Features

2008 Technology Issues for Financial Executives Report: Leveraging Quality Data Is Top IT Concern

The information technology needs of chief financial officers (CFOs) echo the same themes expressed for the past several years — the need to leverage analytical information to monitor and improve business performance and drive shareholder value. With each passing year, the performance expectations of stakeholders continue to rise.

For most companies, the easy improvements have already been realized. Executives are increasingly being driven to use information to improve business performance — how can we better understand our markets, our channels, our existing and potential customers, our suppliers? While it is likely true that “best” normally wins — best marketing, best service, best product, best reliability, best price — when companies understand what customers value and provide it to them, there is another “best” that is growing in importance. Best information, a.k.a. intelligence, enables companies to make “bests” better. One of the major Achilles heels limiting better intelligence and analytical information is high-quality data.

“Improving data quality/information integrity” retained its position as the most pervasive critical technology concern among CFOs, with about 42 percent of respondents considering it a critical technology issue, according to the tenth annual Technology Issues for Financial Executives survey, conducted by CSC in collaboration with Financial Executives Research Foundation — the research affiliate of Financial Executives International (FEI) — and FEI’s Committee on Finance & Information Technology.

“High-quality data is a precondition to any reliable reporting and analysis,” says Jerry Boltin, a senior partner in CSC’s Global Business Solutions and Services Group. “To use a manufacturing analogy, you must start with high-quality raw materials (data quality) and properly convert it at each stage to achieve high-quality information (information integrity). Developing and maintaining high-quality data and information is as much determined by the business community and its discipline, as it is by technology.”

Nearly 70 percent of respondents, an increase of eight percentage points from last year, indicated that information integrity was negatively impacting business performance to some degree.

“Information integrity is a fundamental underpinning of effective and efficient business operations, from routine transaction processing to management reporting to decision support,” says Boltin. “To the extent that information integrity is lacking, it becomes one of the major hidden costs of doing business. The business then pays for the lack of information integrity every day.”

Investing in better information

Planned spending for better analytical and decision support information continued at the same high levels reported last year, indicating on-going significant investments to produce decision-quality information and monitor performance.

Most respondents with analytical spending plans intend to address multiple analytical information needs. However, even with the continued large investments, the percentage of respondents who reported making significant progress with their top information issue slipped from 10 percent last year to seven percent this year. The good news is that most made some progress.

“The market demands for better information are going up year-over-year and, to be competitive in the marketplace, the CFO’s knowledge level of market factors, competitors and customers is going up as well,” Boltin says. “That’s driving year-over-year investments in analytics because what they did last year may not be sufficient for this year and next year. An unending need for more knowledge is driving continued investment in analytical information.”

CFOs are also concerned with “achieving the expected benefits from IT investments” — a new topic on this year’s survey, which ranked second overall, with 34 percent of respondents rating it as a critical issue. The CFO is signing the check and wants comfort that the business — and shareholders — are reaping benefits.

According to the survey report, the trend of modest increases in IT spending should continue in the next year. Like last year, about three in five respondents reported medium returns or better from their IT investments, including about one in 10 who reported high returns. The remainder, about 40 percent, report low, negative or unknown returns.

Revealing strategies in IT
Consistent with previous survey results, all forms of in-sourcing (shared services) and outsourcing are expected to continue to grow, with some areas likely to see substantial increases. Payroll and IT are the most frequent areas to operate in a shared services environment, with 65 percent and 39 percent, respectively, reporting current shared services arrangements.

Like shared services, payroll and IT are also the two areas most frequently operated in an outsourcing arrangement, with 49 percent and 24 percent, respectively, reporting current outsourcing arrangements.

Continuing a trend from the 2007 survey, the direct use of offshore providers of IT services is increasing, but at a relatively modest rate among respondents, and the amount of offshore IT support is still relatively low in absolute terms. Among this year’s respondents, about 81 percent indicated that they were not currently using and had no plans to use offshore IT providers, while four percent indicated they planned to enter into an initial offshore IT relationship of some type.

Information security continues as an area of concern for financial officers, but has slipped from the No. 1 position in the past two years. Only about one in five CFOs is “highly satisfied” with his or her security program. However, three out of four CFOs reported making improvements in security programs in the past year, including about one in five reporting significant improvements.

The survey has been tracking year-over-year change in the total cost of Sarbanes-Oxley compliance, including IT. While slightly under half of this year’s respondents reported a year-over-year decrease in compliance costs — including seven percent who reported a significant decrease — slightly over half reported no change or an increase, including 12 percent reporting a significant increase.

The survey also examined a variety of additional pertinent issues, including financial executives’ views related to financial management, IT strategies, use of technology applications and management of IT, among others.

Results for the 2008 survey reflect the participation of 629 financial officers, who are FEI members. About three in four respondents were in the role of CFO. FEI membership spans all industries, organization sizes and form of ownership. The vast majority of respondents, 83 percent, represented U.S. entities, 15 percent represented Canadian entities and the remaining two percent represented non-North American entities.