My specialization has always been accounting and controlling. However, I never invested any time in looking at the added value that automation/information systems can bring to the financial/accounting departments of a company. The reason for this is mainly the accelerated process of the advancement in technology in the past ten years that caught a lot of companies (including myself) unaware: we have been sleeping, myself included!
While dealing with the daily issues, it’s easy to overlook or even just ignore the technological advancements in the world of automation. In most cases, the focus is on keeping the (outdated) systems up and running as best as possible with minor tweaks to the system while doing most of the analysis in formula/macro-sensitive spreadsheet programs. I think that this leads to a lot of unnecessary (error sensitive) manual labor by employees, resulting in an outdated information system that is polluted with incorrect (master) data and processes that are not standardized.
Because of my lack of knowledge in Fintech, I wanted to dedicate a specific section of my blog to Fintech to explore the new opportunities (and necessities) the world of automation creates.
Why do organizations stick to an old information system?
So I finally woke up from my slumber and stopped ignoring the world of technology around me. I’m sure most of the companies did as well but still, a lot of them are not taking any action. This is because innovation means investments and owners, senior management and/or shareholders of a lot of companies shy away from big investments in a new State of the Art Information System with useful up-to-date applications and standardized processes. I have been running in all kinds of arguments but these two arguments below always immediately surface:
- A transfer to a new information system can be very risky because of the risk of losing historical data by shutting down legacy systems and old applications.
- A new information system is very costly.
I think both arguments are unjustified. Firstly I think you can set up an information system by going full “greenfield” while transferring all the useful (and correct) information into the new system. It’s not impossible to contain all historical data. Additionally, you can also back up the old system and shadow spin a legacy system next to the new system.
Secondly, I think it’s very short-sighted to use costs as an argument. The long-term benefits outweigh the costs by far. For instance:
- New technology can be integrated more easily and more cost-efficient into a State of the Art Information System. This gives companies the opportunity to keep at the same level as their competition and it might even give an edge on companies that are already lagging behind.
- By automating and standardizing processes you will be able to transform employees from being human mechanical Turk’s into creative problem solvers that can actually add value to the company and its customers instead of keeping old systems up and running without thinking.
Don’t underestimate the implementation of a State of the Art Information System
Companies should not underestimate the implementation of a State of the Art Information System as a replacement for their old information system. You can’t implement a new system, new processes, and new applications all at once. It’s a marathon and not a sprint and you have to do this in phases while taking the time for a good implementation of every phase, including a clear project roadmap with well-defined milestones and a thorough adaption process. It’s a long-term investment that should not be treated as a “case closed” once the full project is up and running. It should be treated as a non-stop project that needs dedicated attention all the time because with the current speed of technology, the State of the Art Information System
Companies shouldn’t approach these kinds of projects in a minimalistic economical way. That kind of strategy is bound to lead to disaster as the below practical example will show.
Rushing automation projects
At my first job, I witnessed a flawed implementation of an ERP system at a supplier first-hand. In the end, this supplier seized to exist because their full process of outsourced materials disappeared from their radar during the Go-Live of their new ERP system. Supply Chain wasn’t able to trace back all the materials that were being processed at their suppliers and the production lines had to be shut down because of the unavailability of materials. Because it was a manufacturer of parts for automotive customers, claims/penalties immediately occurred with bankruptcy as a result because a flawed ERP implementation is of course not covered by a Business Interruption insurance. I followed the progress of their project from the sideline so I don’t know exactly why it went wrong. Based on signals I got during the process, my guess is that they had a very tight budget, a project roadmap with gaps in it, and a very impatient senior management who completely underestimated the project. I think this led to:
- A rushed implementation of an ERP system without clear project milestones
- A limited number of people in the project team in combination with resources that were not fully dedicated to the project. You see a lot of time that employees have to combine these kinds of projects with their daily routine work
- No fall-back plan/shadow-spinning of the old information system
Final words
Before the surge of technology a decade ago, companies could afford to ignore technological advancements because they did not follow each other as quickly as now. Being a frontrunner in having a State of the Art information system didn’t give a company an edge compared to their competition. Neither did lagging behind give a company a serious disadvantage to their competition.
But times changed: and quickly! With the pace of technological breakthroughs, I believe that a company can get a significant edge over its competition by having a State of the Art Information System with useful up-to-date applications and standardized processes. Lagging behind with outdated systems, applications and/or with a lack of standardized processes would lead to a serious decrease in the competitive position of companies and, worst case, to becoming obsolete. The competition that has jumped on this technology train will be able to make quicker and better decisions based on fully flawless and transparent data and this process will only be accelerated by all the technological progress we make in the field of AI. Additionally, because of automation, their employees can grow into problem solvers that can optimize processes and spend all their time on customers to make sure that these customers are always served in the best way possible.
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