Digital transformation, one smart step at a time

Digital transformation has emerged as one of the top priorities for CFOs, with new automation and technology continuously being developed, offering the opportunity to, at least in theory, constantly improve how business gets done. 

As keepers of capital, finance chiefs are not only playing a key role when it comes to determining their organizations’ technology spend — they are also increasingly involved in implementing the systems they help pick.

“CFOs in all industries should focus on helping their teams automate as much as possible, based on their resources and aptitude,” according to Shagun Malhotra, CEO of New York City, N.Y.-based account reconciliation software provider SkyStem. “It is definitely their duty to bring the team and company to the next level.”

This first article in the CFO automation/AI close-up series will explore the evolution of automation and artificial intelligence (AI) and how finance chiefs can think about them in order to drive their company's digital transformation in the right direction.  

Defining automation in the digital age

While the term automation may conjure up science fiction-like visions of robots silently operating sleek chrome machinery, when it comes to the finance function, the reality is often quite different.

“Automation is simply, replacing human input into processes that are repetitive, predictable and/or rule focused,” Malhotra wrote in an emailed response to questions.

The history of machines taking on tasks previously accomplished by human labor of course extends back well before the computer age. Early examples include the physical systems for irrigation put in place in the ancient world and more recently the assembly lines of the early 1900s implemented by the the industrialist Henry Ford, according to a 2018 report by IBM.

The term filtered into the digital sphere at the dawn of the information age, morphing into a description of online tools designed to aid data-driven enterprise processes at the start of the 1960s.

“Automation, I would say is the big broad umbrella category,” Amol Dhargalkar, managing partner and chairman for Kennett Square, Pa.-based Chatham Financial said in an interview. “Automation can happen through a variety of different ways. The simplest way is connecting two different data sources.”

Many technologies fall under automation’s banner, such as robotic process automation (RPA), which — despite the name — is simply computer-coded software, according to a 2017 study from Deloitte. RPA, the study notes, can be defined as “programs that replace humans performing repetitive, rules-based tasks,” and not, “walking, talking auto-bots.”

Automation on the whole therefore lends itself well to processes like accounting, which is “full of rules, schedules, and predictable behaviors,” Malhotra, herself a CPA according to her LinkedIn profile, wrote.

CFOs, and financial heads are already likely familiar with applications such as straight through processing — where team members in the finance or treasury functions are conducting manual tasks by “clicking some buttons to transform one data set into another data set,” Dhargalkar said. “Automation is the ability to streamline that process.”

Reducing costs, adding efficiency

For CFOs, the main draw of any technology that utilizes automation is its potential ability to both save money and improve the companies’ bottom line — investing in such technologies  in the current economic environment, where experts are still expecting a recession, can help financial leaders keep costs low if and when an economic downturn does occur, Christina Ross, CFO turned CEO of New York City, N.Y.-based FP&A software provider Cube previously told CFO Dive.

Even automating simple, routine financial processes such as a firm’s accounts payable (AP) and accounts receivable (AR) processes can have a demonstrative effect on cost savings — firms implementing AP automation alone can garner between 60% to 70% in net savings, according to an October 2021 article by AP software provider AvidXchange.

Meanwhile, Deloitte’s 2017 RPA study found firms that had implemented RPA reported payback in less than 12 months. Eighty-six percent of respondents who had implemented the technology said it met their expectations when it came to improving productivity, while 59% said the same of cost reduction.

Implementing automation can be a “boon” to companies, Malhotra said, but it does pose some challenges. For example, executives will have trouble automating if they don’t have a good handle on their company’s existing work process, if the team is not technology-savvy and if the team is “hell bent” on keeping things the way they are, Malhotra wrote. “The good news is that these challenges can easily be addressed.”

AI’s predictive twist 

One common problem that can trip up executives not immersed in technology is a lack of understanding of the difference between automation and artificial intelligence (AI). 

“I would say AI is probably one of the most bastardized terms right now,” Eric Emans, CFO of Bellevue, Wash.-based process intelligence and automation firm Nintex, said in an interview.

