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Top technology issues for CFOs. (Technology).

In anticipation of this month's FEI Forum on Finance and Technology, the FEI Research Foundation spoke with industry professionals and FEI members about key information technology (IT) issues

The recent focus on corporate governance initiatives and financial reporting integrity are likely to impact technology. "Systems should focus on delivering the information to the right constituents," says Mark Jacobson, COO and Partner of Focus Group Corp. and Chairman of FEI's Committee on Finance and Information Technology (CFIT). "Information delivery should be well coordinated with any new governance issues or initiatives. [Further], CFOs should continually reassess if technology is being fully leveraged and aligned with their firm's business objectives," he adds.

Integrating business and technology is an objective of every organization. To better fuse business strategy and technology, priority-setting and resource allocation remains one of the top IT concerns for many CFOs -- particularly as significant sums are spent on infrastructure and maintenance.

A key challenge for the executive is to identify ways to reduce a company's expenditures for IT infrastructure and maintenance in order to free-up valuable IT resources for other initiatives that improve competitiveness and business performance.

Jerry Boltin, a senior partner at CSC Consulting, notes that prior research with FEI members has shown that nearly 70 percent of IT spending goes to sustaining the current environment -- leaving relatively little room for development or innovation. With the recent tightening of IT budgets in many companies, discretionary dollars will likely be further reduced. This will both add to the pressure on infrastructure and maintenance expenditures and increase the difficulty of obtaining funding for new development.

Dewey Norton, a CFO and longtime FEI member, says that this problem particularly hurts middle-market companies that can least afford investments in new technology. In some cases, he says, "They spend the money and never get the return on it." Compounding the problem of return on investment (ROI) measurement are frequent software updates that companies are hard-pressed to keep up with, the intangible nature of many of the benefits of technology investments and the tendency for many IT projects to span several years.

Analytical vs. Transactional

Though certain IT issues, such as Y2K and the Euro conversion, are cyclical, certain key CFO concerns will always be critical -- system effectiveness, competitiveness initiatives, priority-setting, resource allocation, investment productivity, IT strategy and management. On a broader scale, Boltin relates recurring technology issues facing the CFO to two headings, the analytical and the transactional. The first deals with providing decision support and performance measurement for companies to be more effective in the marketplace, while the latter focuses on day-to-day systems integration and transaction processing.

System security and continuity, another top concern, can impact both analytical and transactional levels. Specifically, Jacobson notes that business continuity management still receives interest, particularly in the government sector. Security issues related to email, protection of databases and other intellectual property also remain priorities. "A major breach of security could bring almost any organization to its knees," Boltin says, citing CSC's IT security work in the federal sector. Norton agrees, and cautions: "Hacking is increasingly damaging and is going to be used by combatant governments and terrorists on a larger scale in more sophisticated ways."

At the transactional level, practitioners also point out that enterprise resource planning, or ERP, systems are still on the CFO radar screen, in both the private and the government sectors. In the private sector, companies continue to focus on using newer technologies to capitalize on future business opportunities as ERP vendors release product updates or new products that integrate Web and e-commerce tools.

Practical Advice

Regardless of the specific issue, most practitioners will agree that - from the CFO perspective - business systems should be used to support timely and accurate financial reporting. To a larger extent, IT systems should enable -- not drive -- strategic decision-making, particularly in light of the current economic downturn where resources may be restricted.

In order to use IT resources more efficiently, the IT organization must be tightly connected with the rest of the company. This is achieved, first and foremost, by establishing an IT strategy that is fully aligned with -- integrally part of and derived from -- the overall corporate strategy and business plan.

Understanding work flow and improvement opportunities before implementing any system solution will allow companies to better evaluate software packages. This will help the company ask the right questions and help it assess whether a vendor solution will truly meet a company's needs.

An understanding of business strategy, operating model and related processes enables IT professionals to "think out of the box about ways to use technology to achieve competitive advantage," says Norton. "When you review proposed IT investments, be sure to require a clear statement about the deliverables, the timing and the budget. Think carefully about this, but put in generous contingencies and make every effort to ensure that line managers understand that they are accountable for results and the timetable."

Finance departments and IT departments should work more closely to provide continual status reports on the how, what, where, when and why of all IT projects to ensure that organizational learning takes place. This process can be constructive and can be achieved though the use of flow charts, activity-based-costing and the establishment of project-level ROI metrics. Companies may consider designating both a full-time project manager and a non-IT user to manage and "champion" each IT investment.

Boltin advises a measured approach when applying this process to any substantial new development project. This can be accomplished by providing a prototype or controlled exposure to the new technology. Once the implications are fully understood and success is achieved, the project model can be expanded to the rest of the company's operations. Also, customization initiatives should not be undertaken without a clear business reason, and multiple systems should not be allowed to perform the same functions. Allowing all stakeholders to be involved, along with the CFO, will provide an objective focus on the overall business success and will reduce problems.

Both Norton and Boltin agree that, based on their previous research findings, a single ERP solution may not provide a good fit across a whole enterprise, particularly one with multiple business units operating in different sectors. In these cases, combinations of "best of breed" systems with integration tools may provide a better solution. Jacobson adds that projects involving existing ERP systems allow companies a good opportunity to reevaluate business processes to ensure a proper system fit.

Cheryl de Mesa Graziano is manager of research for the FEI Research Foundation. The Foundation encourages FEI members to provide input on their companies' top technology issues by participating in its fifth annual survey on "Technology Issues for Financial Executives" at http://www.surveystar.com/fei2002/.
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Author:Graziano, Cheryl de Mesa
Publication:Financial Executive
Article Type:Column
Geographic Code:1USA
Date:Sep 1, 2002
Words:1114
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