Technology Issues for Financial Executives - 2007 Annual Report

Technology Issues for Financial Executives 2007 Annual Report Ninth annual joint publication of the Committee on Finance...

Author: Financial Executives Research Foundation

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Technology Issues for Financial Executives 2007 Annual Report Ninth annual joint publication of the Committee on Finance and Information Technology of Financial Executives International, Financial Executives Research Foundation and Computer Sciences Corporation

Table of Contents

Executive Summary

3

1.

Demographics

9

2.

Top Financial Management Issues

10

3.

Information Technology Strategies

16

4.

Technology Applications

27

5.

Managing the IT Function

38

N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

1

July 3, 2007

Dear Colleagues: The Committee on Finance & Information Technology (CFIT) of Financial Executives International (FEI), Financial Executives Research Foundation (FERF) and Computer Sciences Corporation (CSC) are pleased to provide the results of the ninth annual Technology Issues for Financial Executives survey. This report provides a detailed assessment of the information technology (IT) practices, priorities and problems that confront today’s senior financial leaders. Our survey of senior members of Financial Executives International (FEI) is unparalleled among IT studies because it provides the senior financial officer’s perspective on technology. Since FEI membership spans all sectors — both public and private — and organizations of all sizes, it is one of the most comprehensive reports on technology. Among this year’s respondents, 75 percent indicated that they are the most senior financial executive in their organization. In multi-unit organizations, 84 percent indicated that they perform this role for the parent organization. The chief financial officer’s (CFO) perspective is unique in that, more often than not, he or she performs a duel technology role — has technology reporting to him or her and has primary responsibility for ensuring that all expenditures (technology included) are in the best interests of shareholders. Based upon member feedback regarding the previous survey, several changes were made to this year’s survey instrument including elimination or reduction of some topical areas, the addition of new topics, and the expansion of other topics of interest. FERF and CSC have maintained the style of the report introduced by the sixth survey which offers more analysis while providing an at-a-glance review of each question’s responses. Our thanks to CSC and to all of the members who helped make the ninth survey another highly successful effort.

Taylor Hawes Chairman Committee on Finance and Information Technology (CFIT)


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Executive Summary Key Findings This year’s results both reinforce a number of themes and priorities that have been evolving over the past several years and introduce some areas of change. This year’s key findings include:

Information Integrity • “Improving data quality/information integrity,” a new selection choice added to this year’s survey, emerged as the most pervasive critical technology concern with about 58 percent of respondents considering it to be a critical technology issue. “Information security,” which had held the top position for the past two years, slipped to #4 with about 46 percent rating it as critical. Like previous surveys, there was no single technology issue that commanded a majority or even a high percentage of the votes as the most critical technology concern. In fact, no single issue (Aligning business and IT strategy) commanded more than 14 percent of the votes for the most critical technology issue. • Most respondents indicate that the lack of information integrity is negatively impacting operations and performance, and about 70 percent plan initiatives in the next year to improve their information integrity.

Corporate Performance Management (CPM) and IT Spending • Again this year, the need for better and more timely analytical information to assist decision making and monitor performance (often referred to as Corporate Performance Management [CPM]) continues as an acute need, and most (about 61 percent) plan to invest to improve their analytical information environments. • The planned spending levels for better analytical and decision support information is up substantially compared to last year, indicating ongoing significant investments to produce decision-quality information and monitor performance. Even with the continued large investments, only about one in 10 reported making significant progress with their top information issue. • Continuing the pattern of the past several years, IT spending is again expected to increase modestly in the next year, and the financial program/project share of total IT spending is expected to increase somewhat.

Sourcing • A substantial number of new or expanded outsourcing and insourcing (shared services) arrangements are planned for next year. Both outsourcing and shared services continued to receive very good grades from the respondents with these arrangements. • Offshore IT should experience modest growth in the next few years. Offshore IT is starting to close the “satisfaction gap” compared to other forms of outsourcing, as more respondents reported higher satisfaction levels.

Sarbanes-Oxley • Sarbanes-Oxley (SOX) has continued to increase the focus on systems integration and on consolidation and reporting, particularly among large publicly-traded companies. • Twenty-nine percent of publicly-traded companies reported a decrease in the cost of SOX compliance in the past year, while 45 percent reported an increase with the remainder seeing no change.

Systems Integration and ERP • Adopting best of breed applications and developing interfaces is the most common approach to improving functionality and systems integration and has increased its overall lead over the second most common choice by about 5 percentage points. N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

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E X E C U T I V E S U M M A RY

• Most respondents reported highly fragmented, non-integrated financial systems environments (silos of information), indicating that much work yet needs to be done to simplify and standardize. Most seem to have a long journey ahead to get to the state where the only financial systems differences are driven by differing business requirements of the industries in which they operate. • Like last year, about one out of three completed IT projects was considered less than successful by senior management. • Enterprise Resource Planning (ERP) activity continues at about the same pace as reported in the previous survey. About 27 percent have some form of current ERP activity (new implementation in progress, expansion of use to include additional modules, upgrade to a new release), while another 8 percent have new implementations planned in the next year. • On an overall basis, somewhat fewer than half of the ERP implementations are full suite. • Only about one in nine makes no modifications to its ERP system during implementation. Only about one in eight implements new package software releases as they become available from the vendor. • The most common reason for adopting a new release is functionality that is relevant to the respondent’s business.

Demographics Participation in the ninth annual survey produced another excellent turnout — 653 surveys were received — about a 6 percent response rate of the population surveyed. Respondent demographics match the overall make-up of the FEI membership in terms of industry, company size, form of ownership, and location of respondent. Consistent with previous surveys, only the responses of the most senior FEI member in each entity were included in the survey results. FERF and CSC also limited the survey population to those currently serving in financial officer roles.

Top Financial Management Issues “Data quality/information integrity,” a new choice added to this year’s survey, was rated as the most pervasive critical technology issue with about 58 percent of respondents rating it as a critical concern. Data quality/information integrity is fundamental for effective and efficient business operations, from transaction processing to management and external reporting to decision support. Without data quality/information integrity, workers, managers and executives question the information that underpins their work activities. “Information security,” which had held the top spot for the prior two surveys, slipped to the number four position, with 46 percent rating it as a critical technology issue. A relatively new question added to the survey last year adds an interesting perspective to critical technology issues. We asked each respondent to identify the most critical issue from those that they viewed as critical. What we learned is that the top technology issue is quite diverse across respondents. In fact, there is no majority answer or one single answer that stands out from the others in terms of share of respondents. Aligning business and IT strategy was the most frequently cited #1 critical technology issue, but it only received 14 percent of the votes, while a few others received 10 percent or more. This suggests that while there is a fair level of agreement on which issues are critical, there is little agreement on the top issue since it is very organization specific. The top information issues areas cited by CFOs repeated the same themes that have been voiced for the past several years — the need to leverage analytical information to monitor and improve business performance (CPM) and drive shareholder value. Similar to last year, only a small minority, about 10 percent, indicated that they had made substantial progress with their N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

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top information need. The good news is that the majority of CFOs plan to address their analytical information needs. About 61 percent plan to invest in improving their analytical environment, and the level of the planned investments in analytical information is up substantially compared to last year. Although we would expect rather large investments since the areas that they cite are their top areas of need, the size of many of these investments is still quite surprising. As an example, among respondents from organizations with over $5 billion in revenue, the average planned investment is about $23 million, with several planning to spend over $100 million and one planning to spend $200 million. This clearly indicates that CFOs are taking their analytical information need seriously. While commercial off-the-shelf (COTS) software products for CPM have improved substantially over the past several years, there is still room for improvement in some areas. As we have noted in previous reports, “measuring product and customer profitability” has ranked either #1 or #2 each year over the nine-year history of this survey, but it is lower down on the list of planned investment areas. We believe that this is an example of where the current COTS market is not addressing this need very well. CFOs want to avoid custom solutions if at all possible. We believe that when CFOs talk about measuring product and customer profitability, they don’t mean gross profit analysis but rather “economic profit” that includes all of the factors that impact revenue and all of the factors involved in delivering the product/service and in servicing the customer.

