(Originally published on Forbes)
If thriving as a digital business means having the insights to put the right resources to work on the right projects at the right time—and having the flexibility to adapt to changes quickly—a company with siloed finance and HR systems has a distinct disadvantage.
Which is why more and more companies are converging finance and HR automation, processes, and data, say the authors of a new report based on a global survey of 700 finance, HR, and IT managers and executives.
These two areas are so intertwined and central to a company’s agility that they are the logical first step toward unifying all back-office functions, says the report, “Finance and HR: The Cloud’s New Power Partnership,” produced by MIT Technology Review Custom and commissioned by Oracle.
In fact, Oracle has identified 34 critical touchpoints between enterprise resource planning (ERP) and human capital management (HCM) cloud systems in which a tight integration can speed operations and eliminate manual tasks across the departments. For example, organizational changes such as increasing the size of the salesforce require companies to create new departments and budgets, while expanding into new locations necessitate staffing up and acquiring office space and equipment as well as assessing local tax implications.
Given these ERP-HCM cloud system interdependencies, it’s no surprise that integrating cloud applications from different vendors is now the top hurdle to cloud migration, according to 41% of survey respondents in finance and HR and 51% in IT.
Those respondents speak from experience. The vast majority report that their finance and HR functions have either finished or are close to finishing their cloud application migrations. Among their top motivations for moving to the cloud were to improve how data is shared among departments, increase productivity and performance, and reallocate IT staffers or bring in new talent. A considerable 94% of respondents say the cloud is meeting or exceeding expectations. Only midlevel managers consider cutting costs to be the top motivation for moving to the cloud.
“As finance and HR increasingly lead strategic organizational transformation, ROI comes not only with financial savings for the organization but also from the new insights and visibility into the business HR and finance gain with the cloud,” says Steve Cox, group vice president of Oracle ERP and EPM product marketing. “The learnings from the move of finance and HR to the cloud will ultimately spread across the organization as, together, they conceptualize the shape of the next disruption.”
As CFOs get more involved in defining business strategies, they need a better understanding of their company’s talent and resourcing needs, according to the MIT Technology Review Custom report. Meantime, HR leaders need a clearer view of each team’s budgets and strategic priorities if they are to recruit and retain the right people, the report says.
A company that has multiple, disconnected ERP and HR systems, each with its own data structure, won’t have the real-time visibility into operations and market opportunities that these leaders require. And such a structure is likely keeping IT staffers busy with integrations rather than strategic initiatives.
“If you have fewer data sets running in the background, you have closer to real-time visibility across a system,” says Brent Skinner, a principal analyst with Nucleus Research and author of the Oracle HR and Finance Connected Guidebook. “When you have systems that are operating individually, unaware of each other or unconnected, the accounting department can’t see into the payroll function, finance can’t see into the supply chain management or omnichannel environment in marketing. Disconnected systems can result in a company processing payroll before budget constraints make it through, for example, which can lead to a range of holdups and mistakes.”
When finance and HR have a single data model, the integration points between the two areas can be automated, which becomes increasingly important as a company grows, says Inderjit Bains, senior director of marketing for Oracle ERP Cloud.
“One of the advantages is you don’t have to grow headcount to manage all these tactical, back-office processes that grow more complicated as you expand,” Bains says. “Instead, you can evolve into an organization that runs on touchless transactions, whereby employees don’t have to spend their valuable time entering and re-entering data into a range of systems that require logging in, logging out, and submitting the same data in different formats.”
With access to accurate, consistent data and data analytics capabilities across ERP and HCM systems, leaders and managers of both areas can make faster, smarter decisions, Bains says. “Employees at all levels have real-time access to information, and more time to collaborate and innovate rather than focus on mundane tasks,” he says. “And managers can run what-if scenarios to assess the effect of their decisions on headcount and the bottom line.”
Resistance and New Roles
Companies that migrate their ERP and HCM systems to the cloud often realize some bottom-line improvements quickly. But the bigger benefits, such as faster go-to-market times and increases in innovation, take longer, the report says, adding that “Paradoxically, the path to better, more data-driven decision-making requires top executives to display enough patience to override doubts that could intrude on their ambitious path to the cloud.”
Challenges come at all levels, including divisional and departmental fiefdoms, unaligned incentives, outdated KPIs, and old-fashioned resistance to change. When asked to list the most critical factors for a successful implementation of ERP and HCM cloud applications, survey respondents gravitated toward change management considerations—creating the right internal team, for example, and encouraging a culture that embraces a digital mindset.
Keeping a focus on the end game of digital transformation is critical, especially as roles change because of automation and the need for data mastery. More than 30% of survey respondents say the cloud frees them from low-value work to focus on strategic priorities. “You want to empower your managers to run a business, not just a department,” Bains emphasizes. “With integrated planning capabilities across finance and HR, they can do comprehensive what-if scenarios and be able to see the implications to the business of various decisions—like the financial implications of a reorg or the headcount requirements of a new product line. That’s very exciting.”