5 Questions CIOs and CFOs Need to Ask to Prepare for IoT

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Recurring Revenue Models

Are your financial systems geared toward supporting recurring revenue models?

According to a recent survey from the Institute of Management Accountants (IMA), spreadsheets are still the most commonly used method to track revenue recognition despite their inability to handle complex or large volumes of data.

CFOs and CIOs need to be aware of how accounting standards will change and find out what technological capabilities will be required to accommodate them. They must assess major technological shifts, adopt new accounting models, or risk losing market share for failing to give customers the new billing models that they want. In most cases, there will need to be an adoption of a financial system that can handle recurring revenue.

The solution to this problem is a mix of both technology implementation and meeting new accounting standards, and requires an effective partnership between the CFO and CIO.

There is a lot of hype around the Internet of Things (IoT), but make no mistake, the IoT is here to stay and will have a transformative effect on businesses of all kinds. According to a 2015 report from McKinsey, over the next decade the economic impact of the Internet of Things will be as much as $11.1 trillion per year. Ensuring that your IT processes and technologies are prepared for the changes the IoT will bring will be crucial. Investments in infrastructure, security solutions and analytic capabilities are musts for any organization.

Business models are changing too. With the rise of the service economy — a concerted effort by many businesses to focus on developing revenue from their existing customer base (e.g., subscription services, recurring billing, professional services and product/service bundling) — companies are shifting from being product-oriented to service-oriented. Although IoT-inspired business models have not hit the masses, many C-level executives are already evaluating how the IoT may change the way they deliver, measure usage, and ultimately bill for products/services. Sensors and wearables will soon be used to measure how much of a given product or service is used, and businesses will charge accordingly. Recurring revenue is increasingly becoming a key tenet of any business; however, first there needs to be a financial system to support it. When the IoT goes mainstream, will your business be able to perform?

In this slideshow, Kevin Roberts, director of platform technology at FinancialForce, outlines the five questions CFOs and CIOs need to ask themselves to better prepare their infrastructure to support an IoT-centric model.


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