Information Technology Strategies As noted in previous reports, it’s very difficult to reach normative conclusions about IT spending. Generally, there is significant variability in IT spending levels within each of the 30 industries included in the survey. In most cases, one standard deviation in spending is a substantially larger percentage than either the mean or the median spending in each industry, making it very difficult to judge what is normal. In any case, the real questions are whether IT is well-managed, what support it is providing to daily business operations, and what return IT spending is yielding, rather than the level of IT spending. Looking forward, IT spending should increase somewhat in the next year, continuing a trend of modest increases in spending. On an overall basis, financially-oriented IT programs/projects will get their share of the increased IT spending, and nearly one in four respondents expects finance to get a greater share of IT spending. While most will maintain or increase overall IT spending levels, about 15 percent plan to reduce spending in the next year. Return on IT investment remains an issue for many. Perceived returns vary substantially across the respondent base. On the positive side of the ledger, about three in five report medium returns or better, suggesting that this group believes their investments are adding to shareholder value. The remainder report low, negative or unknown returns. This outcome is nothing new since it is relatively consistent with earlier surveys. Given the wide variance in the responses regarding return on IT investment, two years ago we added a new question to learn what percentage of IT projects were viewed as successful by members of senior management and how this might vary across entities. Last year, across the respondent base, about 67 percent of the projects were considered successful. A repeat of that question this year produced an identical project success rate, and, interestingly, the success rate was virtually the same across all company sizes. Another surprising outcome continues to be the variability in project success rates. On one extreme, a number of respondents reported project success rates in excess of 90 percent, while a number reported success rates of less than 30 percent. This is probably also a factor behind why “project management” is continually cited as one of the top improvement needs for IT organizations. The level of formal IT planning is up on this survey compared to the previous survey, 42 percent versus 37 percent previously. We suspect that the level of formal planning hasn’t changed but rather that the results reflect differences in the survey population. As we have commented in previous reports, the level of formal planning is surprisingly low given the scale of the IT investments that most entities are making. This may be a partial explanation for the variability in


5


return on IT investment and the project success (and failure) rates discussed earlier. In a new topical area added this year related to IT governance, most, about 56 percent, reported that they have formal governance programs that were largely internally developed. The report card on the impact of governance was only moderately positive. Interestingly, fewer than half of the respondents that have a formal IT planning process review the results with their board of directors. Similar to last year, about half of the respondents consider IT a core competency, implying that the remainder aren’t particularly happy about their IT performance and are open to alternatives such as outsourcing and/or offshore to improve the price/value relationship of IT for their entities. Interestingly, a somewhat larger percentage of CEOs, about 64 percent, consider IT a potential source of competitive advantage, suggesting that many of the entities where IT is critical to developing/sustaining competitive advantage are being limited by the performance of their IT organizations. All forms of outsourcing and insourcing (shared services) are expected to continue to grow, with some areas likely to see substantial increases. As reported previously, payroll and IT are the two most frequently outsourced areas, with 57 percent and 27 percent, respectively, reporting current outsourcing arrangements. Payroll outsourcing dominates among smaller entities, while IT is the most common area among larger entities. IT outsourcing is the area with the most planned outsourcing activity. Overall, about 13 percent of respondents plan to outsource some portion of their IT in the next year, including about 20 percent of the organizations with over $1 billion in revenues. We suspect that one of the drivers of the continued movement toward outsourcing is the consistently high overall ratings that outsourcing has received from those that have done it. Again this year, about 85 percent of respondents rated their outsourcing arrangements as successful. The direct use of offshore providers of IT services continues to increase, 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, only 5 percent indicated that they planned to enter into an initial offshore IT relationship of some type, and among those with existing offshore IT relationships, about one out of three planned to increase their use somewhat, while the remainder planned no changes. About 70 percent of the respondents indicated that they are not using any offshore IT providers. We will continue to track and report on the penetration of offshore IT providers in future surveys. Last year we mentioned the potential “Achilles heal” of offshore IT: lower levels of satisfaction with offshore services compared to traditional IT outsourcing. While it is too early to say definitively that offshore IT performance has improved, this year’s results suggest that this may be the case. While still below traditional IT outsourcing, the proportion of “highly satisfied” increased from about 12 percent last year to about 25 percent this year. Like outsourcing, insourcing (shared services) continues to experience steady adoption rates, with all industries showing new shared services arrangements planned in the next year. The top areas for outsourcing are also the top areas for shared services arrangements. While outsourcing and shared services have similar overall success rates, the “degree of success” is somewhat higher in shared services arrangements. About 49 percent of shared services arrangements are viewed as “highly successful” versus about 38 percent of outsourcing arrangements. Information security continues as an area of significant concern for financial officers, with a growing percentage of internal and external audits evaluating the level of security and the potential risks. Only about one in five CFOs is “highly satisfied” with their security programs, implying that the rest see varying levels of improvement required. This concern is not a surprise when one considers the potential for business interruption and/or the negative market consequences if confidential information is compromised. About one out of 14 respondents, an improvement from last year’s one out of 10, reported a major business interruption as the result of some type of cyber intrusion. N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

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Technology Applications Each year, a growing proportion of respondents report being constrained in their ability to develop or acquire new applications. This year somewhat over half, 52 percent, reported being constrained in their discretionary IT spending. The reasons cited are varied, but what is at the core for most is the impact of continued earnings pressure. The same earnings pressure that causes projects to be deferred or cancelled has caused the hollowing out of internal business and IT resources and has limited the discretionary dollars available for these projects (after required spending on existing infrastructure and applications). Many are faced with the daunting paradox of not being able to afford to make the IT investments necessary to improve business performance, while the performance improvement expectations of shareholders require the investments. Systems integration continues as an important issue for most, with Sarbanes-Oxley adding to the pressure to achieve greater levels of integration. The greater the number of non-integrated applications, the greater the difficulty the organization has in demonstrating and sustaining an acceptable level of control. Among public companies, Sarbanes-Oxley has substantially increased the focus on both systems integration and on consolidation and reporting, particularly among large entities. To date, IT has done little to reduce the cost of compliance. In fact, only a small proportion of respondents experienced any reduction in the cost of compliance over the past year, and one could argue that the cost is going the other way. Among publicly-traded companies, 45 percent reported an increase in the cost of compliance in the past year, while 29 percent reported a decrease, and the remainder reported no change. While systems integration is a pervasive issue, there isn’t a majority approach to addressing the issue. There are three approaches that have substantial followings: “Adopt best-of-breed applications and develop interfaces” has the largest share across almost all company sizes and improved its lead over the other choices in the past year; “Discontinue all disparate systems, implement a single new integrated system” comes in second and sees its share increase somewhat with company size; and “Build new interfaces between existing systems” comes in third and has its greatest appeal among smaller companies. The financial systems environments of most respondents remain highly fragmented, resulting in non-integrated silos of information. In the most extreme cases, some respondents had as many (or more) different financial systems environments as they had business units. In all but a few cases, the number of different financial systems environments couldn’t be explained by the differences in requirements of the number of industries that they served. As indicated earlier, “information integrity,” a new subject area added to this year’s survey, was cited as the most pervasive technology issue. Only about one in five CFOs reported being highly satisfied with their information integrity. They feel the pain on an ongoing basis in the finance organization working to produce reliable results and believe that the lack of information integrity is a drag on the business, negatively impacting performance and increasing cost levels. On the positive side of the ledger, about 70 percent of respondents plan to undertake programs in the next year that are focused on improving their information integrity. ERP activity continues at about the same pace as reported in our previous survey. About 20 percent of the respondents have either a new implementation planned in the next year or a new implementation in progress, while about 15 percent are either upgrading to a new release or expanding their ERP use to include additional modules. The proportion of full suite implementations is down somewhat among this year’s respondents to about 47 percent. About half of the completed ERP projects experienced schedule and cost overruns, but about three out of four were still considered successful. Modifications to the ERP system continue to be an issue, with nearly half of the respondents reporting either moderate or significant modifications (and only one out of nine making no modifications). Few adopt new releases of package software as it becomes available from the vendor. Most adopt new releases when there is relevant new functionality available in the release.


