What Today’s Finance Leaders Already Know About Resiliency
By Mat McBride, Microsoft Finance VP
2020 has been a year of adaptation.
From February to today, finance organizations worldwide have been forced to revisit their operations, investments, and ideals to still the tide of COVID-19. This season has not been an easy one. Companies of all sizes have seen drastic shifts in sales volumes. This has resulted in significant challenges to companies with fixed depreciation schedules defining financial performance and tying up capital. As a result, organizations are transitioning to new investments and operating models—be they cloud adoptions or shifting from capital expenditure driven P&Ls to ones driven by operation expenditures. At either end, finance organizations are becoming more agile and adaptive by accelerating their paths to modernization.
A lesson from financial history
In times of financial crisis, organizations have historically reacted in one of two ways—by locking down and hoarding capital until the market stabilizes, or by investing aggressively to create a more secure position upon recovery. We’ve since learned that the best solution is somewhere in between, in which finance organizations invest in opportunities that have clear ROI attributed to them. This balanced mindset has made technology adoptions such a viable shift for finance organizations navigating our current market. The path to the cloud brings some very clear total cost of ownership benefits—less maintenance, sustainable infrastructure, fewer on-site demands—that allow organizations to continue their growth despite global uncertainty.
A shift to the cloud not only supports that balanced investment structure but empowers finance professionals in their decision-making by consolidating data under a single source of truth. By creating a common dataset in a common place with common visualizations, organizations can eliminate unnecessary debate or reconsideration about the health of an investment and instead rely on its performance metrics.
Making the hard choice
Today, the most resilient finance organizations are reconsidering their pre-COVID investments and making hard decisions. This ability to quickly shift from an existing investment to a more promising area is critical for navigating a recession, and those shifts rely heavily on having the right data. Organizations that have mastered their data into a modern schema are more agile and can better monitor performance.
The challenge then becomes knowing when to step away from a passion project and instead transition to opportunities with higher ROI. Sunk costs are a real, painful, challenge for any investor, but the reality in a capital constrained environment, these projects may not have the time to recover. Frankly, the ambitions we pursued in 2019 might not play the same way as markets struggle to find the new normal. Stopping passion projects is no easy task but having the courage and fortitude to walk away is the hallmark of a resilient investor.
The next stage in the transition
As an investment, the move to cloud modernization requires both finance and IT departments to work in tandem to control the spend and utilization of the project. By design, cloud technologies scale to meet the needs of their users, so organizations only pay for what they use. This communication line between departments ensures that spend stays consistent for the firm’s principles and is optimized for the organization’s immediate goals. Aligning IT and finance ensures that the entire organization understands the cloud’s improved TCO and shares a vision for a more connected, empowered and profitable future.
At Microsoft, we’re constantly pursuing balance between our investments. If you’d like to learn more about creating a more resilient financial organization, join our finance event series, The Art of the Possible and discover how we’re rethinking the future of finance.