New finance research shows unreliable data is a threat to tech industry
AUTHOR
In an industry characterized by rapid innovation and frequent market shifts, success for technology companies is no longer about growth at all costs— it’s about achieving both growth and profitability. To realize this goal, every part of your organization must be aligned and capable of responding to market changes in a coordinated manner.
For finance leaders in the technology sector, the complexity is compounded by shifting goalposts, unstable market conditions, and macroeconomic changes. Your ability to pivot in response to these variables is hampered by time-consuming, manual planning methods that lack the accuracy and confidence needed for strategic decision-making. Instead, issues with data quality and availability often force you into a reactive stance. The impact is felt in inefficient capital usage, misalignment between strategy and execution, missed revenue opportunities, and poor shareholder performance.
To better understand the challenges and opportunities, we surveyed U.S. finance leaders across the technology sector in partnership with Wakefield Research. Our findings revealed that confidence in accurate planning, budgeting, and forecasting is low in the technology sector, leading to serious repercussions for business performance – and vitally, for finance leaders like you.
Data-driven planning is not yet a reality
96% of finance leaders in tech lack confidence in the accuracy of their forecasts.
This lack of confidence stems from data silos and fragmentation, with 84% of finance leaders reporting difficulties in generating organization-wide insights due to these silos. The problem is further compounded by inconsistent data standards, delays with data delivery, and concerns about the relevancy of that data once it arrives.
As a result, 95% of finance leaders state that their forecasts are outdated by the time they reach stakeholders.
In fact, only 15% of tech companies can forecast in real-time. Without up-to-date and reliable forecasts, finance leaders in this sector are ill-equipped to advise on strategic decisions, such as responding to market fluctuations, making R&D investment decisions, and planning crucial workforce needs.
Despite these challenges, AI holds significant potential to improve financial planning in the tech sector but there is still work to be done. 94% of respondents acknowledge that they need to enhance their data infrastructure and analytics capabilities to fully leverage AI.
Your role is quickly evolving
98% of finance leaders have taken on responsibilities outside of their traditional role in the past five years.
It may come as no surprise that the role of the finance leader is broader and more complex than ever before - and it continues to evolve. New responsibilities for leaders in the technology sector include influencing company-wide innovation, implementing operational processes, and planning supply chains.
However, keeping up with changing expectations is challenging due to a lack of skills within finance teams. Talent is scarce, and training is essential to leverage the opportunities offered by digital transformation and technology.
Transitioning to a data-driven culture across all departments is crucial for improving accuracy and speed of financial reporting. This cultural shift allows organizations to harness data more effectively, leading to better decision-making and a more agile response to changing business conditions.
Inaction comes with consequences
98% of finance leaders have observed a negative impact on business performance due to inaccurate forecasting.
Inaccurate planning, budgeting, and forecasting have tangible negative effects on business performance, including delayed deliverables, poor customer experiences, and missed deadlines. These missed opportunities can significantly impact on business performance and shareholder value.
However, the consequences of inaccurate forecasting extend beyond the balance sheet and share price. Finance leaders are finding their professional credibility called into question, which can negatively affect career advancement. At the team level, inaccurate forecasting can also lead to layoffs and hiring freezes, increasing the workload and stress for remaining team members.
There is an answer: Connected Planning
Technology organizations understand how crucial agility and adaptability have become. Substantial investment is required for software development, which is a highly competitive and capital-intensive process. A clear financial plan ensures that you have the necessary resources for decision-making aligned with your business goals and budget.
Connected Planning offers visibility into future performance based on your business’s current trajectory. Connected planning platforms like Anaplan link finance, sales, marketing, operational, and workforce plans, providing real-time visibility, agile collaboration, intelligent forecasts, and performance coordination for your enterprise.
You can model performance on both short-term and long-term scales, covering key metrics like revenue, subscriptions, billings, EBITDA, net income, and EPS. This delivers the precise data needed to make strategic decisions on investments, R&D, staffing, product direction, and acquisitions – all crucial for building long-term success in the sector.