If you can't beat 'em, join 'em

Last year’s Unisys/Financial Director/IT Week survey on the importance and appreciation of IT (July/August 2002) found that IT and finance departments were not communicating with one another effectively. But things have already changed and FDs see an improvement in their relationship with internal IT departments.

Tony Grace, managing director of Telewest’s business division, says the deadlock between his finance and IT department is improving. “When I was FD at Telewest, IT needed to show a clearer understanding of the business improvement that technology delivers – whether it was in service delivery for customers or internal management information,” he says. “We now have an IT strategy that is clearly linked to the overall business strategy. At times we didn’t even have that.”

That’s not to say FDs don’t face some specific problems when their IT departments pitch new projects at them. For Peter Hatherly, FD of retailer Accantia, it is IT’s desire to appeal to finance’s perceived cost-conscious nature as IT departments invariably underestimate the cost associated with big projects. “They focus on the hardware and licensing side of costs, but the real cost in terms of time and effort – pulling key people out of the business to get it right – is often underestimated,” says Hatherly.

Pubmaster, the tenanted pub company, is a prime example of how seriously FDs are taking IT. For several years, Pubmaster FD Ron Turnbull was deliberately shielded from IT projects. “We had been refinancing and borrowing additional money to grow the business. That was felt to be a big enough task for any FD, without having responsibility for IT as well,” he says.

During this time, IT reported into Pubmaster’s commercial director. But on the day in June 2003 that Turnbull was announced as Pubmaster’s new chief operating officer, he told Financial Director that one of his first priorities was to make IT a direct report into his new FD. This is not from a cost-controlling standpoint but because he felt IT and finance should co-existent within business.

“We have a stable business now so the FD should be able to assume a relationship with internal IT,” says Turnbull. “Key information invariably comes from IT, and finance must reproduce timely and accurate information – not just in terms of management accounts but in terms of business projects. FDs have the disciplines and controls to make sure the information being produced is consistent and reconciled with the information the business investors and shareholders are getting. The trick is to make sure the relationship between the IT department and the finance department is a good one.”

So, if internal battles between departments are being reconciled, it must be easy for FDs to make informed decisions when implementing new, value-creating IT systems. Well, maybe not. Recent consolidation in the IT sector has muddied the waters.

Neil Goulder, an FD who is currently involved in implementing financial systems for the Royal Household at Buckingham Palace, says that the real concern is with communication between external IT vendors and client businesses.

“The IT industry is going through a lot of upheavals. With things such as joint marketing partnerships, there is a lot of overlap in functionality between supplier systems,” he says. “In the short term, this will create substantial problems. Certain products will be phased out and it will be difficult for a lot of consolidated vendors to market and differentiate themselves.”

Oracle’s recent bid for rival enterprise resource planning (ERP) software vendor PeopleSoft is a case in point. A war of words between the companies’ boards has left everyone confused. Oracle chief executive Larry Ellison has been accused by PeopleSoft of trying to kill off the PeopleSoft product line through the proposed acquisition, an accusation that Ellison has branded “lies” (see page 47).

All this leaves customers such as Goulder confused as to whether existing systems will be phased out in a few months’ time. As more companies tie up in takeovers, mergers and partnerships, this can only reduce choice for businesses seeking new technology.

Finance and IT directors will need to build on their relationships to ensure that suppliers are aligned with their business goals, whether they are implementing new systems or considering if they should upgrade to another vendor’s systems because of M&A activity in the IT sector.