28th November 2023, Sydney –  Following a survey of Australian Chief Financial Officers representing organisations responsible for 19% of Australia’s GDP, local technology research and advisory organisation, ADAPT, has today released the results of its forward-looking annual CFO Edge survey, which outlines the top priorities for CFOs as they look to enable modernisation throughout their organisations into 2024.

Matt Boon, Senior Strategic Research Director at ADAPT, said the results are a further indication that businesses are facing economic headwinds, placing innovation initiatives under threat:

“Growing cost pressures are hurting our ability to compete globally and locally. Given that, on average, just 6% of tech budgets are being spent on innovation, it’s sobering to learn more CFOs aren’t willing or able to offer a larger slice of the pie to innovation efforts, which, if done well, can leave the company better off financially.”

 

Cost optimisation top priority of CFOs into 2024, #6 in 2023

When asked about their top priorities into 2024, 83% of CFOs said optimising costs was on their agenda, making it the highest business priority of CFOs this year. This is compared to 68% of respondents saying cost optimisation was a priority for them into 2023. Matt Boon believes the belt-tightening of organisations is almost certain to negatively impact innovation efforts:

“We need to see a transformation in the way CFOs view technology spend, particularly in this economic climate. The last few years have seen companies prioritise projects that easily demonstrate a fast ROI, while leaving ‘big picture’ innovation, the really exciting stuff needed to meaningfully drive productivity and ensure resilience, on the backburner.”

When asked about the main barriers preventing innovation into 2023, 35% of CFOs quoted budget constraints; however looking towards 2024, 43% of CFOs claim budget shortfalls are preventing them from delivering on their innovation initiatives.

“The continued shift to a mindset of incremental tech projects is exacerbating the wrongly-held view often held by the C-suite that value can be realised much more quickly – not the case when it’s actually transformational.”

 

“Room for improvement”: 18% of revenue coming from innovation

CFOs believe that, on average, just 18% of their organisation’s revenue is generated by innovation, with “innovation” meaning products or services being introduced to the market in the last three years. By failing to recognise the potential return on investment brought about by the development of new products and services, Boon says that organisations are leaving too much value on the table:

“Given the low levels of investment in innovation despite potential economic upside, it’s clear there’s plenty of room for improvement: We’re not undergoing huge transformation, which is preventing the modernisation of the overall economy. There’s a clear link between modernisation and revenue from innovation which isn’t being realised.”

 

“CIOs need a seat at the finance table”: CFO Collaboration key to cost control

ADAPT’s CFO Edge survey found a strong positive correlation between the influence of an organisation’s Chief Information Officer (CIO) and its ability to control IT costs and manage environmental risks. 56% of CFOs claimed there is no barrier to collaboration between IT and the finance department when their CIO was considered a “strategic advisor” to the business, but just 15% of CFOs claimed no barriers to collaboration when their CIO was considered an “order taker”. The study found 63% of CFOs with a “strategic advisor” CIO were able to effectively manage cloud costs, compared with just 17% of CFOs with “order-taker” CIOs. Additionally, the study also found 61% of CFOs with a “strategic advisor” CIO said their ability to manage environmental risks was mature, compared to just 33% of those with “order-taker” CIOs.

Matt Boon comments on the need for closer alignment between IT and finance departments:

“Companies are served well when CFOs work closely with their tech departments, so it’s a good thing that they’re having more influence than ever before, with 70% now involved in the IT decision-making process. We’re also witnessing a response from the rising cost of cloud, with CIOs embedding people with accounting and finance skills into their cloud teams to help manage costs.”

Media Contact media@adapt.com.au