7


Managing the IT Function Little has changed here from our previous report. The CFO continues to be the most common reporting relationship for the CIO in organizations up to about $1 billion in revenue. In the $1 to $5 billion size range, the CEO and CFO are about equally likely to have IT, while in organizations larger than $5 billion, the CEO is the more likely reporting relationship. Repeating an outcome that we saw for the first time last year, a portion of the CFOs are suggesting changes to the IT reporting relationships, with a fairly sizeable group of CFOs, about 7 percent of the survey population, desiring to take on that responsibility. When a new CIO is needed, smaller companies are much more likely to go outside to find the replacement (about 60 – 65 percent come from outside), while the largest companies, those with over $5 billion in revenue, go outside only about half of the time. Little has changed related to the use of chargebacks. Chargebacks become more likely as organization size increases (probably in part because the shared costs of IT span more than one reporting entity), and the sophistication of the methods also increases with organization size. Where chargebacks are used, about a third view the impact on technology investment decisions and technology adoption as somewhat positive, but most believe chargebacks are neutral in terms of their impact. Most financial officers are moderately positive about their IT organization’s ability to keep abreast of the latest technology developments. However, consistent with previous surveys, these same financial officers also cite fundamentals as the areas of greatest IT weakness. The most frequently cited IT weaknesses were project management, understanding the relationship between business and technology, and communication with the business community. These areas suggest a gap between technology knowledge and the ability to execute.


8

1. Demographics The Ninth Annual Survey produced another excellent turnout, with 653 financial officers participating. This is the third largest turnout in the nine-year history of the survey. The survey was conducted from January through March 2007 so that the highlights were available for presentation and discussion at FEI Summit. Participation again mirrored the membership of FEI. All company sizes and industry sectors were represented in the survey. Among respondents, 84 percent were responding for the parent organization (corporate) and 4 percent were responding for a group or sector within a parent entity, while 12 percent were responding for a division, wholly owned subsidiary, or operating unit of a parent entity. Seventy-five percent of the respondents were the chief financial officer or equivalent for their entity. The vast majority of respondents, 83 percent, represented U.S. entities, while nearly all of the others, about 15 percent, represented Canadian entities.

Industry and Company Size Table* Less than $100M

Aerospace and Defense Chemicals Consumer Goods Mfg. – Durable Consumer Goods Mfg. – Non-Durable Distribution Engineering and Construction Financial Services – Banking Financial Services – Insurance Financial Services – Other Government Healthcare – Payor Healthcare – Pharmaceuticals Healthcare – Provider Higher Education High-Tech Industrial Mfg. – Discrete Industrial Mfg. – Process Leisure and Hospitality Media and Entertainment Mining and Metals Oil and Gas Other Nonprofit (Non-Governmental) Professional Services Publishing and Printing Real Estate Retail Telecommunications Transportation Services Utilities Wholesale Other Grand Total

2 1 8 6 3 6 8 6 13 0 2 5 8 4 29 27 3 1 4 2 5 18 26 8 2 2 5 3 1 3 36 247 38.2%

$100M – $499M

$500M – $999M

$1B – $5B

Greater than $5B

4 1 6 12 9 10 7 7 8 1 0 4 5 5 5 15 11 3 1 2 5 5 5 1 7 15 2 4 6 10 13 189 29.3%

1 1 1 3 3 3 7 3 2 1 0 1 0 0 5 7 7 1 2 2 4 0 1 0 2 5 0 0 0 2 6 70 10.8%

5 1 3 3 1 6 4 7 6

0 1 0 1 2 1 3 3 0 1 0 1 4 0 4 1 2 0 1 0 1 0 0 0 0 3 3 2 2 1 7 44 6.8%

1 1 1 3 7 5 2 3 5 4 0 2 1 3 7 4 0 4 2 5 96 14.9%

Grand Total

1.9% 12 0.8% 5 2.8% 18 3.9% 25 2.8% 18 4.0% 26 4.5% 29 4.0% 26 4.5% 29 0.5% 3 0.5% 3 1.9% 12 2.8% 18 1.4% 9 7.1% 46 8.8% 57 4.3% 28 7 1.1% 11 1.7% 11 1.7% 19 2.9% 3.6% 23 34 5.3% 10 1.5% 14 2.2% 32 5.0% 14 2.2% 9 1.4% 13 2.0% 18 2.8% 67 10.4% 646 100.0% 100.0%

*Excludes seven respondents who omitted either industry or company size data Note: Percentages are independently rounded to one decimal point

Form of Ownership – Count and Percentage of Size Range* Size Size Less than $100M

Public Public

Private Private

Other Other

41 41 – 16.7% 16.7%

181 181 – 73.6%

2424 – 9.7% 9.7%

$100M –– $499M $499M

64 64 – 34.0% 34.0%

103 103 – 54.8%

21 21 – 11.2%

$500M –– $999M $999M

39 39 – 55.7% 55.7%

24 24 – 34.3% 34.3%

77 – 10.0% 10.0%

$1B –– $5B $5B

65 65 – 67.7% 67.7%

22 22 – 22.9% 22.9%

99 – 9.4% 9.4%

Greater than $5B

36 36 – 81.8% 81.8%

11 – 2.3% 2.3%

77 – 15.9% 15.9%


*Excludes seven respondents who omitted either industry or company size data Note: Percentages are independently rounded to one decimal point

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2. Top Financial Management Issues In Section 2., we examine the financial management implications of information technology (IT) from both an information and a technical perspective. Questions 2.1.a and 2.1.b attempt to focus on technology, the “T” in IT, putting aside information content, while questions 2.2 through 2.6 focus on the “I,” examining information issues. Finally, questions 2.7 through 2.10 focus on eXtensible Business Reporting Language (XBRL).

Question 2.1a. Please indicate how important you believe each of these technology issues is to your organization. Data quality/information integrity, a new choice added this year, was the most broadly shared critical technology issue. Rated “Critical”

Response Commentary: For the ninth annual survey, we added a new choice, “Improving data quality/information integrity,” to the list of technology issues to evaluate on a scale from “not a concern” to “critical,” and it proved to be the most broadly shared critical technology concern. In many respects, this choice is not a surprise since high-quality data is a precondition to any reliable reporting and analysis. Among larger entities, those with over $1 billion in revenues, “Aligning business and IT strategy” shared the top spot with Data Quality/Information Integrity. We suspect that this is a reflection of the increased difficulty of achieving and maintaining alignment in very large organizations. “Information Security,” the #1 selection in the prior two surveys, slipped to the #4 position. With few exceptions, larger companies were more likely to consider each area as critical.

Improving data quality/ information integrity Prioritizing technology investments Aligning business and IT strategy Identifying the appropriate level of security for information and electronic communications Identifying how IT can improve or influence business process Achieving the expected benefits from IT investments Identifying the appropriate level of technology investment Establishing and maintaining effective dialogue between IT and users Using technology to drive business change Upgrading or replacing legacy systems Developing disaster recovery capabilities Increasing the usage of common systems and shared technology Evaluating or measuring the return on technology investments Educating senior management on the value of technology Using technology to improve the system of internal controls Training staff in new technologies and upgrades Developing/enforcing an effective IT governance framework Managing the application/ technology portfolio

Overall > $1 Billion

Deploying wireless technologies Evaluating the adoption/use of XBRL

0%

10%

20%

30%

40%

50%

60%

Percentage of Respondents


10

70%

2.