While the terms may be bandied about interchangeably, they offer distinct solutions, with AI systems typically being forward-looking and predictive, Emans said. 

“I think we aspire to get into AI but there's very few solutions out there right now that I would say are truly AI driven, that drive predictability,” he said.

A good example of the difference between automation and AI when it comes to something like payments is reconciliation, said Dimitri Dadiomov, CEO of San Francisco, Calif.-based ACH software firm Modern Treasury.

“When we help companies build into their product, build a flow of funds, and we're initiating payments on their behalf, we're reconciling things automatically,” he said — with automation, team members know exactly what will happen when used. Funds are reconciled and notifications are sent in real-time, without employees needing to get involved in the process manually.

Using AI would eliminate the human element entirely, and while that can present its own benefits, financial leaders may not yet be fully ready to rely wholly on machinery and software for their financial processes.  

“What we found is CFOs are much more comfortable with automation versus the idea of artificial intelligence, because there is a desire to make sure that there is a human check on various processes, especially financials,” Dhargalkar said.

But either way, whether choosing an automation or AI solution, understanding what one’s company is doing with the technology is key to making the right choices which can ultimately free up people and human brains to focus on more critical and less routine tasks, Emans said. 

“The number one thing about automation for me, is put the gray matter behind the important stuff and don't put the gray matter behind stuff that's less important — let the technology take care of that,” Emans said. 

In this era of digitization, making “pocketed” investments — or setting aside investments for future technology projects — is the only way to survive, Presidio CFO Manny Korakis said in an interview with CFO Dive. 

“Tech investments are important long term because it is the only way a company will survive,” said Robert Kim, chief technology officer of Presidio — a global digital services and solutions provider — in an interview. 

Integrating automation into an organization can actually support the work of employees, with recent research findings showing use of AI yields a higher revenue for businesses. Across all sectors, an increasing number of CFOs are investing in IT, specifically, in artificial intelligence (AI) and automation.

Internally at Presidio, the digitization that is happening is going to require the company to upgrade their technology and make investments in order to keep pace with their customers and vendors, said Korakis. 

As the pandemic posed unexpected challenges and the current macroeconomic environment is placing unprecedented inflationary pressures on organizations, “the organizations that are more innovative in the way that they use technology, will be the leaders,” said Kim. 

“The pandemic and what we went through showed us that any future challenge we run into, especially when you think of it in terms of an unprecedented event, the only way that we can provide a solution will be through the use of that technology,”

If companies have the proper technology in place, like automated processes, then when they are faced with unprecedented challenges — like the pandemic and rising interest rates and inflation for example, this digitalization allows them to overcome them, Kim told CFO Dive. Having the correct infrastructure in place before a challenge like the ones cited above arises is key, according to Korakis and Kim. 

Invest now, if you can

Persistent inflation, a looming recession and now, potential stagflation remain top of mind concerns for executives. 

While the benefits from a tech investment may not be immediate, and are certainly not as pressing as some of the inflationary impacts, seen by companies, making investments in tech during times of pressure is how organizations can position themselves for success when inflation eases, said Korakis. 

Besides interest rates and inflation, “there’s also the looming recession and nutty geopolitical issues,” said Kim. Additionally, disasters like Hurricane Ian “are going to continue to happen, so now is the time to make those tech investments. We need organizations to stop thinking short term and start prioritizing innovation,” he said. 

Technology investments also help tactically, noted Kim. Human capital is a very expensive part of organizations, and automation can help mitigate those costs, he said. 

Differently than the economic pressures that businesses face today, the impact of tech investments are not seen immediately. However, investing in technology is a long-term process and it positions executives to be prepared and at the ready the next time these pressures come around, because they will, advised the executives. 

CFO/CIO Partnership

When Korakis took the financial helm of Presidio back in August, he told CFO Dive that his main priorities were going to be looking at automation and AI technology opportunities to improve processes and drive efficiencies to free up capacity to focus on more impactful financial matters. “It’s a never-ending process,” said Korakis on the current state of those goals. 

