One of the three pillars of our National Defense Strategy is to “reform the Department for greater performance and affordability.” The strategy makes clear that current bureaucratic processes and functions are not serving the military’s needs as it modernizes for future battlefield challenges. More to the point, the strategy implores Defense Department support organizations to “shed outdated management practices and structures while integrating insights from business innovation.”
We’ve heard calls for management reform before throughout the Defense community. But today, they carry a pronounced urgency because the stakes are so high given the rapid pace of innovation and shifting global security landscapes we see around us.
In the federal financial management community, the imperatives for reform seem all too obvious. Consider these factors:
Today’s financial tools and business systems are increasingly outdated and straining to keep up with the fast-paced needs of our military. They are costly and difficult to operate and sustain, they are not integrated, and they cannot easily deliver the data-derived insights that planners need to make smart resource decisions that will shape the future.
Expectations on the financial management community are growing. Defense planners and military commanders need better insights and information, and they need them faster to respond to a more complex, dynamic world. As the National Defense Strategy puts it, the Defense Department needs “a management system where leadership can harness opportunities and ensure effective stewardship of taxpayer resources.” Abundant data exists on enterprise resources, their costs, and how they’re consumed and used; but CFOs and their organizations are unable today to fully leverage that data to better understand, manage, and improve costs.
The nature of financial management work will change dramatically in the next half-decade. Accenture research tells us that, on average, federal financial management employees spend four out of five days a week collecting data, maintaining spreadsheets, and developing reports. With the advent of artificial intelligence (AI), big data analytics, and robotic process automation (RPA) technologies, we will see much of this backward-looking, transaction-based financial work go away. Accenture research suggests that between 60 percent and 80 percent of process-oriented work for finance and budget staffs can be automated and that as much as 40 percent of the federal financial workforce will be repurposed to perform higher skill-level work, such as analysis and strategic-focused work, that is more directly aligned to adding value to the mission.
Enterprise resource planning (ERP) systems, as we know them, are about to change dramatically. Current ERP systems will stop being supported by their vendors — SAP, Oracle, and Workday — on or around 2025, forcing Defense organizations to upgrade to new systems that will be cloud-based and embedded with a range of new capabilities powered by AI and machine learning, data analytics, and other emerging technologies. These next-generation ERP (NextGen ERP) systems will go beyond performing record-keeping functions and backward-looking diagnostics to delivering more real-time analytics and forward-looking predictive intelligence to assist with strategy and planning.
The path ahead
These trends and factors — many of which are technology-driven — will lead to foundational shifts in how Defense financial management teams operate, manage risk, and contribute to their organizations and missions in the not-too-distant future.
Consider the implications of this for future CFOs and their teams. Many tasks they do today — for example, tracking transactions, accounting, auditing and control, compliance, and reporting — will be automated soon, freeing them up to concentrate more on higher-value responsibilities. These higher-value responsibilities include things like:
- Planning. This includes tasks like strategic planning, target setting, financial planning, and performance planning.
- Analyzing. This could include portfolio analysis, performance analysis, and resource management analysis.
- Advising. This includes serving as a business advisor to agency leaders, supporting strategy execution, and engaging with agency stakeholders.