TO P F I N A N C I A L MANAGEMENT IS S U ES

Question 2.1b. From the preceding list, which is your most critical concern? The “most” critical technology issue varies significantly across financial officers.

Aligning business and IT strategy Upgrading or replacing legacy systems Identifying how IT can improve or influence business processes Prioritizing technology investments Using technology to drive business change Improving data quality/information integrity Identifying the appropriate level of technology investment Achieving the expected benefits from IT investments Identifying the appropriate level of security for information and electronic communications Establishing and maintaining effective dialogue between IT and users Evaluating or measuring the return on technology investments Increasing the usage of common systems and shared technology Developing disaster recovery capabilities Educating senior management on the value of technology Using technology to improve the system of internal controls Training staff in new technologies and upgrades Developing/enforcing an effective IT governance framework Managing the application/ technology portfolio

Overall > $1 Billion

Deploying wireless technologies Evaluating the adoption/use of XBRL 0%

3%

6%

9%

12%

15%

18%

Percent Rated #1 Critical Technology Issue

Response Commentary: Consistent with previous surveys, the #1 critical technology issue was quite varied, with the top two choices “Aligning business and IT strategy” and “Upgrading or replacing legacy systems” each only receiving about 14 percent of the top place votes across all respondents. Like “Information Security” in prior years, “Improving data quality/information integrity” placed well down on the list of choices selected as the #1 critical issue. Again, this should not be a surprise since each organization’s circumstances are somewhat different.

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2.

TO P F I N A N C I AL MANAGEMENT IS S U ES

Question 2.2. Please rank the top three areas in which you believe your organization is most constrained by a lack of appropriate enabling technology solutions. Analytical information, commonly referred to as either Business Intelligence or Corporate Performance Management (CPM), is the area of greatest need. Measuring product and consumer profitability Facilitating analysis and decision making (business intelligence) Helping to position the company for profitable growth Reducing enterprise operating costs Ongoing monitoring of business performance (management dashboard) Creating/maintaining an enterprise-wide view of business relationships: customers, products, vendors Integrating strategy with daily business operations and rewards (balanced scorecard) Creating an effective environment for sharing relevant information (knowledge management) Integrating the financial function with the overall enterprise Managing business risk

#1 need

Managing integration of systems following mergers, acquisitions or divestitures

#2 need

Keeping large-scale business transformation projects on track #3 need Budgeting and projecting future earnings and financial position Improving consolidation and reporting Creating and administering effective internal controls Shortening the financial closing cycle Complying with the requirements of Section 404 of the Sarbanes-Oxley Act Complying with the requirements of Section 409 of the Sarbanes-Oxley Act Maintaining effective contact with the investment community 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Ranking Based on #1 Need

Response Commentary: As the saying goes, “The more things change, the more they stay the same”. The ongoing difficulty that financial executives experience in developing and/or accessing/sharing relevant information for analysis and decision making is clearly evident in their top choices, which have remained largely unchanged since the original survey nine years ago. While most respondents have made and are continuing to make substantial investments to improve their analytical environments, analytical information needs are also steadily growing to keep pace with an increasingly complex and competitive marketplace.


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2.


Question 2.3.

How much progress has your organization made in the past year addressing the #1 issue?

Only about one in 10 made substantial progress with their #1 information issue. Response Commentary: The good news is that about two out of three respondents reported making progress against their #1 information need. The bad news is that very few reported making significant progress. We’ve seen similar report cards each of the past few years in spite of the substantial investments being made. As we have noted in the past, CSC believes that the top issues are relatively complex, not lending themselves to quick, permanent solutions and that the analytical information requirements continue to increase.

Substantial progress Moderate progress No change Moderate deterioration Substantial deterioration

0%

10%

20%

30%

40%

50%

60%


Question 2.4. Does your organization plan to upgrade its analytical and decision support capabilities in the next year? Most respondents plan to invest. Response Commentary:

No 39%

This is the third consecutive year that 60 percent or more of the respondents indicated plans to invest to improve their analytical information environment. This suggests a pattern of ongoing investments just to maintain parity with business information needs. What is a differentiating capability today soon becomes “table stakes” as competitors match the capability. As analytical information needs increase, more sophisticated solutions are required to keep pace and/or differentiate.

Yes 61%


Question 2.5. If you will be upgrading analytical and decision support capabilities in the next year, please describe your plans. Analytical investments typically address information needs in multiple areas. Response Commentary: The top analytical investment areas represent broadly shared, ongoing information needs and are virtually unchanged from the previous survey. Collectively, the top four areas (plus consolidation and reporting) are often referred to as Corporate Performance Management. With the exception of “Data Warehouse,” the ranking of investment areas is similar across all company sizes. Not surprisingly, the data warehouse investment plans grow with entity size.

Management Dashboard Planning/Budgeting/Forecasting Performance Measurement/Scorecard Customer and Product Profitability Data Warehouse Online Analytical Processing (OLAP) Statistical Analysis Modeling Other 0%

10%

20%

30%

40%

50%



13

60%

2.


Question 2.6. If you are upgrading analytical and decision support capabilities, what is the planned expenditure? Planned expenditures are up compared to last year but vary broadly across respondents. Response Commentary: The average level of planned investment is up substantially on an overall basis, particularly among larger entities. Spending plans vary broadly across the respondents from those that may be making a small investment in a desktop analytical product to those making a major investment to create or significantly upgrade their overall analytical information environment. At the extremes, the smallest planned investment is $10 thousand, while the largest is $200 million.

Size

Minimum

Average

Maximum

Less than $100M

$10

$302

$5,000

$100M – $499M

$20

$673

$4,000

$500M – $999M

$50

$3,587

$50,000

$1B – $5B

$50

$5,073

$100,000

$100

$22,930

$200,000

Greater than $5B

Dollars in Thousands

Question 2.7. What is your organization’s level of knowledge of XBRL/Interactive data and its potential implications and benefits? XBRL knowledge levels continue to remain very low and are virtually unchanged from last year. Response Commentary: Little has changed from the previous survey regarding XBRL; the distribution of responses is virtually identical. In fact, financial executives at publicly-traded companies were only slightly more knowledgeable than those at private companies. As noted last year, we must conclude that financial executives do not view XBRL as a pressing issue/need at the present time (without a regulatory mandate). Also see Question 2.1a which indicates that XBRL placed last on the financial executives list of critical technology issues.

Question 2.8.

1 Highly knowledgeable

Public Private

2

3 4 5 No knowledge 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


In what timeframe are you planning to implement an XBRL/Interactive data solution?

The vast majority see no urgency to move forward with XBRL. Response Commentary: SEC encouragement seems to be having little impact on plans to adopt XBRL. Among publicly-traded companies, only about 3 percent have implemented XBRL and another 5 percent are in the process of implementing, while nearly 80 percent have no implementation plans.

No current plans Planned within two years Planned within one year

Public

Planned within six months

Private

Implementation in progress Already implemented 0%

20%

40%

60%

80%

100%

Percentage of Respondents N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

14

2.


Question 2.9. Is your organization planning to participate in the Securities and Exchange Commission’s voluntary XBRL/Interactive data filing system in light of the SEC’s increased emphasis? Relatively few public companies plan to participate in the program. Response Commentary: Since the form of ownership was added to this year’s survey, we are able to refine our understanding of respondents’ intent to participate in the SEC’s program. Among publicly-traded companies, only 8 percent plan to participate (only 3 percent of all respondents, which is identical to last year before narrowing to public only) Like last year, the overwhelming majority of answers reflect a combination of lack of urgency, knowledge, and/or perceived benefits of participating. The responses to the following question highlight the low level of current interest.