His first couple of months have been spent overcoming the learning curve related to the company’s processes and seeing how the organization can leverage any technology. 

“In every company I've worked at, and I’m sure other CFOs have seen this too, it is very hard to automate when you don't have consistency in processes,” he said. 

Part of overcoming this learning curve is establishing a partner like relationship with IT, Korakis said. “We’re finance people, but we don’t know the whole landscape of how different automation tools work,” he said. 

This partnership is especially important when it comes to cybersecurity. Recently, more businesses are looking to decentralize cybersecurity leadership to mitigate some security concerns. 

“One analogy I always use is this: there are some people who when looking at a house, will need to see it staged and there are others, who can walk into it empty, see a good structure and good bones and know what needs to be done,” said Kim. 

Similarly, IT leaders can envision what needs to happen with regard to cybersecurity issues and technology investment issues because of their breadth and depth of experience that they have in actually deploying technology.

Evidence of a global recession is becoming increasingly apparent, and CFOs are gearing up to redefine economic resilience. As the economy waves a white flag to inflation, finance leaders are ardently designing strategies and accelerating the digital transformation. They're rushing to adopt modern technology to streamline workflows to remove complexities.

Trudging through heavy currents of financial uncertainty

Sustainability is vital in any economic phase, but especially during a recession. CFOs are responsible for driving companies through challenges and uncertainties and are equipped for extensive changes.

CFOs know that building efficiency and creating cost controls will navigate the company's strategic direction. To prepare, finance leaders go far beyond traditional back office responsibilities to fulfill short-term and long-term needs.

Gaining financial visibility in unchartered territories

Recession is derived from the Latin word recession, meaning "going back" or "to go back, fall back; withdraw, depart, retire." While the economy may be going backward, finance leaders need to continue to look forward.

Regarding the word "recession," lexicographer and author John Ayto remarked, "There was more than a hint of euphonism in the coining of the term." But CFOs know to take a recession seriously and maximize visibility throughout the business.

Due to increased economic uncertainty, it's recommended that CFOs adopt an agile monthly forecasting method instead of focusing on annual plans—this way, no budget or headcount is committed, and everything is up for discussion at any moment.

When finance leaders ensure spending is reviewed and approved in their processes, they expedite the financial close and give insight into real-time cash flow and spend visibility. By maximizing these operations, they're bettering their supplier's payment transparency.

Resilience and efficiency buoys company morale

Building economic resilience through efficiency is no easy task, but efficiency is a prerequisite to conquering a recession.

Efficiency improves the productivity of the finance team workflow processes by accelerating the finance workflows. Businesses can allocate resources to achieve mission-critical tasks and add value to each employee's role. The correct technology will ensure work is done efficiently, and leaders can avoid direct hiring to customer facing or revenue generating functions.

Once a technology is applied to the finance function, CFOs create efficiency by reducing the resource requirements necessary to run workflow processes. Additionally, they stabilize operations and eliminate time spent on manual workloads. Modern efficiencies add strategic value across the business and adapt to changing market conditions and company needs.

Automation is a CFO’s lifejacket

Recessions can devastate businesses, which supercharges the need for digital adoption in workflow processes. Businesses survive recessions by embracing innovative strategies and techniques. Budget cuts are often necessary for a recession, but creative business leaders don't miss an opportunity to invest in a robust tech stack; the implementation influences a stronger future. This tech stack should automate workflow complexities, so a company can grow and scale successfully.

Automation proved to be a lifesaver during COVID 19 and will help businesses through the recession. A best-in-class solution removes mundane manual tasks and helps companies recognize their value. Automation motivates the finance team to strategize, forecast, plan, and budget —all critical functions in a disruptive economy.

The digital transformation helps businesses stay afloat

Today's innovative CFOs keep their business above water by scaling through thoughtful finance. The future of finance requires forecasting industry trends, real-time strategy, and providing visibility into a business.

With modern strategies, these CFOs are ensuring smooth sailing across the business.

CFOs overcome economic insecurity by ensuring streamlined workflow processes help their company through cloudy circumstances—such as a global recession. High-velocity businesses are actively implementing financial tech stacks to conquer the recession. With these modern methods, value-driven results inspire teams to march ahead.

