Digital Transformation » Systems & Software » FDs and IT – whose role is it anyway?

FDs and IT - whose role is it anyway?

There was a time when qualified accountants could look forward to along and illustrious career in finance. Now they tend to find themselvesburdened with the responsibilities of the company's IT department -something which many are out of their depth with, unqualified in, and alltoo often uninterested in. But, at last, the tide may be turning.

Just about the last thing on people’s minds after they pass their final accountancy exams and move to a plum job in business is the thought that within a short space of time they will be responsible for their new company’s IT strategy. Yet, all too often, this is what happens, and finance professionals soon find themselves struggling with a subject for which they have no real training and, worryingly, no real enthusiasm.

The relationship between finance and IT in any organisation is a tricky one. Just 10-15 years ago the majority of IT systems installed in a company were finance related – accounting packages, financial management software and, perhaps, executive information systems. This has changed. IT now underpins virtually every aspect of the modern business and can make all the difference to an organisation’s competitiveness. Indeed, technology is moving so fast these days that the only thing which can be said with any degree of certainty is that tomorrow will be very different.

Managing IT in the biggest of companies is fortunately not the finance director’s direct responsibility, though they still sign the cheques.

In these large organisations, IT and finance responsibilities are split between their respective directors. And although the FD is more senior, both will usually sit on the board of directors. Further down the scale, however, it is a different story. Most FDs are given responsibility for IT and many struggle with it too. Recent research by Deloitte & Touche found finance directors to be questioning the value of their IT investment.

Gary Simon, director of Deloitte’s management advisory services business, says:

“FDs are more acutely aware that their job is wider than just finance and now encompasses a role as information manager. They have to do more than just be the guardians of numbers and must put them into the context of the business at large.”

The growing complexity of IT has done nothing to make FDs’ lives any easier. Whereas companies would once have bought all their computer equipment from one supplier, they are now buying from several. Systems are increasingly decentralised, using a range of servers, networks, PCs, groupware and other items spread around different offices and locations. All this requires careful management yet the ability to take a wide-angle view of the technology is not a skill many chartered accountants are equipped with.

Arthur Andersen partner Paul Williams puts the blame for this squarely at the door of the accountancy bodies, such as the Institute of Chartered Accountants in England & Wales, for failing to keep their training syllabuses up to date.

“I know from all the research we have done that the one area where accountants feel at sea in their first major job is IT,” adds Williams, also chairman of the institute’s IT faculty. “The professional training just didn’t prepare them adequately – they were expected to be responsible for IT and were basically thrown in at the deep end. I have every sympathy for them because the institute’s training is not geared up for this.”

Dissatisfied institute members forced an extraordinary general meeting on the issue of training and education earlier this year. As a result, Williams believes, changes are afoot.

“It is not enough to give people spreadsheet or word processing skills.

What students really need are the management skills to handle IT. There is still a huge gap between provision and need.”

Software analyst Dennis Keeling says IT directors have in the past failed to deliver what their businesses wanted. As a result, responsibility for IT has passed to the finance function. However, the experiment has not been a success, according to Keeling.

“Allowing IT to provide the answers was fatal,” he believes. “They came up with inflexible solutions and loads of mistakes and now the pendulum is swinging back towards the IT function.”

Keeling has seen plenty of companies where finance directors have surrounded themselves with IT experts, to avoid getting bogged down or confused by the technology.

Looking at the IT industry and the mass of new technologies vendors are selling to an apparently willing customer base, it is easy to see why finance professionals are confused.

Roger Catto, finance director of outsourcing and facilities management company ITnet, explains:

“As the FD of a technology company, my position is somewhat different.

I’ve taught IT skills to student chartered and management accountants for their exams. But it wasn’t very in-depth and there’s usually a long gap between when they take these exams and the time they are given responsibility for IT in their company. It is one thing to be looking after accounting systems, but in one job I was actually put in charge of technical computing because they thought that was my role. I was definitely out of my depth.

“With my business hat on, I think it is the IT industry’s job to give customers more information about the systems it provides. Traditionally FDs seem to have seen it as their responsibility. But the emphasis should be on overall management, not the “techy” bits because they can’t hope to keep up with them,” Catto added.

Just five years ago management thinkers were predicting the advent of “hybrid managers”, qualified accountants working in business who were also IT whizzes. But the academics’ theories just haven’t come to pass.

Deloitte’s Simon came across few finance managers sufficiently au fait with technology to have any meaningful responsibility for it.

“There is a universal shortage of systems accountants,” he says. “It comes back to training – very few people can happily sit on both sides of the fence.”

Birmingham university accounting lecturer Andrew Lymer agrees: “The finance directors I come into contact with are definitely not hybrids. There is still a conventional structure with IT directors on one side and financial directors on the other.”