Publicly Traded

Not applicable 15.1% Plan to participate 7.9%

Not familiar with the program 30.6%

No plans to participate 46.4%


Question 2.10. If you have no current plans, what are the major barriers to your organization in implementing XBRL/Interactive data? Only a few have XBRL as a top-of-mind priority. Lack of need

Response Commentary: Like last year, the answers to this question suggest one overriding theme — lack of a compelling need, and with all of the other issues that are on the financial officer’s plate, XBRL is just not a priority yet. Without some form of mandate or clear business benefits, it seems that any form of mass adoption is well into the future.

Lack of regulatory mandate Lack of knowledge Lack of available resources #1 barrier

Lack of funding

#2 barrier #3 barrier

Lack of technology 0%

10% 20% 30% 40% 50% 60% 70% 80% 90%



15

3. Information Technology Strategies Question 3.1.

What is your company’s IT spending as a percentage of revenue?

Spending varies significantly both across and within industries. Industry Aerospace and Defense Chemicals Consumer Goods Mfg.

-

Durable

Consumer Goods Mfg. - Non-Durable Distribution Engineering and Construction Financial Services - Banking Financial Services - Insurance Financial Services - Other Government Healthcare - Payor Healthcare - Pharmaceuticals Healthcare - Provider Higher Education High-Tech Leisure and Hospitality Industrial Mfg. - Discrete Industrial Mfg. - Process Media and Entertainment Mining and Metals Oil and Gas Other Nonprofit (Non-Governmental) Professional Services Publishing and Printing Real Estate Retail Telecommunications Std Deviation

Transportation Services

Mean

Utilities

Median

Wholesale 0%

2%

4%

6%

8%

10%

12%

14%

IT Spending as a Percentage of Revenue

Response Commentary: As we have noted in previous reports, there is wide variance in IT spending as a percentage of revenue both within and across the different industries reported. In almost all industries, one standard deviation in spending was larger than either the mean or median spending for that industry. With such a wide variation in spending, it’s difficult to reach normative judgments. At the end of the day, it’s not about spending but rather business benefits derived from the IT spending. (See Section 1, Demographics, for the number of respondents by industry.) N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

16

3.

I N F O R M AT I O N TEC HNO LO GY S TRATEGIES

Question 3.2a. How has the relative level of IT spending changed over the past three years? Overall, IT spending has increased somewhat. Response Commentary:

Somewhat higher (increased by 10% to 30%) 28.4%

In aggregate, IT spending appears to be up somewhat over the past three years. Forty-three percent of respondents report higher IT spending for that period, while only 13 percent report a decline. Last year’s survey produced a similar result for that three-year period.

About the same (+/- 10%) 44.4%

Significantly higher (increased by 30% or more) 14.1% Significantly lower (reduced by 30% or more) 3.1% Somewhat lower (reduced by 10% to 30%) 10.0%


Question 3.2a. (continued) How do you expect IT spending to change in the next year? A modest increase in IT spending should occur in the next year. Response Commentary: The outlook for IT spending for next year is a continuation of the trend of the past four years. Forty-three percent of respondents expect higher levels of IT spending, while only about 9 percent of respondents expect IT spending levels to decrease.

Somewhat higher (increased by 10% to 30%) 34.6%

About the same (+/- 10%) 48.1%

Significantly higher (increased by 30% or more) 8.5% Significantly lower (reduced by 30% or more) 1.6% Somewhat lower (reduced by 10% to 30%) 7.1%


Question 3.2b. How has the relative level of IT spending on financial programs/projects changed over the past three years? For most, the change has been in line with the change in overall IT spending. Larger increases than the overall change in IT spending 18.8%

Response Commentary: Over two-thirds of the respondents indicated that the change in spending on financially-oriented IT programs/projects was consistent with the change in IT spending for their organization. Among those that reported larger changes in financially-oriented IT programs/projects, more reported a relative increase than those that reported a decrease.

Change consistent with the change in overall IT spending 69.3%

Larger reductions than the overall change in IT spending 11.9%



17

3.


Question 3.2b. (continued) How do you expect it to change in the next year? For most, the expected change is in line with the change in overall IT spending. Larger increases than the overall change in IT spending 23.3%

Response Commentary: Like the historical spending patterns, for most respondents, the planned change in spending on financially-oriented IT programs/projects is expected to be consistent with the change in overall planned IT spending levels. For those that expect disproportionate changes (about a third of the respondents), somewhat over twice as many expect larger increases than those that expect larger decreases.

Change consistent with the change in overall IT spending 67.1%

Larger reductions than the overall change in IT spending 9.5%


Question 3.3.

What overall return is your organization obtaining on its technology investments?

About 60 percent of respondents are achieving acceptable returns. Response Commentary: This year’s results are very similar to those reported in prior periods. Overall, only 11 percent of respondents believe that they are obtaining a high return from their IT investments, while another 49 percent believe they are obtaining a reasonable return. On the other hand, 40 percent believe they are obtaining a low, negative or unknown return from IT.

High return Medium return Low return Negative return Unknown 0%

10%

20%

30%

40%

50%


Question 3.4.

Does the organization for which you are responding have a written IT strategic plan?

The level of formal IT planning continues to remain relatively low. Company Revenues

Response Commentary: Most respondents still do not have a written strategic IT plan. Only among entities with over a billion in annual revenues do we find the majority having a formal IT plan. While planning doesn’t ensure good IT investments, it certainly increases the likelihood. This level of planning may be a partial explanation for the significant differences in IT returns cited in Question 3.3.

Less than $100M $100M – $499M $500M – $999M $1B – $5B Greater than $5B 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percentage with Written IT Plan N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

18

3.


Question 3.5a. How well aligned is this plan with your organization’s overall corporate strategy? Most respondents report relatively good alignment of IT with business strategy. 60%

As noted in the commentary to the previous question, most respondents still do not have a written IT strategic plan. Of those who do have a plan, over two thirds report good or full alignment of the IT strategic plan with corporate strategy.


Response Commentary: 50% 40% 30% 20% 10% 0% 1 (Not at all)

2

3

4

5 (Fully aligned)

Question 3.5b. Does the Board of Directors review and approve the IT strategic plan? Only about one in three reviews their IT plan with the Board.

Overall

> $1 Billion

Response Commentary: We find this outcome quite surprising. Among those that do go through a formal IT planning process, only about a third review the results of the IT planning process with their Board. Looking at this from the opposite perspective, it’s equally surprising that the Board doesn’t insist on a formal planning process and that the Board be apprised of the plan and progress against the plan.

Yes 33.6%

NA 10.7%

Yes 34.3%

NA 14.2%

No 51.5%

No 55.7%


Question 3.6a. Does your organization have a formal IT governance framework? IT strategic planning and IT governance go together hand in hand. Overall

> $1 Billion

Response Commentary: There is almost a direct correlation between formal IT planning and IT governance. In almost all cases, respondents either have both or have neither.

No 43.5%

No 25.0% Yes 75.0%

Yes 56.5%



19

3.


Question 3.6b. If yes, how was the governance framework developed? Governance frameworks tend to be internally developed. Response Commentary: Irrespective of the size of the entity, the vast majority of IT governance frameworks were internally developed with limited incorporation of external standards.

Based upon external standard 14.4%

Internally developed 85.6%


Question 3.6c. How successful has the governance framework been in guiding IT decisions? Governance has had a modestly positive impact on IT decisions. Response Commentary: While nearly 60 percent reported a positive impact from governance, only about one in eight reported a highly positive impact. Another substantial group, about a third, view governance as having neither a positive nor negative impact.

Highly successful Moderately successful Neutral Moderately disappointing Highly disappointing No formal governance framework 0%

10%

20%

30%

40%

50%


Question 3.7.

Is IT considered a core competency in your organization?

