CFOs of large information service companies find themselves at the nexus of multiple changes that impact their industry, role, and business. The industry is in a state of flux as companies look for ways technology might drive growth and organizational efficiencies.
At the same time, the role of information services CFOs has expanded. CFOs are increasingly concerned with aspects of the business that go far beyond the financials – from internal digital transformation and talent acquisition to the overall customer experience.
Information services CFOs who understand the industry challenges, as well as the related opportunities and risks, play a pivotal role in shaping the future of their companies. They help build profitable, resilient organizations ready to adapt to changes while maintaining growth targets.
Industry Challenges
The changing nature of information services creates a unique batch of challenges for the industry's finance executives. Consider the following:
Economic uncertainty. Macroeconomic factors, including recession fears, political uncertainty, inflation, and talent shortages, are certainly cause for concern. Within this context, many CFOs are increasingly focused on reducing operational costs and finding efficiencies.
PwC’s August 2023 Pulse Survey of 609 executives and board members found that 68% of CFOs cite near-term margin pressures as a top business risk. Others plan to revisit pricing models as falling prices and rising inventories still present near-term margin risks. The survey also found that 59% CFOs say cost cutting is a top priority for the finance function – likely a defensive move in the face of continued economic uncertainty.
Rapid technological change. Information services companies may strategically leverage emerging technologies to drive business growth via the development of new products and services. However, in a recent poll by The CFO Alliance, 35% of CFOs reported that "time to invest" is the top constraint holding them from their next investment in data, analytics, and AI.
"This highlights a general undercapitalization of the CFO seat, where CFOs and their teams are mired in fire drills and reactive engagement with their stakeholders," says Benjamin Lehrer, head of learning and development for The CFO Alliance. "We know many are operating one or more people down as well, and this overall team capacity constraint is a factor in assessing emerging technologies."
However, competitive enterprises still prioritize their technology roadmaps.
Data security and privacy threats. Information services customers are understandably concerned with how companies maintain the security and privacy of their data. PwC's 2023 Global Consumer Insights Survey questioned 9,180 consumers about their shopping habits, tech preferences, and financial outlook and found that 49% of consumers say they don't share more personal data than necessary, and 32% opt out of emails, texts, and other forms of communication with companies.
Additionally, the rise of regulations in this space – such as the GDPR in Europe and the California Consumer Privacy Act – makes compliance not just a customer benefit but an industry imperative. Information services CFOs likely understand the risk in this space as well as the opportunity to help alleviate customer security concerns. This leaves them weighing in on issues of cyber insurance while fielding questions from board members, and working to facilitate collaboration between business lines to bolster security, privacy, and compliance.
Recruiting and retaining finance talent. Information services executives continue to struggle with finding and keeping great employees. In a 2023 survey of 307 CFOs in the U.S. and U.K. by Avalara, a provider of tax compliance software, 84% of CFOs say they face a significant talent shortage, especially for accounting and finance roles. Nearly three-quarters of the Certified Public Account workforce reached retirement age in 2020. And more than 300,000 accountants and auditors left their jobs between 2020 and 2022.
A dwindling talent pool could hinder the finance team’s effectiveness, which makes it difficult to sustain regular operations and drive growth. Moreover, the talent shortage creates a negative cycle, with the existing talent asked to do even more. 47% percent of CFOs report that the resulting burnout causes finance professionals to leave the industry, diminishing the talent pool even further, according to the Avalara study.
Get – and Stay – Ahead
While challenges can create obstacles for information services CFOs, there are ways to decrease their impact and increase organizational success. For example, consider the following:
Step 1: Get more from your data analytics. CFOs might prioritize connecting data across business lines and using real-time insights to facilitate financial planning and reduce risks. A 2022 survey from PwC of 722 executives and board members from Fortune 1000 and private companies shows that 47% of CFOs plan to develop and implement predictive models and scenario analysis capabilities. This strategic move enables CFOs to understand the current risks better so that they can collaborate across the organization to reduce those risks and uncover new revenue opportunities along the way.
In this uncertain landscape, 53% of CFOs want to accelerate their organization's digital transformation. Finance leaders are looking for financial tools that employ data analytics, AI, automation, and cloud solutions to "help drive standardization and intelligently automate as many manual processes as possible," according to the PwC report.
Step 2: Focus on optimizing talent. The struggle to find talent could threaten an organization’s growth. And CFOs may feel powerless in their ability to build up the pipeline of available finance employees. In the face of this larger and longer-term problem, CFOs might optimize the talent they already have. Lehrer recommends that companies adopt the "20% rule," which encourages employees to spend 20% of their time outside of their core work on areas that have long-term potential.
"The concept here is for CFOs to encourage, if not demand, that their team carve out dedicated time for upskilling and training," Lehrer says. "With rapid advancements in extract-transform-load (ETL), data visualization tools, and AI applications, this time doubles as investments into individual professional development while sowing the seeds for future process improvements."
CFOs could also dial in selective hiring, focusing more on recruiting high-demand and technical skills that will directly impact the company’s growth and leverage outsourced services to supplement their in-house talent.
Step 3: Cultivate a customer focus within finance. Information services CFOs are paying more attention to the customer experience – and how finance decisions and strategy help improve it. By understanding customers' needs and priorities, CFOs can direct financial and human resources toward the initiatives likely to sustain and drive revenue.
This customer focus may be a new role for some CFOs, but it’s an apt one. They’re charged with creating and fostering the company’s near and long-term financial performance. And those efforts begin with building a strong customer base, which fuels the organization's success.
Step 4: Stay true to the long-term vision. According to a 2023 EY report based on insights from 1,000 CFOs and senior finance leaders, 78% of CFOs cite balancing short and long-term priorities as an important challenge. Lehrer says that budgeting season often results in a scramble for a fixed amount of financial and other resources. "When coupled with the near-ubiquitous desire for cost optimization in the current environment, companies risk prioritizing short-term requirements at the expense of longer-term strategy and growth," he says.
Lehrer notes that providing analytical transparency regarding the direct impact of current decisions on long-term strategy helps combat this. "With respect to the budget builds themselves," he says, "CFOs can add dimensionality to their budget assumptions and presentations, such as clearly delineating between expenses and investments required to 'keep the lights on' versus those connected to longer-term objectives."
The Takeaway
The information services industry is dynamic and ever-evolving – and CFOs in this space need to be as well. By understanding the challenges and approaching them with a data-driven, customer-focused, strategic mindset, information services CFOs can help their companies thrive through changes and expand for the future.
