Digital revolution waiting for no one
Originally posted by Louis White @ afr.com
This content is produced by The Australian Financial Review in commercial partnership with Chartered Accountants Australia and New Zealand.
Australian business is expected to spend more than $65 billion on technology in 2019 as part of an ongoing transformation to ensure the nation can compete effectively in the globalised digital economy.
Market research company Forrester puts cloud computing, automation and AI as the top three priorities for technology investment, which is largely in line with Top 100 Accounting Firms data.
Top 100 respondents ranked cloud computing (98 per cent), automation (94 per cent), and real-time data sharing (83 per cent) as the top priorities for accountants and their clients, in the study conducted by The Australian Financial Review and Chartered Accountants Australia and New Zealand.
Australian Chamber of Commerce and Industry CEO James Pearson says there is more pressure than ever on the Australian business community to use technology to compete, with change needed in a range of areas.
"We need to position business to compete effectively in the digital economy and to better manage technological disruption," Pearson says. "To do this we need to ensure we have world-class technological infrastructure to engage appropriately in the digital economy."
As the wider business community seeks to meet its transformation challenges, with cyber security, data privacy and digital literacy all high on the national agenda, accounting firms are working to increase their advisory role in the area.
Rob McKie, of Pitcher Partners, says some established mid-market clients have a long way to go to optimise their processes and systems and the digital shift requires transforming their customer engagement models.
"This is costly, and challenges the established way of working, their corporate mindset and their culture," McKie, a partner with the firm, says.
"Take for example a start-up energy retailer, with a strategy to sell via a mobile app as their primary channel. In contrast, the incumbent mid-tier competitor has a broader set of obligations – first establishing a digital strategy, then investing in new platforms to match the offering, and then integrating this approach into what is usually a complex legacy ecosystem.
"That same story is repeated across different industry sectors and types of clients."
The digital shift also puts security as another critical expense as businesses prepare to face up to increased local and international threats to information, says McKie.
Research firm Gartner predicts Australia's cyber security spend will hit $3.8 billion this year, driven by increased government regulations, a change in businesses' buying mindset, a heightened awareness of emerging threats and the evolution to a digital business strategy.
"Businesses need to have a constant state of awareness and assume it is only a matter of time before they are a target or before a mistake is made," McKie says.
"Unfortunately, businesses tend to only respond to this risk when they take a hit first-hand. We work very hard to help businesses learn from the experiences of others because smaller businesses can be wiped out overnight from these types of attacks."
McKie thinks that businesses will foresee standards and changes in cyber security practices from the likes of ISO, APRA and ASIC designed to strengthen requirements on reporting, compliance and cloud providers.
"We would also anticipate changes in the period of time that data is retained, as a result of being digitalised," he says. "It's now cheaper and can be kept for an extended time period which we expect will become a point of challenge in the future."
Grant Thornton Australia chief operating officer Ian Herman says increased cyber security investment is needed to remain compliant with the latest local and international data breach regulations in order to protect a firm's own and client data.
"Privacy and security will also continue to be a challenge," Herman says. "Access to information will continue to be tightly regulated and protecting data will continue to be a hot issue."
He adds that the technological shift means lodgement of information with tax authorities and other regulatory agencies is likely to become more automated for all businesses.
"We're already seeing this in other jurisdictions such as countries like the Netherlands," he says.
Accounting firms are spending an average of 8.5 per cent of their budget on technology, with the mid-tier and larger firms' expenditure almost half of that at 4.9 per cent, the Top 100 data shows.
Small accounting firms (revenue under $50 million) are tending to play catch-up, spending 9 per cent of their annual budgets on IT.
As well as ensuring their own technology is up to scratch, firms are talking to clients about their software systems so they can not only work harmoniously together but efficiently and effectively.
"The digital standards and expectations of our clients and our people have changed," says Vishy Narayanan, partner and chief digital officer at PwC Australia. "In response, we are focused on embedding digital capability into the fabric of our firm."
Many accounting firms, and businesses for that matter, still rely on internal systems, such as Microsoft Excel, for some basic bookkeeping functions. This can lead to bigger problems such as human error going unchecked due to locks and one person only inputting the data.
All businesses, and accounting firms, are understanding that sophisticated software and the ability to make decisions based on real-time data, gives them a significant advantage in increasing revenue and ultimately profitability.
"Over the past four years we have been moving to the cloud and we're now 70 per cent of the way to being completely cloud enabled," Narayanan says.
"This has been a critical transition to support our workplace strategy and enable our people to be at their best, and access the information they need wherever they are working from that day, for example at a client site, in the office or at home."
Preparing the workforce
Narayanan says that the transformation challenged PwC to think about how they could do things differently to become a digital business.
"We have transformed our workplaces to provide a tech-enabled experience for our clients and people," he says.
The ACCI's Pearson says business will need to ensure the workforce is ready for such technological changes, with a focus on digital literacy.
"AI and robotics will impact some occupations more than others and our skills mix needs to change as the economy changes," he says. "We need to keep students and jobseekers well informed about where the job opportunities are and will be in the future, while accepting that we may not always know where the greatest impacts will be.
"The key aid for Australian businesses is an education and training system that is responsive to the needs for the entire workforce to have stronger digital literacy skills, as digital is impacting most occupations."