Thought of the Week

Where exactly did all the money from everyone's 401K's and the bank's balance sheets go? I know I don't have it. Maybe it disappeared into the cloud?

Thought of the Week

What happens to the economy when the banks (e.g. Citi or Bank of America) that are too big to fail, fail?

2009 Finance System Resolutions: Hunker Down or Thrive?

I recently caught up with Rob Kugel of Ventana Research during a conversation with the executive team from Star Analytics. One of the most interesting parts of the discussion centered on how the economic meltdown is impacting senior executives in corporate finance departments and the ways technology can help.

Kugel mentioned, “Unfortunately, the financial meltdown has driven many senior financial executives to hunker down and focus only on survival tactics. It’s a shame because this is a great time to throw off organizational complacency and make important changes to how the finance department operates.”

The challenge, he says, is that people delay making changes in better times because they think they’re too busy, complicated by the tendency of people trained in accounting to reflexively answer “we’ve always done it this way” when asked about a policy or process.

“Now is the time to make changes because facing deep, persistent challenges, people are more willing to accept change and the results can be dramatic.”

Star Analytics CEO Trevor Hughes agreed, “From a technology perspective, we’re starting to see a shift this year as more finance executives look for ways their existing technologies can provide the slightest competitive advantage in this economy.”

Hughes remarked that the days of making decisions on yesterday’s data are long gone, and what’s emerging are continuous planning and forecasting environments and make it easy to adapt to uncertainty in the markets.

Hughes added, “The challenge is that financial data has been inaccessible in non-standard proprietary systems and beyond the immediate reach of the business decision makers. This is driving a surge of interest in simple and cost-effective solutions that allow IT and Finance to communicate and provide a stream of continuous data into the hands of everyone who needs it.”

The discussion surfaced a call to action for finance executives, with Rob outlining simple and cost effective ways Ventana Research believes they can drive change in 2009 and prepare to capitalize on an economic turnaround – both from an IT and business perspective. Over the next few weeks and months, I’ll reveal his top 10 “resolutions.”

Kugel points out, “Many of the ten resolutions are interrelated, and almost always there is a connection between the business and IT issues since the latter drives or heavily influences how well departments can do the former. Our research consistently shows companies misuse spreadsheets and consequently suffer from – for example – a longer than necessary closing cycle and ineffective business planning. It’s also not intended to be an exhaustive list.”

Resolution #1. Focus attention on more strategic activities and less on transactions processing.

For years CFOs have been advised to change the focus of finance departments from transaction processing to more strategic activities. Surveys show, however, not much has happened. The two biggest barriers to making this shift are people and IT. Sadly, too many finance executives love managing minutiae because it’s at the core of their comfort zone. Misusing technology contributes to the problem since not applying automation to rote functions or using spreadsheets inappropriately. There is a data dimension as well: frequently it is too difficult to bring together finance department data and data from business operations because companies are not using the right tools to reliably automate this process.

Is your company making headway in this area?

Thought of the Week

Even though companies have collectively spent billions of dollars on Business Intelligence applications, it's still frightening how much financial reporting at major enterprises is still done using spreadsheets...

A Cloud Over Your Financials?

With all the hoopla recently over cloud computing, I’ve been wondering if companies would be willing to entrust their sensitive and confidential financial data (including financial transactions, financial and statutory reports, etc.) to the cloud. I have little doubt that small companies and even large enterprises will eventually manage (and more than a few are already managing) many forms of information using the cloud, but would an experienced Enterprise CFO or CIO even risk making an “orange-jumpsuit” kind of mistake by risking legally privileged data (e.g. SEC filings, as just one example) leaking out into the public domain inappropriately?

While it might be an easy step to conceptualize the cloud as an abstract remote processing and storage mechanism that you can rent by the hour, gigabyte, or megaflop, the reality is that when you push your data into the cloud you are storing it on a real hard drive on a physical server somewhere. Compared to the expense and hassle of managing a data center it can be an extremely cheap and cost effective way of handling large volumes of information. However, using the cloud does require you have to have an extraordinary degree of trust in the provider; not just in the security of storage and transmission of your data, but also in its availability.