Accounting and consulting giant PricewaterhouseCoopers has agreed to acquire data-focused consulting firm Sagence, the fourth tech acquisition in 18 months for the company as it grows its consulting-services business.

Chicago-based Sagence will become part of PwC’s analytics insights business, which helps companies develop data and analytics strategies. Terms of the deal were not disclosed. It is expected to close at the end of November or early December, the company told CFO Dive. 

“A lot of clients are wrestling with big volumes of data from a lot of different places: Some of those are legacy old systems — they’re on premise — and some of them are on the cloud,” said Jenny Koehler, a strategic growth and business development leader at PwC. “Sagence has a continuum of professionals that can actually architect the optimal data structure … for the future.”

Tech shopping spree

Sagence is the latest in a series of technology acquisitions by PwC aimed at beefing up its consulting services business, including EagleDream Technologies in November 2020; Applications Consulting Training Solutions (ACTS)  in March 2022; and Netrovert in June 2022. 

Each of these acquisitions helped the firm enhance its cloud services offerings: EagleDream was a cloud transformation company and consulting partner for businesses using Amazon Web Services; ACTS focused on financial services and cross- industry modernization for Microsoft cloud services; and Netrovert, a consultancy which focused on enterprise integration, largely on the Salesforce MuleSoft platform.

Sagence, which has between 51 and 100 employees according to Crunchbase, can help execute C-Suite leaders’ agendas, according to Koehler.

“It could be on the cost side or the risk side of the ledger, in terms of how to control costs, or where predictable risk failure points may be,” she said.

The heavy data lift

Data management poses a major challenge for senior leaders across industries. In a May 2022 Forrester Research survey of 157 data management decision makers commissioned by Capital One, 78% of participants polled said they considered a lack of data cataloging as a top challenge, and 80% said they had difficulty governing data at scale.

With Sagence, PwC gains a new roster of talent with data scientists, data engineers, and professionals with expertise in artificial intelligence and machine learning. Some of its staff members have certifications in Amazon Web Services and other cloud applications, said Koehler. Sagence also brings industry-specific experience and skills, particularly in financial services and healthcare. The firm will also help PwC in its efforts to serve private equity clients, she said.

The string of acquisitions also helps PwC build a competitive advantage against other large accounting and professional services firms, while helping it enhance clients’ internal tech teams, Koehler said.

The acquisitions allow the firm to quickly add new talent in a competitive labor environment.

“Sagence is bringing in a class of folks that would take us a long time to either train and grow internally,” Koehler said. “The community of solvers that they will join are going to be the ones that we have within our cloud and digital business, which is one of our significant growth businesses.”

Higher margins

PwC’s efforts to grow its consulting services arm comes as rival Ernst & Young (EY) has taken a different approach to structuring its firm. EY is spinning off its consulting division into an entirely separate company.

In contrast, last year PwC reorganized its U.S. firm into two business segments: a trust solutions component that incorporates assurance and tax reporting practices; and a consulting services unit focused on business transformation, cybersecurity, cloud, digital, privacy and other cross-cutting areas. 

But PwC’s focus on growing its consulting business is consistent with efforts at the large accounting firms going after the profitable business, said Liz Cowle, assistant professor of accounting at Colorado State University.  

“The reason that the accounting firms are going after consulting clients is because when you look at the margins on audit versus consulting, consulting represents very lucrative margins, much higher than audit,” Cowle said.

The acquisition of Sagence can also act as an important vehicle to gain talent in a challenging labor market, said Cowle.

“It's really a good strategy from a business standpoint,” she said. “There's been a lot of discussion about talent shortages and human capital shortages. I think the hiring process, especially for good people, has become more and more difficult.”

While much has been made of the importance of CFO-CIO relationships, the emergence of hybrid work policies is also fostering additional collaboration with human resources executives as well.

As companies launch hybrid work plans, CFOs and CIOs are working more closely with HR leaders to ensure that workplace technologies meet the needs of all employees, executives said Thursday at a preview roundtable for WebexOne, a technology conference hosted by San Jose, Calif.-based technology giant Cisco at its headquarters.