One exception to the rule is Russell Altendorf, a chartered accountant and IT director at Travelex, the currency exchange company with over 80 branches in the UK. Altendorf said he knew of very few IT directors who were qualified accountants, adding:

“What many people forget is that IT helps us do business, it is not the business itself. We are here to earn money, not to be glamorous about technology. Knowing the technical detail is less relevant than being able to identify the benefit of IT.”

But how much blame should the systems vendors shoulder? Isn’t it guilty of blinding buyers with science? Baffling them with technology when it should instead be focusing on business benefit? Jyoti Banerjee, managing director of research analysts Tate Bramald Consultancy, agrees:

“Around half of all FDs in the u5m-50m turnover market have IT responsibility.

We’ve asked them regularly about their IT awareness and it is pretty poor.

The IT industry is pushing new concepts such as ODBC (open database connectivity), data warehousing and OLAP (online analytical processing) as big issues in finance. Yet 62% of FDs don’t know what ODBC is, 66% haven’t a clue what data warehousing is, and 83% have never heard of OLAP. If they’ve never heard of it, there’s small chance of understanding the technology, let alone managing it successfully.”

Vendors, Banerjee believes, are “no help whatsoever”. Interested solely in selling technology, they are less concerned with what the end-user really knows and more interested in the size of their purchasing budgets.

“FDs looking at new systems want to use the new technology they keep hearing about, but unfortunately they don’t know what it is or how it works,” adds Banerjee.

“I ran seminars at a major trade show in January and asked the audience of senior finance directors to define ‘client/server’. Now this is a tricky one because vendors themselves have about 20 different definitions. But only one-third of the delegates thought they knew what it was. 90%, however, said they knew it was going to be really significant in their organisation – I had to ask them how they knew this if they couldn’t even tell me what exactly client/server was.”

Altendorf concurs. Having just signed off a major corporate IT initiative that was “about 50% over time and budget” the key he believes was explaining the benefits to other board members.

“I have never mentioned client/server in the boardroom,” he explains.

“It is utterly irrelevant. I’d never mention technology in an argument about (our project) because it would fall on stony ground and so it should.

We are only here to deliver the goods.”

Other research among medium-sized companies points to increased integration of IT in the business. This means more work for the FD, according to Garrey Melville, marketing director of software house Walker International, sponsors of the independent study.

“We asked 300 FDs how they thought the IT department might change over the next five years. 57% said it would be integrated and 11% said it would become more decentralised. Altogether it shows there will be a broader, yet tighter relationship between IT and other business units.”

Melville adds: “FDs might not be technologically astute individuals, but they should nevertheless have a good awareness of what IT can do.

Around 40-50% of FDs surveyed have IT reporting in to them and we think this figure is going to grow.”

At the board level, many IT directors have yet to achieve equal billing with the finance director. Although FDs have more wide-ranging responsibilities, residual suspicion of IT among other board directors means IT chiefs face an uphill battle to win recognition from their peers.

“Having an FD in charge of IT is a bad thing. Technology is sophisticated enough now to be able to provide good enough commercially-minded IT directors.

The argument was that they all came from computer science, that they were just ex-programmers. That was the case once, but things have changed.

Boards are not interested in the IT, merely the result and if an IT director can show how they can achieve it, then they should be arguing their case on the board,” observes Attendorf.

However, Geoff Kitt, senior partner with Minerva Consulting and an ex-Big Six consultant, fears technology has already run away from finance directors.

“In the good old days everyone bought a box from IBM and software from one supplier. Now everything is multi-vendor and you can’t rely on wall to wall service and back-up as in the past. It means there has to be more self-awareness and self-reliance among those responsible,” Kitt adds.

Despite the technological complexities, there is evidence of more self-reliance. Analyst Keeling feels the ability to handle external management consultants is now less important in the selection of new systems than in the past. He explains:

“Because financial systems have been around for over 10-15 years, the companies now implementing them are doing so for at least the second time.

This means they are much more sophisticated buyers and they don’t need their hands held during the selection stage. In any case, many of the big-name consultancies are no longer independent and are in partnership with two or more applications vendors.”

“In the past consultants were used almost from the concept stage, through selection and on to implementation. Nowadays few larger organisations use external help in the early part of the process,” Keeling adds.

While Deloitte’s Simon warns: “A lot of FDs are keen to off-load problems by outsourcing them. They don’t seem to realise that their problems do not go away by doing this.”

So the growth of outsourcing, not just in the IT area but within the finance function itself, means finance directors still need the skills to handle external consultants in a number of situations.
Guy Dresser is IT correspondent for Accountancy Age.

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