A graphic example recently was when a certain major online accounting package went offline for some of its users for almost an entire day – those companies were literally dead in the water, effectively unable to issue invoices, record payments, or generate financial reports for 24 hours. If that outage had happened at the end of a quarter or another similar time, the consequences could have been disastrous. If your company were put in that position, who can you call? Remember, everyone else is also calling, and you would be just one voice among many in the same position.

My impression is that at least as far as large enterprises are concerned, we aren’t quite there yet. The security of data centers is improving daily, yet the ingenuity and determination of hackers remains a constant threat. The overall uptime record of many cloud service providers is exceptional, but what happens if they do go offline? For a small company with few resources the risk/cost equation is minimal. However for larger organizations which have the resources to manage their own data, there is still some value to controlling their own destiny.

Thought of the Week

Many businesses are cutting their spending because revenues are down, and those cuts in spending in turn cause other businesses to lose revenue, and so cut spending, and so on. When does this spiral end? Why don't all businesses just fire all their employees, and cut their spending to zero? That way everyone can at least break even...

Can we really afford to hide?

If we stay the course, what will change? One of the interesting phenomena of this economy is the “turtle syndrome” it has evinced. If I just become invisible and don’t do anything extraordinary maybe I can hold on to my job just a bit longer…

In fact, the opposite is the reality. I am not advocating for being outrageous or creative beyond measure, but I am advocating for innovation. This is a tough economy and no one is going anywhere if we just keep doing what we have been doing. We have less, but we have to DO MORE. That means that innovation and moderate creativity are the orders of the day, not the opposite.

Profit is measured in reduced headcount and better efficiencies, not just in increased revenue, although that would be a bit nice as well. If we introduce innovation, even at a marginal cost, or apply new education to a problem, the payback will be almost immediate and the effect, dramatic. An example of that is in the use of current technology. If a process or an event takes a tremendous manual effort or a “Rube Goldberg” string of spaghetti code because of lack of knowledge, then find and justify the solution – as long as the return on the investment is immediate.

If you are a technical user of Oracle Hyperion products and need additional hands-on experience with the products and could benefit from face-to-face access to the experts in the field, then you need to attend ODTUG Kaleidoscope – the Oracle Development Tools User Group in Monterey, CA June 21-25, 2009. www.odtugkaleidoscope.com . Even if you have to pay for it out of your pocket, this type of event is of immediate tactical value in helping overcome specific technical challenges that might inhibit the short term growth of your company and possibly your career. At this juncture tactical wins are more visible and may have the strategic impact we all need. This is just one example. I am certain that we each encounter solutions like this everyday. Free user groups and lectures abound if you are willing to make an effort to attend and a commitment to empower yourself to innovation. Perhaps that is the first step in the process of being innovative; making an effort.

Thanks to Gary Crisci for bringing this to our attention. http://garycris.blogspot.com/2009/02/some-tips-for-kaleidoscope-2009.html

Thought of the Week

If the major US banks are nationalized by the Government, would the Government be any worse at running them than the bankers?

Innovation versus Inventive

“Why Accounting Can’t Keep Up with Financial Innovation,” a CFO Blog from 01/12/2009 written by Tim Reason,(http://www.cfo.com/blogs/index.cfm/l_detail/12922621) cites innovation as the perpetrator of evil undoings. It is unfortunate that the GAO chose to use the term “innovation” instead of using a less technologically associated term when referring to unique, pioneering or inventive financial malfeasance. While innovation does envision new and a more packaged offering and involves the “bright shiny object” paradigm, it also invokes an idea that technology was a component of the creation. The perception is that the innovation is one of disruption. In this case the disruption was more an effort to circumvent the basic rules instead of to introduce true innovation. Non-disruptive technology can be innovative without being speculative or corrosive to basic ethical principles and guidelines. Financial innovation should be the hallmark of any Office of the CFO or Controller who is fiscally responsible and actually altering their assumptions in their planning and budgeting process in the attempt to improve their cash and revenue instead of find less-than-acceptable means of generating paper profits. Maybe a new policing body should exist that prevents accounting rulemakers from accepting the use of any instruments that were designed by non-practitioners and applaud the use of technical innovation that supports and enforces legally acceptable processes. This is the heart of governance and compliance applied to innovation.