Respondents are almost equally divided on whether IT is a core competency of their organization. Response Commentary: Overall, there is almost an even split between organizations that consider IT a core competency and those that do not. Compared to last year’s responses, the data shows little change in the proportion of organizations that consider IT a core competency. The nearly 50/50 relationship held for all but the largest of entities, where there was a slight decrease to about 44 percent. This relationship explains in part the continued expansion of IT outsourcing.


No 52%

Yes 48%


20

3.


Question 3.8.

Does your organization’s CEO consider technology a source of competitive advantage?

When IT is a source of competitive advantage, it’s much more likely to be a core competency. Response Commentary:

100%


While most CEOs (64 percent) consider IT a source of competitive advantage, this doesn’t directly translate to IT being considered a core competency. Among organizations where the CEO considers IT to be a core competency, somewhat over 60 percent consider it to be a source of competitive advantage. On the other hand, among organizations where the CEO does not consider IT to be a core competency, only about 20 percent consider it to be a source of competitive advantage. This result is very similar to last year.

Not a competitive advantage

90%

Competitive advantage

80% 70% 60% 50% 40% 30% 20% 10% 0%

Core competency

Not a core competency

Question 3.9a. Has your organization already outsourced any activities or processes, or does it plan to do so within the next year? IT should see a substantial increase in outsourcing activity. Response Commentary: Payroll and IT activities continue to be the most commonly outsourced activities at 57 percent and 27 percent, respectively. IT outsourcing is the area of greatest planned activity in the next year, with about 13 percent of all respondents reporting outsourcing plans (including slightly over 20 percent of entities with over $1 billion in revenues).

Payroll Information Technology Production Logistics Human Resources Research and Development Customer Service Sales and Marketing Accounting Purchasing

Outsourcing already Outsourcing planned

0% 10% 20% 30% 40% Percentage of Respondents

50%

60%

70%

Question 3.9b. For each area that is currently outsourced, how successful has the arrangement been? Outsourcing continues to be rated successful. Response Commentary: Like previous years, the report card on outsourcing produced very good grades. About 85 percent of all respondents that have outsourced one or more areas consider their arrangements to be successful. Of all of the outsourced areas, payroll gets the highest marks, with 93 percent rating it successful, while outsourcing accounting received the lowest marks, with 73 percent rating it successful. This suggests that companies have identified the areas to outsource well and that the providers are generally performing to expectations.

Highly successful Moderately successful Moderately disappointing Highly disappointing No opinion


0%

10%

20%

30%

40%

50%

Percentage of Respondents that Outsource

21

3.


Question 3.9c. How important are the following criteria to your organization when it evaluates what activities to outsource? Not a core competency is the most frequently cited reason. The activity is not a core competency of the organization

Response Commentary: Competence and cost factors, together representing somewhat over 70 percent of responses, are the main drivers of outsourcing an activity. Companies outsource processes and activities that cannot be done well in-house and/or those that when done in-house have costs that are too high. A small percentage of respondents that outsource cite a variety of other reasons as primary.

The cost to perform the activity is too high Enable us to better respond to changing business needs and/or respond to opportunities Activity takes up too much valuable management time We anticipate having to invest significantly in the activity in the future to maintain its in-house viability Service levels are low and/or inconsistent Change from a fixed to a variable cost Improve overall control environment Other

0%

20%

10%

30%

40%

50%

Percentage of Respondents Citing this as the Primary Outsourcing Criteria

Question 3.9d. How much, if any, of your total IT resource is provided though outsourcing arrangements? Surprisingly, over 90 percent of respondents report some use of IT outsourcing. 25% to 50% 10.6% 50% to 75% 3.0%

Response Commentary: While over 90 percent of respondents report outsourcing some portion of IT, only slightly more than 20 percent have outsourced a quarter or more of their IT resource (overall average penetration of about 20 percent with outsource providers). Interestingly, the smallest and largest of respondents indicate that they have outsourced the greatest proportion of their IT, with about 26 percent and 27 percent, respectively.

75% to 100% 8.0% Not using outsourcing 8.0% 1% to 25% 70%

Percentage of Respondents Within Each Percent Usage Range

Question 3.10a. Of the IT resource/support that is provided though outsourcing, what portion is provided by offshore arrangements? While offshore continues to represent a small source of total IT resources, its use increases with the size of the entity. Response Commentary: About half of the respondents report some use of offshore providers for IT. Among those that are using offshore, the offshore content of outsourcing is still fairly small, about 14 percent, but growing steadily. As would be expected, the use of offshore providers is much more prevalent (as a percentage of total IT support) among larger entities.

Size

Outsourced

Offshore/ Outsource Ratio

Less than $100M

25.6

9.6

$100M – $499M

15.9

10.5

$500M – $999M

11.4

14.0

$1B – $5B

16.5

21.1

Greater than $5B

27.4

31.5

Note: Only includes current users of outsourcing services


Mean %

22

3.


Question 3.10b. How long have you been using offshore IT providers? Among this year’s respondents, the offshore relationships are generally fairly recent. Response Commentary: Each year, this question seems to produce somewhat paradoxical responses. Only about 13 percent of respondents have been using offshore for two or more years, similar to both last year’s result and the previous year’s. Either the respondents each year are a different sample of FEI membership or the distribution of the length of the offshore relationship should be changing. It also suggests a level of offshore usage which is substantially different than Question 3.10a.

0-1 years

1-2 years

2 or more years

Not using offshore providers 0%

40%

20%

60%

80%

100%


Question 3.10c. What was the primary reason for going to offshore providers for IT? Cost reduction continues to be the primary fuel. Reduce costs

Response Commentary: The overwhelming reason for going to offshore providers for IT is cost reduction, cited by 70 percent of those with offshore arrangements.

Reduce burden on (or free up) current staff Access to otherwise unavailable skills Shorten delivery times Extend the hours of support Improve quality Other 0%

40%

20%

60%

80%


Question 3.10d. How satisfied are you with offshore IT providers? Most are satisfied with their offshore decisions but less satisfied than with other forms of outsourcing. Response Commentary: This year’s results reflect a substantial improvement in the percentage of respondents that are highly satisfied with their offshore providers. While there is still a gap in satisfaction levels between onshore and offshore, the gap is noticeably smaller.

Highly satisfied Somewhat satisfied Neutral Somewhat dissatisfied Highly dissatisfied

2006 2007

Too soon to judge No opinion 0%

10%

20%

30%

40%

50%

60%


23

3.


Question 3.10e. How do you expect your use of offshore IT providers to change over the next year? Respondents indicate a modest increase in their planned use of offshore in the next year. Plan initial use of offshore 4.6%

Response Commentary: About 5 percent expect to enter into a new relationship, while about 8 percent plan to increase their usage of offshore.

Not using offshore 71.0%

Plan to increase use 8.3% Remain the same 13.6%

Decrease use Percentage of Respondents by 2.5% Planned Increase in Usage

Question 3.11a. Do you currently use — or plan to use — a shared services center for transactional accounting or other services? Payroll The use of shared services continues to increase. Response Commentary: The most commonly implemented shared services continue to be “internal processes” — processes providing services to individuals/ other functions inside the organization. These processes include payroll, travel, and IT. These processes also coincide with the most commonly outsourced activities (see Question 3.9a).

Travel IT Accounts Payable Accounts Receivable Overall

Fixed Assets

Currently use

Human Resources

Plan to use

Credit and Collections General Ledger

>$1 Billion

Purchasing

Currently use

Logistics

Plan to use

Customer Service Other 0%

10%

20%

30%

40%

50%

60%


Question 3.11b. For each area currently in a shared services arrangement, how successful has the operation been? Shared services continue to be highly successful. Highly successful

Response Commentary: Shared services, the “insourcing” or centralization of common, repetitive processes, technology and personnel, continues to be overwhelmingly successful, with about 90 percent of respondents reporting either highly successful or moderately successful results. Similar to last year, the percentage of respondents reporting “highly successful” results remained at about 50 percent.