Fran Katsoudas, Cisco’s chief people, policy and purpose officer, explained that the momentum behind a more active role for HR leaders in technology decisions was building prior to the pandemic. The pandemic, however, supercharged the level of collaboration between HR heads and other executives, particularly because security was a joint responsibility between chief people officers, CIOs and CFOs, she said in an interview.

She pointed to an instance where her company chose to shift to a technology vendor more aligned with employee needs as an example of how HR leaders can impart technology user experience insights to other C-level leaders.

“In the past, experience and cost were seen as at odds with one another,” she said. “The CFO now also knows that if the experience is better, the adoption is better, which gives us a better return.”

Early days 

Katsoudas described technology that can improve hybrid workplace situations, including a prototype for a bot created by Cisco interns that connects people randomly in virtual spaces, “just like we would run into each other in the lobby.” She also noted that workplace tools are becoming more integrated with management systems, allowing for proactive recommendations based on behavioral insights.

Jennifer Dudeck, senior vice president and chief people officer at the Raleigh, Durham-based software firm Red Hat, said technology discussions between HR leads, CIOs and board members center around finding common ground.

We “have a voice because we represent associates and how we do our work together,” she said.

While HR leaders may be playing active roles in technology decisions at some large firms, it’s still not a trend reflected in most companies, said Jim Lundy, chief executive and lead analyst at Morgan Hill, Calif.-based Aragon Research. HR leaders typically are more concerned with the policy aspects of technology decisions, he added.

Others note that it may be too early to prejudge the outcome of discussions between HR leads, CFOs and other C-suite members on workplace technology because businesses are still in the early stages of hybrid-work implementation.

“I don't know if there is this big pressure point between HR and CFOs until companies actually figure out what they want their workforce to look like,” said Zeus Kerravala, founder and principal analyst at ZK Research. “Companies that have tried to put in place ‘You must come back’ [to the office] and that's been largely rejected by employees.”

CFOs who aim to give their companies a competitive edge through digital transformation need to cultivate technological savvy across the C-suite and among other top executives rather than just in the IT department, McKinsey said in a study.

Companies succeeding in a digital transformation outperform their peers by focusing on customer engagement and innovation, McKinsey said. They also build — in a scalable, cloud-based architecture — proprietary assets that combine software, data and artificial intelligence.

“Companies with higher aspirations for digital tech tend to see better outcomes than other companies do,” McKinsey said, citing a survey of 1,331 C-level and other executives in a range of industries and company sizes. “Digital strategies that involve incremental changes or lack ambition don’t deliver the economic success that bolder digital strategies do.”

Global spending on digital transformation — encompassing outlays for technology, data, people, processes and governance — will surge to $2.8 trillion in 2025, or more than twice the amount in 2020, according to International Data Corporation (IDC).

Organizations will focus their spending on upgrading a full range of functions, including accounting and finance, human resources, enterprise IT, supply chain management, design and research, manufacturing operations, marketing, sales and customer service, IDC said.

Companies will spend the most on robotic manufacturing, customer/client management and autonomic security operations, according to IDC.

Many top executives are underwhelmed by the return on investment in digital technology, McKinsey said. Few companies sustained over time the financial and operational benefits from various types of digital transformation, including building new digital businesses and strategically changing their core business, McKinsey said, citing its survey.

Building new businesses is most difficult, with 70% of respondents saying they failed over time to meet their initial targets, McKinsey said.

“While organizations have made massive tech-driven changes over the past two years, the survey results suggest that they have captured much less of the value than respondents initially expected,” according to McKinsey.

Top-performing companies, or those that have increased revenue and EBIT by at least 15% over the past three years, netted “a median of 50% of the full revenue benefits that their recent transformations could have achieved” compared with a median of 31% among all respondents, McKinsey said.

Nearly one out of three respondents said their companies are building new digital businesses to enter a strategically important market or industry, and one out of five said they are doing so to incubate new digital capabilities, McKinsey said.

