Meeting of Minds
Finance and IT executives are rapidly finding common ground.
By Kristine Blenkhorn Rodriguez
Remember the good old days, when accountants did a bunch of number-crunching and the IT guy fixed the computer? Tim McCracken, vice chair and national practice leader of technology leadership for Tatum LLC, does. He also remembers that, once upon a time, companies had the luxury of a slower pace of business in a less highly regulated environment. Thanks to the microchip and Sarbanes-Oxley, among other things, the finance and IT functions of any business are in a fast-paced partnership that shows no signs of slowing down.
“There was a time when finance executives and practitioners captured data, reviewed it and did periodic reporting,” says McCracken. “In today’s business world, company leadership wants to identify key success factors rapidly, and they want metrics on those factors in real-time, and on a daily or weekly basis. That requires technology.“
All this measurement results in some interesting divisions of labor. “I’ve seen a number of people move from finance into IT leadership,” says McCracken. “We’ve seen flip-flopping between IT reporting to the CIO and the CFO. As a result, most CFOs no longer view IT as a mechanism just for cost-containment purposes. They look at it with more of a strategic viewpoint, as a driver of revenue growth.”
Roles are changing ”This more enlightened viewpoint changes the game for many finance executives. It’s no longer enough to meet business needs and control costs via IT. Instead, smart professionals are using information technology to anticipate trends, putting systems in place on a proactive—not a reactive—basis.
“The role of the CFO within the company has changed over the past several years,” says Lorna Nahil, founder and managing partner of CFO Enterprise, LLC, which provides part-time, interim and project-based CFO expertise to small, emerging and mid-sized companies. “Enterprise-wide business insight is the new game.”
A CFO cannot garner those insights, or even interpret them intelligently, without first harnessing technology. And, as a result, says Nahil, “You’re seeing more CFO candidates become CIOs.”
The trend is not surprising, given recent numbers on the expected CIO shortage. A March 2007 report, Grooming the 2010 CIO, written for the Society for Information Management Advance Practices Council, cites a shortage of qualified chief information officers over the next several years. Some of the roles cited as necessary for a CIO in 2010 are educator, leader, strategist and information steward—roles that could apply equally as well to a CFO.
Back to basics So what are the whiz kids—the companies and executives exhibiting top-form IT—doing? For starters, they’re training their people. That might sound basic, but nothing replaces a strong skill set in your top talent pool.
“There are niche areas of technology where very large banks basically are having to pay someone to sit in school for six months,” says Jeromee Johnson, senior analyst for financial markets research and advisory firm, The TABB Group. “They’re sending some financial engineering guys—quantitative analysts and the like—to learn about things like hardware-acceleration technologies. You wouldn’t have seen this 5 years ago.”
And for those firms that place more emphasis on excellence in unique processes or marketing power, “There are an awful lot of outside consultants,” says Nahil, “because your in-house staff is just inundated with projects that are equal parts finance and IT. This is pretty ironic considering that, 20 years ago, finance and accounting people didn’t have a clue what IT people did.”
In addition to instilling new skills within their own ranks and borrowing skills from consultants on a contract basis, many companies (a hefty number of them financial companies) are listening to their customers’ needs and wants, which translate into “reality via technology.” While some CFOs are still shielded from such feedback because their operations are not customer-facing, other CFOs with IT oversight responsibilities are now in the thick of it, and subsequently closing an information gap that has existed for decades.
“Don’t underestimate the disconnect between IT and the business,” says David Furlonger, a managing vice president at analyst firm Gartner. “It exists in many places, even at investment banks and high-profile firms.”
According to Furlonger, smart companies are eliminating the disconnect by means of cross-fertilization. “The businessperson goes to work in IT, and IT sends people into the business,” he says. “Combine that activity with a team-based orientation, and you’ve got a forward-thinking company that’s marrying business needs and IT expertise. The old organizational chart view, the one that pigeon-holed people into set roles, now looks very old-fashioned.”
When it all goes wrong In print, it all sounds very neat and tidy. But, as with most things, cautionary tales abound.