Moderately successful Moderately disappointing Overall IT Payroll

Highly disappointing No opinion 0%

10%

20%

30%

40%

50%

60%

70%



24

3.


Question 3.12a. Is information security an issue that is addressed in your internal and external audits? Information security is becoming a normal component of most audits. Response Commentary: Information security is formally addressed by 87 percent of respondent organizations as a part of either their internal or external audit processes or both. In fact, information security is included in almost all (over 97 percent) of the audits of entities with $500 million or more in revenues. It is only among smaller entities that information security may not be included in the audit, particularly those with less than $100 million in revenues, where about 76 percent report including security as part of the audits.

External audits only 18.8%

Internal audits only 8.1%

Not currently addressed 13.0% Both internal and external audits 60.2%


Question 3.12b. Describe your personal level of involvement in information security. Information security continues to occupy a prominent position on the financial executives’ radar screen. Response Commentary: Incidents involving the compromising and/or theft of customer or employee information plus the growing dependence on IT have made the financial officer much more concerned with, and now involved in, the planning, deployment and management of information security activities. Seventy percent of respondents report “significant or moderate” involvement in information security, a 2 percentage point increase over last year, and the attention to security transcends entity size and industry, with all having similar levels of attention.

Minimal 24.5%

Moderate 42.1%

No involvement 5.3%

Significant 28.2%


Question 3.12c. How satisfied are you with your current level of information security? Only about one in five is highly satisfied with their current level of information security. Response Commentary: Interestingly, those industries where the customer is the consumer (and the risk therefore greater) tend to have higher overall satisfaction levels, implying that they have made and continue to make the necessary investments to protect their information. Although substantial work is being done to meet the information security challenges, most respondents recognize that much more must be done to reach comfortable levels. Compared to the previous survey, there has been little change in overall satisfaction levels.

Highly satisfied Somewhat satisfied Neutral Somewhat dissatisfied Highly dissatisfied No opinion


0%

10%

20%

30%

40%

50%

60%


25

3.


Question 3.12d. The scope of IT security in my organization includes: For most, information security has multiple core components. IT disaster recovery

Response Commentary:

Information privacy

The scope of IT security continues to widen beyond the traditional cyber-security area to include operational and regulatory environments. Also, as entity size increases, so does the scope and scale of the ongoing security programs, particularly in consumer-based industries.

Physical security Business continuity planning Internal audit Fraud investigation Other 0%

40%

20%

60%

100%

80%


Question 3.12e. How many cyber incidents did your organization experience in the past 12 months? The number of incidents has declined somewhat. Number of Incidents

Response Commentary: The number of cyber incidents reported by this year’s respondents dropped compared to those reported last year. Only about half of the respondents said that incidents are tracked and recorded. Among those that record incidents, about one out of 14 respondents reported having at least one major incident, compared to about one in 10 in the previous survey. Major incidents were defined as causing a day or more of business interruption and/or adverse publicity.

None One to three Major incidents

Four to seven

Moderate incidents Eight to ten

Minor incidents

More than ten 0

100

50

150

200

300

250

Number of Respondents

Question 3.12f. Rate your level of concern in each area regarding information security. Increasing dependence on IT for normal business operation continues to be the primary concern. Response Commentary: Like last year, increasing reliance on IT for all aspects of business operations and the resulting vulnerability to business disruption is by far the most critical concern related to information security, while a number of other factors are viewed as important contributors.

Growing dependence on computerized and automated systems Government regulation My organization doesn’t understand the risks Industry standards and cost of compliance Rapidly growing IT security expenditures Public pressure to increase information security Competitors using security (or privacy) to differentiate themselves

Critical

Terrorism against your company

Important

Duplication of security efforts by internal organizations 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


26

4. Technology Applications Question 4.1a. Is your company constrained in its ability to develop or acquire new applications? Slightly over half of respondents feel constrained in their ability to develop or acquire new applications. Response Commentary: Each year a substantial percentage of the survey respondents indicate that they are constrained in their ability to develop or acquire new applications. In fact, the trend has been a steady increase in the size of this group. This suggests that many are working hard to avoid falling too far behind in technology, let alone stay current or acquire new technology.

Yes 51.9%

No 48.1%


Question 4.1b. If constrained, please rate the importance of the following factors in limiting discretionary IT initiatives. Again this year, resource constraints (human) are the major inhibitor to discretionary IT initiatives. Response Commentary: Management and staff resource constraints are the largest single factor inhibiting new development/ adoption of applications. In fact, there was about a 10 percentage point increase in the number of respondents citing human resources as the primary constraint (46 percent this year versus 36 percent prior). The hollowing out of middle managers and staffs due to cost reduction pressures has made it more difficult to support discretionary initiatives. “Required maintenance and infrastructure spending,” the legacy of our past decisions, is the second most frequently cited factor.

Required maintenance and infrastructure spending Short-term 19.7% corporate earnings goals 17.0%

Difficulty in developing business case 7.8% Past development project problems 6.6% Other 3.3%

Management and staff resource constraints 45.7%


Question 4.2. How significant is the issue of integrating heterogeneous systems and applications in your organization? Most financial officers continue to view application integration as a major issue. Response Commentary: About one out of six respondents views integration as “not important,” while the remaining respondents express varying levels of concern. Most of the respondents who viewed integration as “not important” are with smaller entities (under $1 billion in revenue). Among entities with over $1 billion in revenue, fewer than one in 10 said that integration was “Not important”. We’re assuming that all those who indicated “Not important” have already addressed their integration issues.

Not important 17.7%

Extremely significant 35.7%

Moderately important 47.0%


27

4.

T E C H N O LO G Y AP P LIC ATIO NS

Question 4.3a. In the wake of Sarbanes-Oxley (SOX), have the issues of integrating systems and applications gained more of management’s attention? SOX has permanently raised the priority of systems integration. Response Commentary: With Section 404 and its requirement that publiclytraded companies attest to their control environment, the issue of systems integration has taken on new meaning. This is clearly indicated by respondent data which shows that as company size grows, so does the attention to (and need for) integration. Generally speaking, larger companies tend to have the business characteristics that make SOX compliance more difficult to achieve and sustain — global markets and operations, multiple acquisitions/divestitures, heterogeneous business units, etc. — implying “more moving parts,” e.g., differing business practices supported by systems with different lineages.

Publicly Traded Only

Significantly more 34.3% No change 28.8.7% Moderately more 36.9%


Question 4.3a continued In the wake of SOX, have the issues of consolidation and reporting gained more of management’s attention? Likewise, SOX is having a continuing impact upon the consolidation process and related technology. Response Commentary: Like systems integration, consolidation and reporting has been impacted by SOX. In addition to certifying the control environment, SOX has put in place an accelerated filing schedule for the 10Q and 10K and a requirement for ongoing monitoring of performance and rapid disclosure of material changes. Like integration, consolidation and reporting is an issue that generally grows with company size — more entities, more complex entity relationships, intercompany transactions, foreign currency, etc. — and yet the requirement to produce accurate statements in a compressed timeframe remains.

Publicly Traded Only

Significantly more 41.2% No change 22.3% Moderately more 36.5%


Question 4.3b. How has the cost of compliance for SOX changed in the past year versus the previous year? Relatively few have seen a reduction in the cost of compliance. Publicly Traded Only

Response Commentary: For most, the expected (hoped for) reductions in the cost of compliance have not occurred. Recognizing that there is probably a permanent increment in cost associated with compliance, most expected that there would be some cost reduction as compliance became an ongoing, repetitive part of business operations. To date, that does not appear to have occurred for very many. In fact, more respondents report an increase in cost than report a decrease in the past year, 45 percent up and 29 percent down.

Decreased moderately 25.0% No change 26.0% Increased moderately 28.0%

Decreased significantly 4.0%

Increased significantly 17.0%


28

4.


