While many in and out of the finance team praise automation's benefits, the costs associated with these tools may be burning a hole in organizations’ pockets when they were expecting to save them money. According to data from IBM, some technology’s lack of return on investment (ROI) is becoming noticeable to CFOs.
Business leaders, particularly those in finance, are feeling the pressure to justify these investments from a cost perspective. Nearly two-thirds (65%) of the finance leaders surveyed in IBM’s 2024 CFO Study said they are feeling pressure to accelerate ROI across the organization's technology portfolio.
The importance of identifying balance
When it comes to technology allocation and investment, many finance leaders are “sacrificing” long-term innovation for short-term gains. More than half (57%) of finance leaders said they are prioritizing short-term targets over long-term ones when building their tech stacks, which not only impacts ROI but also affects long-term strategy, employee morale and sustainable business growth.
Less than a third (30%) of CFOs said they hit the “sweet spot,” or the perfect balance between cost reduction, increased efficiency, growth opportunities and cost. “Leading CFOs” — or roughly 9% of the dataset that IBM identified as outperforming their competition — are much more likely to balance investments focused on efficiency with growth opportunities. Over half (52%) of this subset was able to achieve this.
Big bets mean risky business
From a cybersecurity, functionality and employee morale perspective, technology integration comes with risks. More than half (57%) of CFOs say their appetite for risk is understood and aligned with the rest of the leadership.
However, among leading CFOs, the rate at which they say their finance team is effective at managing the enterprise’s risk is much higher. Nearly six in 10 (59%) of this group said their finance team is effective at this, while less than four in 10 (38%) of non-leading CFOs said the same.
If levels of risk tolerance are not agreed upon by leadership before making business decisions, havoc can ensue. Surveyors say without this, misalignment between risk tolerance and strategy can lead to “contradictory decisions, misalignment of initiatives with organizational goals, and increased exposure to excessive risks or, conversely, stifling growth by being overly cautious.”
Your AI is only as good as your data
The complications and complexities around creating accurate and actionable data are some of the biggest challenges being faced by CFOs today. As the struggle continues, combined with the costs and risks associated with it, traditional automation may continue to triumph until its use becomes more feasible and safe.
While surveyors don’t define the term “traditional AI,” they note that 34% of all CFOs are using it in their finance functions as of now. For generative AI, that figure dramatically drops to 11%. As the report notes the importance of making data “AI’s oxygen,” many companies will have to work on building the foundation of these tools before they can implement them at scale.
