ultimate goal is to balance forward-looking technology investments with today’s operational needs.”
How Sales Tax Software Addresses Both Defend and Innovate
Sales tax software has the benefit of addressing both the digital transformation, automation and operational excellence needs of the business with the need to defend existing technology infrastructure from regulatory changes. Integrating with existing financial applications and ERPs, acting as the single source of financial truth with regards to tax requirements, and removing burdens from multiple departments to ensure compliance from purchase to sale provides a compelling ROI for finance and IT leaders today who may still be struggling with the measurement of metrics associated with the implementation of technology.
A solid tax compliance audit defense through sales tax automation software has been proven to significantly reduce penalties from tax audit. According to an Aberdeen survey of manufacturing, retail and software businesses, average audit costs were reduced from $64,524 to $8,733.00, or an 86 percent reduction per audit in the manufacturing sector, when using sales and use tax automation.
Offensively, sales and use tax automation software that is adaptable, connected and global creates competitive advantage by enabling organizations to more easily and confidently expand or upgrade existing technologies that touch financial data (ERP, eCommerce platforms, purchasing, etc.), to add new business channels, evolve supply chains, enter new markets, or support more seamless M&A activity without adding supporting IT infrastructure. The ability to make data available to a broader array of departments such as tax and procurement teams, in order to optimize their processes and remove the “dirty work” from IT’s plate further accelerates technology and process innovation to drive competitive advantage.