Making predictions is a dangerous activity – just ask any banker who’s been involved in hedge funds over the course of 1998. For leading players in the IT industry, prediction is a somewhat less risky pastime. For a start, making a commitment to a company like Microsoft allows them to predict fairly accurately that Bill Gates will get richer as a result. And with the size and importance of IT systems in the body corporate increasing by the day, it’s a fair punt that IT spending is unlikely to drop through the floor any time soon. But in cold, hard, financial terms, maybe prediction is the wrong game for finance directors (although they’d certainly make a better job than 99% of the IT world which seemed to miss the year 2000 problem: whoops, there goes $850bn!). Perhaps, instead, 1999 should be less about predicting down which plughole that IT budget will disappear and more about consolidating your IT spend. It’s time to start asking some simple questions, both of your IT suppliers and your internal IT teams. “Why would I want to do that?” This is a question seldom asked of technologists, who, as a result, have largely forgotten how to answer it. Try it out: “This new system will enable you to incorporate HTML tags into e-mail.” “Why would I want to do that?” “Because 21st century communication is all about richness – you must have richness in your e-mail.” “Why would I want to do that?” “Because … you can!” Moral: Just because you can, it doesn’t mean you should. “How much is it going to cost?” No one, least of all a finance director, would buy a car without knowing what the fuel consumption was like and into which insurance category it fell. But over the coming year, FDs will be bombarded with propaganda about “sub-£600 PCs”, without being told at the same time what it’s going to cost to keep them running. Software is getting more and more complex, and the demands on users’ PCs will almost certainly grow. That means more support and more training. Still interested in scrapping the old, tried, tested and well-understood system for that new bells-and-whistles model? The IT industry couldn’t stop saying “total cost of ownership” a year ago. Now, it hardly ever gets a mention. Moral: IT spending is for life, not just for Christmas. “How much is it going to cost?” part 2. The figures – according to US research firm The Standish Group – are staggering, with 46% of IT projects running over budget or over time and 28% never even reaching roll-out. Enterprise resource planning (ERP) can mean big savings and better organisation in your company. But what if the roll-out busts open its project budget at a time when cash flow is going to be tight thanks to economic downturn? Tried-and-tested routes may not give you “leading edge” status. But there’s a huge risk that “leading edge” becomes “bleeding edge”, and even on the “safe” IT projects, careful FDs will make a mental note to set aside extra cash for budget over-runs. Moral: In for a penny, in for a pound. “What if it falls over?” IT hasn’t really got the best reputation for getting things right first time. 1998 saw two classics from Microsoft: the first was when Bill Gates was showing off Windows 98 to a hall full of industry observers only to find the wall-sized screen going blue and presenting him with an error message (now he knows how it feels …). And at the launch of the Windows CE-powered AutoPC (“the computer in your car”) the “smart” radio cassette player promptly guided CNN reviewers in the opposite direction from their destination. As Bill would say, “Where don’t you want to go today?” But a wrong turning on a newly acquired accounting system, network or database is now seriously bad news for your company. By all means try out Windows NT 5.0 in 1999 (supposing it launches), but just be sure that you can carry on working if there’s a glitch which delays things. Your IT people should have contingency plans in place for year 2000 and other IT disasters anyway, but just because it’s Y2K compliant doesn’t mean it’s a risk-free system. And risk is your business. Moral: If you’re in a crisis management meeting and you don’t already know who the scapegoat is, it’s probably you. “Can you explain what you mean?” If the systems manager or the IT salesman can’t explain, in very simple terms, what the business benefit of a new system or piece of software is, it’s probably not worth buying. If they can explain the business benefit, they ought to be able to explain specifically how it will improve operations at your company. And if they can do that, there ought to be a rough idea of the return on investment. So ask. Get rid of three-letter acronyms from their vocabulary PDQ – superfluous technological jargonising merely obfuscates. And remember: you’re a finance guy, not a nano-technician or a C++ programmer, so if you can work out their NI contributions and maximise their tax break on the company pension, they owe you a patient explanation about how and why they’re spending company money on new technology. Moral: A little knowledge is a dangerous thing. “What are we doing next?” IT, ironically enough, is a hugely labour-intensive thing, and your systems people, especially in the run-up to 31 December 1999, may well have their noses so deeply buried in the detail that they miss the Next Big Thing. In fact, the Next Big Thing ought not to be driven by technology at all – it ought to be driven by the finance function, like all the best IT projects. The FD as strategist is nothing new, but the advent of mass data communications, sophisticated database analysis tools and cheap computing power should have you thinking about what you want to do in the future, both as a finance function and as a company – then looking for technologies to solve the problem. If the business drives IT, rather than being dragged along by it, you’ll have fewer cultural problems within the organisation, use your 1999 IT budget to more effect and make better use of what you’ve already bought. Moral: It is not the horse that draws the cart, but the oats.
View our archived webinar, including Oracle and a host of ‘Fast Data’ experts, to discover how financial professionals can help create a Fast Data business
Business whose operations span a number of sectors and a broad variety of projects put immense demands on FDs and their supporting finance teams
Christian Doherty looks at the impact Brexit will have on trade relationships and supply chains
Reinmoeller, professor of strategic management at Cranfield School of Management, has proposed an Eight Actions Model to help organisations increase margin and perform ahead of market expectations