Outsourcing with Integrity

Outsourcing developed a bad reputation straight out of the gate. Few technology process shifts can boast such embarrassing and costly early results as outsourcing did. Companies such as Dell (that outsourced call center operations), experienced such radical declines in customer satisfaction that they were forced to drop their outsource projects (1). Early efforts at outsourcing development operations often resulted in development lag times, missed requirements and ongoing quality issues (2).

The costly lessons of early outsourcing projects have given companies today the knowledge needed to create successful outsource initiatives. As companies work to maintain a balance between streamlined operations and cost-effectiveness, many are choosing to re-evaluate the opportunities offered by outsourcing. According to Gartner Research, "The global outsourcing market continues to grow at a steady pace, with a forecast growth rate of 8.1 percent in 2008. But, healthy growth rates for outsourcing do not necessarily mean that user organizations are without challenges."

Not all outsourcing projects are the same. Project requirements, processes, deliverables, and structures vary greatly with each type of outsourcing project. Whether looking to outsource call center operations, manufacturing, software development, IT services or other operations, there are common success factors that span all outsourcing projects.

Find the right place and people: While one location may offer considerably lower production costs, the talent-base of the workforce must also match your needs. “You must understand the offshore location landscape," states Gartner research vice-president Ian Marriott. Gartner’s Top 30 Offshore Locations for 2008 provides a list of the top countries around the world for IT outsourcing, based upon criteria such as talent availability, environmental stability and cost.

Establish consistent processes: Adherence to corporate processes and procedures by all business teams (whether internal or outsourced), is a fundamental requirement to ensure consistent, quality project results, corporate governance and compliance. This is a difficult goal to maintain when working with external companies across geographies. By automating business and financial processes, companies can ensure consistent, repeatable data movement with integrated control steps. Detailed audit trails from content management, change control, and financial systems provide traceability.

Ensure visibility: Corporate teams must have understanding of outsource project activities and their results at all times. Up-to-date, accurate financial and lifecycle data provide critical insight needed for decision-makers at all project levels. Continuous effort needs to be put to tracking progress and making the best fact-based decisions for the overall business.

Verify integrity: Quality is a major outsourcing concern, and was the downfall of many early projects. Create checks and balances for the outsource project where quality is measured on a number of levels:

• Data Integrity: Is the data from outsourced systems, (financials or operational data), accurate and complete? Is the data refreshed regularly?
• Service Integrity: Customer satisfaction surveys, call monitoring and agent coaching provide basic quality management. Operational reporting, scorecards and analytic tools provide more robust service management.
• Performance Management: Establish a performance management system that tracks performance and measures against expected results. Solutions are available from small-scale tracking and reporting systems (designed for small to mid-size companies), to full Enterprise Performance Management (EPM) systems.

As companies look to outsource a variety of business activities (including manufacturing, contact center, procurement, data management, Software as a Service (SaaS), marketing, etc.), the model for successful outsourcing becomes more complex. A hands-off, contract-signed, out of sight, out of mind approach to outsourced projects will spell disaster. These relationships are extensions of your organization; they rely on the same monitoring, management and integration as other business functions.

Outsourcing with integrity means creating a model that supports people, processes, and data at high quality levels that meet a company’s standards. It also means having the tools and framework in place to seamlessly integrate data from outsource systems into the company’s systems. And finally, it means ensuring that tools are in place to manage and monitor the relationship on an ongoing basis.

Outsourcing done right is good for shareholders, for the company and for the outsource partner. By taking the time to outsource with integrity, companies can experience lowered costs, streamlined operations, and have the opportunity to focus on business growth and corporate innovation rather than on peripheral business tasks.

Some Resources
Gartner Myth vs. The Real Deal Blog
Outsourcing Journal



(1) Dell admits it has "learnt its lesson" after being forced to drop its Indian call centre last year following customer complaints about the quality of service…The call centre operation for the OptiPlex desktops and Latitude laptops was moved back to the United States
ZDNet

(2) Sourcing Mag