Planning, people and processes historically have influenced technology decisions in accounting firms. Having tracked relevant metrics related to the investment and return on investment for over 20 years, the evidence proves the current business model is not sustainable.
Early in my career, I promoted applying a technology surcharge (per hour) to offset the loss of revenue due to the efficiency and reduction in charge hours. Competition and the reduced cost of technology leveled the playing field for all firms. Unfortunately, some of the best practices that provided success in the past won't get firms to the next level.
One of the greatest challenges in tracking metrics has been the quality of data provided by participating firms (e.g., total investment and revenue per full-time equivalent). Depending on the firm, there can be different definitions for "full-time equivalent" and various ideas for what's included in "total IT investment."
Two distinct trends have prevailed in calculating the investment and related return. The initial approach by firm management was what we refer to as the "peanut butter method" of accounting: Spread it thin, and no one will know.
Next came the debate over the definition of a full-time equivalent. We have always used 2,080 hours to calculate a full-time equivalent and included all employees. Outsourcing has also positively impacted the metrics. Some firms have only included chargeable employees in their metrics. This has never made sense to me as it takes a team — not a rugged individual — to meet the needs and wants of a client.
Why do I even mention the above? The perfect storm was brewing even before the pandemic and has accelerated with the rapid advancement in technology — including artificial intelligence, machine learning and robotic process automation — and competition for talent.
The business model most firms have utilized in the past is not sustainable. Neither are the mindsets associated with transactional and compliance work. Digital and business transformation has accelerated more in the past two years than in the previous 10 years. Ray Kurzweil refers to this phenomenon as "the law of accelerating returns."
The chief information officer's role has become even more critical to the success of an accounting firm. Being strategic used to be enough; now, they must also be visionaries while they position themselves to manage the innovation process. Many larger firms have separated innovation from the traditional CIO's job description. The question is not how to do more with less, but how does the profession add more value?
Visioning and planning have become even more important, and CIOs play a critical role due to the increasing convergence of technology and the business capability model. Many new technologies are available and will be implemented over the next three years. Your challenge: What is your vision, plan and timeline? And most importantly, who is responsible/accountable for success? Do you have the capacity and capability to execute your vision and plan?
Now for the crystal ball. I asked Amanda Wilkie, an experienced consultant at Boomer Consulting with a computer science background, and project management and Lean Six Sigma Blackbelt certifications, for her thoughts on the technologies that will impact firms the most by 2025. Here is her response:
I believe the most significant impact on how accountants do their jobs will be the convergence of several emerging technologies, starting with two that give us an enormous amount of data:
1. The Internet of Things. The IoT comprises devices that connect to the internet via Wi-Fi, Bluetooth or cellular data connections. It includes everything from toasters to fitness trackers and refrigerators to industrial machinery. While the chip shortage continues to impact the number of connected devices, the number of global IoT connections is still growing. According to IoT Analytics, there were 12.2 billion active endpoints in 2021, and they predict that by 2025, there will be approximately 27 billion connected IoT devices. The amount of data shared by all those connected things is massive.
2. Blockchain. Blockchain systems include an append-only cryptographically secure ledger of transactions. Software-driven consensus ensures transactions are only added to the ledger if the system validates them. This immutable ledger, where transactions are virtually impossible to change, gives us levels of transparency and information about transactions we've never had access to.
When you take these two data sources and throw them into cognitive systems like machine learning, artificial intelligence and robotic process automation — truly intelligent systems — big things are possible.
I would further summarize her response by categorizing the technology into three primary areas:
- The experience: Employee and client.
- Data privacy and security.
- Integration: Process and workflow.
The challenge facing most CIOs and firm leaders is time and deciding who should be involved.
Amanda further emphasized that the project implementation season (summer) is a very short window and has passed for this year in most accounting firms. The visioning, planning, prioritizing and budgeting season is now through the end of April. Utilizing a cross-functional team will produce the greatest return on investment.
Other critical criteria for success are:
- Project filters to define requirements, expected results, budgets, and what happens if we don't change.
- Project management, including migration of data, training, and terminating the use of the old technology.
- Marketing and messaging to members of the firm and clients.
- Trust — the level of trust determines the amount of time and dollars invested. As author Stephen Covey says, a high level of trust results in a dividend, while a low level of trust results in a tax.
All firms are talking about outsourcing and automation, yet many may not experience improved returns on their investment until 2024. What happens if you don't invest now?
Think — plan — grow!