Uncle Sam traditionally gets a bad rap in discussions about keeping pace with technological advancements, probably because failures are so very much in the public sector. The first tale involves a fatal flaw: Underestimating the ramifications and snafus inherent in a major software upgrade, and classifying it as a maintenance task rather than a strategic one.
When the IRS wanted to upgrade its fraud-detection system, it had a deadline in mind: January, 2006. According to Information-Week’s coverage of the blunder, “In January, when the system was supposed to go live, users generated 534 problem tickets. One problem was that the electronic fraud-detection system project office wasn’t communicating with the Criminal Investigation division of the IRS, the main user of the system. In fact, communication was breaking down all over the place. When one development team made a change, it didn’t notify other development teams whose portions of the system were affected by the change. As a result, the IRS’s System Acceptability Testing (SAT) team would en-counter another problem in another place. This would cause the SAT team to write another problem ticket, which would go back to the contractor, requiring another software fix, according to a report.”
In an interview, a Treasury Department official said the IRS “lacked the project-management discipline to pull off an upgrade of such a critical application.” This same official is quoted as saying, “They lacked testing rigor, and they didn’t have program-management activities set up where there’s a defined plan, and that they could execute against.”
When the House Ways and Means Committee investigated the incident, they found that classifying the project as a maintenance project rather than an upgrade led to insufficient oversight and funding.
When it all goes right Contrast the IRS’s experience with a software upgrade to that of Kärkimedia Ltd., an advertisement broker for 30 of Finland’s national and regional newspapers.
In 2000, with the help of Accenture, Kärkimedia successfully implemented Siebel 99 Call Center—a customer relationship-management (CRM) software solution. This implementation enabled all Kärkimedia employees to capture and access certain business information (such as current and past advertiser buying habits) online.
However, member newspapers were still unable to access the system to share information about advertisers with each other. Kärkimedia and its members relied on email, faxes and telephone calls to exchange information—an inefficient and time-consuming method of communication. Evidently, Kärkimedia needed to enhance cooperation and communication between its members via a common online channel. With a server and software upgrade, the company would be able to create a single, comprehensive view of its advertising agency and direct advertising customers.
Thanks to careful planning and oversight, the upgrade was a success. “Today, advertisers have an unprecedented array of traditional and new media vehicles to choose from,” says Juha Alanen, Kärkimedia’s marketing director and chief operating officer. “For Kärkimedia to prosper, it is more important than ever to provide our customers with distinguished service.”
Two organizations in vastly different fields but with a similar need—a software upgrade for better communication amongst key stakeholders. One allowed an enterprise to generate increased revenues; the other resulted in an estimated $318 million lost in fraudulent IRS refunds.
A combined approach As these tales of trial and tribulation tell us, expertise is key. And if you don’t have it in-house, you may need to look elsewhere.
“I realize outsourcing is not for everyone,” says McCracken. “But when you look at what your company does well or falls short on, it is crucial not to overestimate your capabilities.”
He cites a worldwide logistics provider based in Dallas as a good example. “They touted IT as a differentiator to customers,” he says. “On their website and in their marketing materials, they touted their IT capabilities as a strength.” A Tatum team survey, however, found a host of homegrown applications and outmoded programs with shaky security. “They were in serious jeopardy of damage to data,” he states. “In a case like this one, outsourcing is not such a bad idea, at least until you get the situation under control.”
In other words, the smart players are using a combination of outside expertise in the form of consultants, while shoring up their internal capabilities through continued education and the hiring of a new breed of financial executive.
“We’re very clear,” says Nahil. “We’re looking to staff a couple of senior accountants and a controller, and the knowledge, skills and abilities we look for now include the application and integration of information technology into the accounting process, as well as financial and managerial accounting principles. Organizations rely on the new generation of accountants, controllers and CFOs to be familiar with today’s systems. At the CFO level, we look for technical skills and conceptual knowledge of accounting information systems, especially with major ERP systems.”
Johnson concurs: “Broad technology skills as a numbers guy? You need them now,” he says. “It’s the evolution of the market. We’re not going back.”