Finance and IT must go together

Last year, a survey in Financial Director magazine revealed a gulf in understanding between UK CIOs and finance directors.

Finance directors wanted IT to be more accountable, while IT directors complained that finance couldn't give them the tools with which to measure return on investment.

And, while IT directors were seen as unstrategic and uncommercial by many finance directors, FDs in turn were seen as technophobes who refused to open their chequebooks.

But a year on, finance directors are starting to see an improvement in their relationship with internal IT departments.

Problems with IT implementations are less about 'them and us' and more about how departments work together to align IT with strategic business goals.

Tony Grace, managing director of Telewest business and former finance director of its consumer division says, for his company at least, the deadlock between finance and IT departments is loosening.

'When I was finance director, IT needed to show a clear understanding of the business improvement technology delivers - whether it is in service delivery for customers or internal management information," he says.

'In Telewest we now have a much more sophisticated IT department that is closer to the internal customers and the external requirements of the business. We now have an IT strategy that is clearly linked to the overall business strategy. At times we didn't have that.'

FDs still face some specific problems when their IT departments pitch new projects at them.

For Peter Hatherly, finance director of retailer Accantia it is IT's desire to appeal to finance's cost-conscious nature.

He says that IT departments invariably underestimate the costs associated with big technology projects.

For example, Hatherly was recently heavily involved in implementing a large SAP project when his business was under Smith & Nephew's ownership.

He had to make sure his IT department appreciated that extra costs would be involved.

'They focus on the hardware and licensing side of costs but the cost in terms of time and effort, pulling out your key people out of the business to get it right is often underestimated. If in doubt, over-resource projects,' says Hatherly.

A call for more money to be thrown at IT may sound unusual coming from a finance director. Yes, costs are an issue, but if an IT project is will produce clearly articulated, defined and deliverable benefits, finance directors are more than happy to allocate resource.

Paul Gilbert, finance director at National Car Parks thinks that IT projects are essentially no different from any other business project.

'IT projects should have the same generic features of all successful projects,' says Gilbert.

'Projects should align with the organisation strategic objectives or you should not be doing them. They should have clear sponsorship and ownership, especially as at NCP we are not technology driven therefore business sponsorship is key.

'You have to assess business case and financial case (including cash driven ROI) and sensitivities (including risks and opportunities - financial and non-financial). And projects should be governed to avoid scope creep and ensure progress reporting back to the sponsor in the business."

Specifically in terms of IT, Gilbert says that project objectives should be aligned with business objectives.

'None of this is rocket science, it is basically common sense,' he says 'At NCP we strive to achieve this otherwise I would not sanction the release of resource. Typically IT guys are strongest at the technical and process related stuff but not always as strong on the strategic, people and commercial issues.'

This, says Gilbert, is where the FD can help.

Martyn Lloyd at P&O Travel is in an unusual position in that he holds the position of IT director as well as FD - what he says is 'a hangover from when IT used to be payroll and little else.'

But in his role he can appreciate the problem that IT directors have selling systems internally to finance.

'Finance and IT are conflicting visions of the business and that tends to be the problem. The IT person is always looking for an expansive, future-based type of approval and so that makes it harder to quantify. Finance people may find that hard to appreciate,' Lloyd says.

'A lot of IT projects therefore have to be expressed in terms of costs and cost benefits and IT guys have to get the concrete and tangible side of a project established. In this area you have to present finance with several scenarios - an 80 per cent success rate scenario, a 40 per cent and a terrible failure.'

That is not to say that all finance directors want to stifle creativity, but they do want to be presented with a detailed analysis of how the project will develop going forward.

'For the expansive side of a project you have to factor in a lot of probability and risk. Finance will discount the benefits side and factor in the risks. As an IT director you have to express your cases in both these areas,' he says.

One example of how seriously FDs are taking IT is Pubmaster, the tenanted pub company.

For several years Ron Turnbull, Pubmaster's finance director was deliberately shielded from IT projects.

'We had been refinancing the business and borrowing additional money to grow the business and that was felt to be a big enough task for any FD without having responsibility for IT as well,' Turnbull says.

During this time IT reported into Pubmaster's commercial director.

But on 17 June, the day that Turnbull was announced as Pubmaster's new chief operating officer, he told financial director that one of his first priorities is to make IT a direct report into his new finance director. This is not from a cost-controlling standpoint but because IT and finance should be co-existent within business.

'We have a stable business now so the FD should be able to assume a relationship with internal IT,' Turnbull says.

'Key information invariably comes from IT. Finance are the people who produce timely and accurate information - not just in terms of management accounts but in terms of business projects. Finance directors 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 finance department and the finance department is a good one."

But if internal battles between departments are a diminishing problem what is the main IT issue for business?

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

'The IT industry is going though a lot of upheavals. With all these things like joint marketing partnerships there is an awful 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 very difficult for a lot of consolidated vendors to know how to market and differentiate themselves.'

The main problem may not be whether internal finance and IT departments are aligned but whether consolidation in the financial software and ERP space creates confusion and less choice for client businesses.

Communication between IT and finance will be crucial to ensure that supplier companies are aligned with their client's business goals, whether businesses are choosing new systems to implement in the coming months, or considering whether existing systems will be supported by software vendors in future.

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