“Many companies are building new digital businesses for reasons other than strictly financial ones, which could explain why a new business is less likely than a core business to hit its targets,” McKinsey said.

Respondents at top-performing companies “report bolder strategic aspirations” and plan to spend twice as much of their digital and technology budgets on building new digital businesses than their less successful peers, McKinsey said.

The top-performers are comparatively more aggressive in adopting practices that enable faster innovation and automated processes to test and deploy new technology, according to McKinsey.

The first tier of companies are also well ahead of their peers in moving operations to the public cloud, “which helps them become more agile, more efficient and better able to maximize the value they get from other digital investments.”

Environmental, social and governance (ESG) programs are gaining more attention among members of the C-Suite, with CFOs attempting to square the costs of such programs with the changing wants and expectations of their stakeholders, employees and consumers.

When overhauling one’s ESG strategy, it’s critical for CFOs and other key leaders to examine “what you have already in your system,” said Donavan Hornsby, chief market strategy officer for ESG software solutions provider Benchmark ESG |Gensuite in an interview. Considering how existing ERP, HR or finance systems can be used to help collect and disseminate ESG data should be top of mind for organizations.

“When you’re talking about ESG you’re talking about a lot of information,” he said. “The other key thing to note is that it’s cutting across a whole bunch of different functions — this is not just the purview of the sustainability group, or the supply chain or what have you.”

Tapping technologies such as the cloud in tandem with existing tools can allow for smoother, data-driven communication between these different functions, aiding companies as they craft their ESG strategies in response to changing company needs as well as regulatory guidance.

CFOs don’t necessarily need to become sustainability experts, therefore, Hornsby said, but they do need to be able to accurately quantify and share key data regarding it with other executive members.

“I don’t think that CFOs and other members of the C-Suite have to have this capability,” he said of sustainability expertise. “What they do need to have is the ability to communicate with others how sustainability performance is directly tied to the creation and protection of shareholder and stakeholder value.”

ESG — and especially climate-related disclosures — have also become top concerns for regulators as well as shareholders, with the Securities and Exchange Commission (SEC) seeking to tighten rules that would require mandatory climate change disclosure for companies within filings. Implementing ESG data management and reporting capabilities in compliance with these rules can help to “lay the foundation” for a more sustainable and resilient business, Hornsby argued in an opinion piece published with CFO Dive in May. 

A June 2022 survey of 50 Fortune 100 companies by law firm White & Case found every firm surveyed had included environmental disclosures within their 2022 filings, with 37% of filings including historic metrics for information on greenhouse gas emission reductions and renewable energy use. U.K. and European regulators have also taken steps to increase environmental reporting guidance for companies, meaning firms now have to juggle multiple ESG standards and requirements to conduct international business.

“Probably the biggest concern our community has is the proliferation of this in the different jurisdictions and trying to identity the common thread across [them],” Hornsby said.

This means there is always going to be a “push” for global ESG standardization, but Hornsby is not optimistic about the chances of such standardization ever occurring. Companies should instead look to find that “common thread” between different jurisdictions and standards and “build [their] programs and processes across that common thread,” he said.

Creating the kind of holistic ESG strategy will take time, however. ESG is a “30-to-40-year transformation” for firms, a timeline that often comes with significant cost attached, Kristin Moyer, an analyst VP for Gartner, said at a June conference.

Corporate opinion about the benefits of such programs thus remains divided, especially as rising inflation causes many firms to review their spending in an attempt to cut costs and bolster profits. ESG investing typically bumps up production costs with a corresponding drop in output, something that can lead to an increase in inflation and divert money away from other key areas for companies, a July 5 opinion piece in The Wall Street Journal pointed out.

Both stakeholder, employee and consumer opinion has swung to value ESG — especially environmental strategies and data — much more highly in recent years, however. For example, HSBC executive Stuart Kirk recently resigned from his position at the U.K. bank after facing severe backlash for May comments where he criticized the financial sector’s commitment to reporting climate change risk, with HSBC CEO Noel Quinn stating Kirk’s comments were “inconsistent” with the bank’s strategy.

