Summary

A recent study conducted by Ventana Research found that a majority of people who work in midsize companies say they want their finance organizations to play a more strategic role in their organizations, moving beyond traditional bookkeeping duties. Information technology (IT), in our experience, provides important tools that finance departments can use to become more strategic. IT can help midsize companies regain the agility they enjoyed when they were small and enable them to use people and other assets more effectively to narrow the resource gap with large corporations. Still, our research shows a majority of midsize companies lag in their use of IT, and that they do not execute their basic processes as well as larger organizations. We believe the two are related. While some midsize companies have kept up with the IT capabilities of larger ones, a majority has failed to make the investments they need to do so. More than ever, the finance department of a midsize company today has access to IT that can enhance its value to the rest of the organization. Improving the visibility and usefulness of the information available to the organization is a good place to start.

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Finance plays a key role in collecting and disseminating information vital to running a company. Today, midsize companies can use information technology to provide managers and executives with greater visibility and insight into company operations. We define “visibility” as the ability to access relevant information quickly. Thus, for example, “supply chain visibility” is the ability to know quickly the location and status of the physical components, from raw materials to finished goods, as they move from suppliers through the stages of production to delivery to customers. In midsize companies as in larger ones, finance departments typically collect, contribute and analyze key corporate data that helps managers run the business. Yet our study results show midsize companies fall short in using IT for these purposes. Compared to large companies, midsize companies take longer to report results and their reports are less accurate. Midsize companies do not provide enough visibility into how well their company is operating or what extent employees are performing to their objectives. Their heavy use of desktop spreadsheets also suggests that these organizations are not using their time efficiently, which is one of the factors preventing them from playing a more strategic role in the corporation.

The research, which was sponsored by Lawson Software and Prophix and supported by media sponsors Business Finance, IMA, Intelligent Enterprise and Montgomery Research, also confirms a correlation between a company’s IT maturity level and its ability to execute finance and administrative functions and to see how well it is performing to its financial objectives. In other words, a company that makes ongoing investments in IT not only executes basic functions more effectively and efficiently, it also has a more complete and up-to-date view of how well it is performing. This type of visibility has been a major IT objective for decades. The data shows midsize companies have good, but not great, visibility into their business conditions. Most perform adequately when providing standard information, such as financial performance and manufacturing output, but are mediocre or worse when it comes to evaluating individuals’ performance to objectives or having clear, timely information about the state of their supply chain – likely because they are unable to collect and to distribute this information easily.

Midsize companies used to be in a bind because the high cost and complexity of IT relegated them to relying on second-class resources. A significant gap existed between what global corporations had available and what midsize companies could afford to buy and maintain. However, over the past decade the software designed for midsize companies has grown increasingly capable. Perhaps because this is still a relatively recent development, we find midsize companies have been slow to capitalize on the much-improved IT systems available to them today.

Assessment

IT for midsize companies has evolved considerably over the past decade. Software that once required large budgets to buy and many technicians to run is now within their reach. Given these opportune changes, CFOs and other finance executives in midsize companies must take a fresh look at what is possible. If they do, they likely will find ways to innovate and to take on a greater leadership role. Midsize companies can use IT to plan more effectively, to make better use of resources and to anticipate how best to respond to competitors’ moves or changing business conditions. They can enlist IT to reduce administrative burdens through more automation, less paperwork and an increased ability to manage by exception. And by making it more efficient in its execution of repetitive, low-value tasks, IT can free up finance organizations to take on a more strategic role.

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