Finance vs. IT: Who Runs the Numbers?

In light of Sarbanes-Oxley, CFOs must be comfortable with IT to produce financial reports of high integrity, writes a reader. More letters: ROI isn't for all IT projects; the dynamics of IT's contribution; more.

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Finance vs. IT: Who Runs The Numbers?

Your article “One Way, or Another?” (Winter 2004) struck home. Having been in finance the first 10 years of my career and marketing the last 10, I’ve dealt with many of the same issues. In particular, I was interested in the results from your poll stating that almost 50 percent of finance people feel that the demands of Sarbanes-Oxley have fostered a closer working relationship between finance and IT. In light of Sarbanes-Oxley, it seems imperative that CFOs be comfortable that they have control over all areas that affect their ability to produce financial reports of the highest integrity. A look at the balance of power between finance and IT [given that the business-intelligence and reporting systems, and the staff that use them, tend to cross these boundaries] would make a great follow-up article.

Charlie Cary

Via E-mail

Regarding your Editor’s Note and article “One Way, or Another?” I would like to congratulate you and your magazine for doing what all business magazines should be doing: making us think about the issues—all the issues, no matter how painful. As your headline indicates, “CFOs agree on the value of IT but disagree on how to measure and manage it.” This alone gives us all an indication of just how complex the issues really are, and the impact they have on the companies we serve.

George B. Tselentis

Via E-mail

In Praise of Fuzzy Advantages

I must confess to being perpetually perplexed that so many CFOs insist that major IT projects show a positive ROI. After all, these are fairly smart people by and large; surely they cannot think that all that is involved is directly measurable.

While there are point solutions that certainly have real-world ROI, the ROI meter is too often used to make decisions on major projects, like ERP software, and this simply does not make sense. ERP projects (as well as CRM and others of that ilk) both affect and are affected by so many intangible factors that measuring hard numbers just doesn’t make sense.

Of course, there are plenty of problems in the implementation phase, and to blindly throw money at a project without regard for payback is a fool’s errand. But the CFO/financial community must come to grips with the fact that there are IT projects that are not all about solid figures. Perhaps the trick is to identify the ones that can be better measured, and not expect so much calculated ROI for the projects that have fuzzy advantages.

Frankly, I wonder how many of the CFOs who insist on ROI today would have approved [the purchase of] spreadsheet programs years ago—the very spreadsheets their assistants use to calculate ROI!

Bob Fately/Third Wave Int’l

Van Nuys, California

How to Measure IT’s Contribution

Regarding the notion of estimating how much revenue to allocate to every kind of corporate resource in proportion to each respective resource’s contribution (“Revenue Is What Matters,” Letters, Fall 2004), I have to wonder what purpose there is to that. Not being an economist myself allows, perhaps, my view on this matter to spawn a useful question. Namely, without a definition of “contribution” there is no logic to the presumed “proportion,” and don’t we already know from real life that contribution means impact and that impact is defined by the system of measurement?

What most of us in IT and everyone in science have learned is that we can’t talk about impact without talking about complexity, which means talking about interdependencies and frequently about the obscure order found within apparent chaos. If at Company X a $50 spreadsheet program in the hands of a $100K-per-year employee results in a discovery that generates $10 million in revenue, that’s a great trick. And yet even if Company Y copies the same set of “resources,” it probably won’t get the same results.

The reason why accountants have not set or proved the so-called value of IT is because value is not generated by resources but instead by dynamics, and accountants don’t measure dynamics. I agree that what is needed is a look at the answers already found in other disciplines.

For example, meteorologists measure systems and motion, such as high pressure, low pressure, and temperature, and from that they can attribute daily and even hourly impact to real causes instead of merely to gases. Likewise, coaches who actually know how to coach can tell you that the influence of the most talented player on the team can turn the team into a loser, where a much lesser talent can influence the team to win and so gets put on the field.

So the key is to break free of the notion of “resource” that is rooted in a concern for corporate property and learn to see that the elemental dynamics of situations are the real resources. For most companies, the closest they come to this awareness now is their understanding that some company assets, like people and technology, must service something that they call processes, with processes representing the company’s hypotheses of desirable dynamics. Logically, then, the process is the closest they come to defining the resource that should claim some of the credit for the revenue. What does the process cost, and how well is it managed?

Malcolm Ryder

Chief Strategist/Renovance LLP

Palos Park, Illinois

Linux and the Law

Thank you for your excellent and very informative article on Linux and open-source software (Winter 2004). As a longtime “Linux zealot” I’ve been dismayed at the quantity of disinformation and empty rhetoric thrown around by the various camps with an interest in seeing Linux and open source succeed or fail. Your article was reasonable, well written, informative, and almost rock-solid on facts as far as I know them. It’s this kind of dispassionate look at what works and what doesn’t in IT that’s helping Linux and open-source software gain a solid foothold in all areas where well-crafted and affordable software and open standards are important.

My one quibble is that your description of lawsuits brought by the SCO Group is inaccurate. While it’s true that SCO Group spokespersons have, in speeches and press releases, characterized the issues behind the lawsuits as infringement of Unix intellectual property, the issues under contention in the lawsuits have boiled down to matters such as contract disputes and license compliance complaints. For anyone interested, please see that information at www.groklaw.net and on the related GrokLine and GrokDoc sites.

Lindsay Haisley

FMP Computer Services

Leander, Texas

On Travel Coverage, No Reservations

I was quite impressed by your article on the choice between online and traditional travel management companies (Bookmark, Winter 2004). You outlined the issues in a straightforward and concise way yet without oversimplifying matters. You present the various perspectives fairly, including shedding light on the pros and cons of each approach. You even discuss the “hybrid” solutions that many companies are implementing. This is an important current topic in travel management, and I hope you’ll cover it again.

Caleb Tiller

National Business Travel Association

Alexandria, Virginia

Island of (No) Automation

Your “Saving Gracefully” (Fall 2004) article was very interesting. Information life-cycle management is a subject that should be taught in school, or better still, a graduate requirement for students in business management, computer science, or any discipline that deals in file or record management.

I work for a life insurance company. As such, we maintain hard copies of the application forms, medical records, and other files that cannot be destroyed, due to federal and/or state government mandates. I have watched as our branch office in the U.S. territory of Guam has expanded its number of filing cabinets from 4 to more than 20 in a matter of eight years. Some IRS regulations do not allow for microfiching or photocopying of files. Small and midsize businesses like ours can certainly use some relief. Thanks for a wonderful article.

Fred Magdalera

Via E-mail

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