Employees, meanwhile, are also keeping ESG factors such as environmental strategies and social factors such as access to reproductive rights top of mind when they hunt for new opportunities, something that could turn sustainability strategies into a talent acquisition play for many firms. Thinking about one’s ESG strategies in the long-term is therefore critical for today’s companies, Hornsby said.

“If you want to be able to sustain high-performing ESG companies, it’s what you do in year two, it’s what you do in [years] three, four, five that’s going to matter,” Hornsby said.  

Despite its dreamy name, a data lake is a high tech affair: a repository for company data from multiple internal and external sources which can require some heavy lifting by a company’s financial team, IT and sometimes consultants and outside vendors to set up.

Once implemented, treasurers and finance teams can use them to extract more up-to-the-minute and reliable data from across the company to better plan and strategize–improving cash management and liquidity and even enabling the company to better track patterns and catch instances of fraud, according to several experts in a FinLync webinar on data lakes last week. 

“There could be countless use cases,” said Chad Wekelo, principal of Actualize Consulting and a panelist, who noted trends in disbursements and invoices would be easier to see and then act upon. “If we’re using checks or wires, can we be smarter about our mix … I don’t think a lot of treasury groups are thinking that way and the main reason they’re not is because they just don’t have access to all that information to put the pieces together. They’re in little silos.” 

While data lakes have been around for a number of years, they have become increasingly important as tech stacks and finance technology has evolved and new data feeds have become available, according to Mitch Thomas, a panelist and head of solution engineering-North America at FinLync, a fintech company which serves corporate finance and treasury teams.

“Data lake is the newest term in a line of buzzwords meant to indicate centralization of data,” Thomas wrote in an email. “Complicated data extractions and combinations of manual and automated reporting is what is being replaced … To centralize the data across a company and access real-time bank data so they can be analyzed together has been impossible until now.” 

Data lakes, which typically hold unstructured, structured and semi-structured data such as social media feeds and data from bank statements, are slightly different from data warehouses, which hold structured data such as relational databases with tables, columns and records that are used to manage data for business intelligence (BI) and analysis, he said.  

Probing the unknown

“Data lakes are generally used to probe data for deeper insights and for answering questions that are not known in advance,” Thomas wrote, adding that data lakes typically have lower hardware and implementation costs than warehouses but can be more expensive to extract information from. 

Budgeting is a major challenge that treasurers must overcome to set up such systems. Nearly 90% of the respondents polled during the webinar cited lack of IT resources or allocation as the biggest hurdle to getting started with a data repository, followed by 14% who cited understanding the benefits to treasury.  

Panelists said the the cost of such a system varies greatly but declined to estimate the average cost of implementing such a system. Trellance, a data analytics provider for credit unions, estimated that the cost of building a data warehouse or data lake for an analytics platform at an individual credit union can range from around $500,000 to well over $1 million. But some data experts say the cost varies greatly and can be much less. 

The software and storage technology tools themselves have elastic pricing depending on the size and volume that companies need and competition has also brought prices down, panelists said. The cost of building and maintaining are other cost components which differ. For example, if a company has the expertise internally to be able to build the interfaces and the exchanges into the data lake that will cut the price. But the panelists said companies can reduce the cost by starting with a small project and then using that to make a use case for larger investments. 

“There is a sort of crawl-walk-run approach to this,” Wekelo said.“It doesn’t have to start fast. It can be looked at in phases and steps, almost like a prototype thing. That’s what we see with a lot of clients.”

Keeping IT spending in check is one of the many challenges confronting CFOs and financial executives as they fight record inflation while also seeking to retain a competitive edge in technology. 

Still, the companies that aren’t leveraging their data over time are going to suffer because the quantity of data that's being used is growing, one panelist said. “In a sense there’s a cost to not using the data and that cost is only going to grow,” Rob Granger, senior manager of Actualize Consulting, which has worked with treasury departments on data lake projects, said in the webinar. “As data becomes more and more prevalent in daily lives, leveraging that is going to become more of a differentiator than it is now.”