Question 4.4a. What is your overall level of satisfaction with your organization’s “information integrity,” defined as accuracy, consistency and reliability of information? Information integrity is an area of concern for most. Response Commentary:

Neutral 16.3%

In Section 2 of this report we noted that “Improving data quality/information integrity” was the most pervasive critical technology issue. The responses to this question help explain the basis for it placing in the #1 position. Fewer than one in five financial executives are “highly satisfied” with their information integrity. Interestingly, it’s about one in five in every company size category and in both public and private entities.

Somewhat satisfied 47.1%

Somewhat dissatisfied 14.0%

Highly dissatisfied 3.7%

Highly satisfied 18.9%


Question 4.4b. To what extent is the current level of information integrity hampering (lengthening response times, raising cost, reducing confidence, etc.) your ability to attain your business objectives? Information integrity (lack of ) is negatively impacting business performance. Response Commentary: On an overall basis, nearly 62 percent of respondents indicated that information integrity was negatively impacting business performance. Information integrity is a fundamental underpinning of effective and efficient business operations, from routine transaction processing to management reporting to decision support. To the extent that information integrity is lacking, it becomes one of the major hidden costs of doing business. The business pays for the lack of information integrity every day, so it becomes a normal cost of operations.

Size

Signficant

Moderate

None

Less than $100M

7.5

47.9

44.6

$100M – $499M

9.9

53.3

36.8

$500M – $999M

15.9

60.9

23.2

4.3

53.2

42.5

11.4

61.3

27.3

$1B – $5B Greater than $5B


Question 4.4c. Does your organization have plans to improve its information integrity in the next 12 months? Seventy percent plan programs to improve information integrity Response Commentary: Financial executives are well aware of the information integrity issue. They live it on an ongoing basis through error corrections, reversing or adjusting transactions, reconciling differing amounts for the same level of activity, cutoff issues, etc. On an overall basis, nearly 70 percent of respondents indicated plans to improve their information integrity in the next year. The percentage of respondents planning improvement actions grows steadily with company size, from about 63 percent in entities with less than $100 million in revenue to about 88 percent in entities with over $5 billion in revenue. Publiclytraded entities are somewhat more likely than private companies to have improvement plans, 72 percent versus 67 percent, respectively. N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

Yes 69.8%

No 30.2%


29

4.


Question 4.5a. What is your organization’s preferred approach to addressing systems integration issues? While there is no majority answer, adopting best of breed remains the most common approach. Response Commentary: As we have noted in previous reports, the end goal of integration for all respondents is the same, improving business effectiveness and efficiency, but the approaches vary. Organizational size and complexity clearly play a role in the preferred approaches. “Adopt best-of-breed applications and develop interfaces” is the most frequent approach overall and widened its lead over other alternatives, increasing from 37 percent of respondents last year to somewhat over 42 percent this year. “Discontinue all disparate systems, implement a single new integrated system” tends to grow in popularity somewhat with company size. Both of these choices reflect a desire to improve functionality and achieve greater integration, but functionality holds the upper hand. This is clear when the preferences are viewed from an industry perspective. All things being equal, why wouldn’t all entities aspire to having a single integrated system? Functionality (degree of fit) seems to be the trump card. In industries that produce and sell a physical product such as consumer goods, discrete manufacturing, etc., the preference for “Discontinue all disparate systems, implement a single new integrated system” (ERP) is generally higher than best of breed since the degree of fit is generally much higher. In contrast, service industries such as banking, insurance, telecom, etc., show a much lower preference for a single integrated system. The only rational explanation for these differences is differences in the degree of fit of ERP for their business, i.e., functionality wins over integration. Stated another way, financial officers will choose more functionality (through best of breed) over just integration (with less functionality). The responses to the following question confirm this perspective.

Less than $100M

$100M - $499M

$500M - $999M

$1B - $5B

Greater than $5B

0%

10%

20%

30%

40%

50%

Percentage of Respondents Operate and maintain separate systems

Build new interfaces between existing systems

Discontinue all disparate systems, implement a single new integrated system

Adopt best of breed applications and develop interfaces

Question 4.5b. What are the most important factors driving your approach to systems integration? Required functionality was the hands-down winner. Response Commentary: Required business functionality trumped all of the other choices, garnering nearly 60 percent of the votes for the most important criteria. Stated another way, the financial official is willing to pay more for both implementation and maintenance and to introduce new technologies that may complicate the IT environment and require more complex integration if there is substantially better functionality that helps the business improve its overall performance.

Required business functionality Cost to implement and maintain Existing IT applications and infrastructure Available solution alternatives


Other 0% 20% 30% 10% Percentage of Respondents

40%

50%

60%

30

4.


Question 4.6. Please rank the primary criteria used to measure the success of a systems development project. Delivered functionality remains the primary measure of success. Response Commentary: Delivered functionality is again the clear winner as the primary measurement of success. However, companies are also looking for operational efficiencies and for the system to improve their competitive position.

Functionality meets user needs Enabled the company to operate more efficiently Improved the company’s competitive position Delivered within budget Delivered on time

Most important

Generated a positive return on investment

Moderately important Somewhat important

Other 0%

10% 20% 30% 40% 50% 60% 70% 80% 90%


Question 4.7. Does your organization routinely perform post-completion audits of major IT programs/projects. Fewer than a third regularly perform post-completion audits. Yes 29.9%

Response Commentary: Most respondents don’t make an effort to formally evaluate major IT programs/projects once they become operational. Even among larger entities, those with over $1 billion in annual revenues, only about half regularly perform these types of audits. In a sense, this shouldn’t be a surprise. We’d probably get a similar answer if we were asking about major capital appropriations. Financial executives seem to be most concerned about trying to make the best decision with the available information and moving forward. Looking back is only helpful to the extent that it sharpens our ability to look forward.

Question 4.8. of IT projects.

No 70.1%


Rate your relative satisfaction with your organization’s ability to measure the success

More continue to be dissatisfied than are satisfied. Response Commentary: There is little change in satisfaction levels compared to last year. Overall, about twice as many respondents are dissatisfied with their ability to measure the success of IT projects as those that are satisfied. Another 40 percent are “neutral.” Measurement is a continuing concern of financial executives, and the situation has not improved since last year’s survey. There is not much variation across different sizes of organizations, and only a few organizations, about four percent, are very satisfied with their ability to measure project success.

Less than $100M $100M - $499M $500M - $999M $1B - $5B Greater than $5B 0% 20% 40% Percentage of Respondents

60%

80%

Very dissatisfied

Somewhat satisfied

Somewhat dissatisfied

Very satisfied

100%

Neutral N INT H A NNUA L T ECH N O L O G Y I S S U ES FO R FI N AN CI AL EX EC UTIVES SURVEY

31

4.


Question 4.9. What percentage of your systems development and/or integration projects are considered successful by management?

Response Commentary: The good news is that the glass is more than half full, but it’s no more full than last year. Across all respondents, the results are virtually identical to last year: about 67 percent of all systems development projects are viewed as successes by management. It’s interesting that the larger entities report somewhat lower success rates, about four percentage points than smaller entities, and that the median success rate is about 75 percent (nearly three out of 10 respondents reported success rates of 50 percent or less).

Percentage of Projects Considered Successful by Management

Overall, about two out of three projects are considered successful.

76% - 100% 51% - 75% 26% - 50% 0 - 25% 0%

10%

30%

20%

40%


Question 4.10. How many separate business units (financial accounting entities) does your organization have? How many different/independent financial systems environments (silos of information) does your organization have? Most financial systems environments remain fragmented. Response Commentary: It should not be a surprise that financial executives are operating in a very complex business environment (as evidenced by the number of business units). What is somewhat surprising is the number of separate financial systems environments that still exist. This is not to suggest that there should only be one system. There are valid reasons why more than one may be the correct answer because the various business units have very different operating models and operate in very different industries. Having offered that explanation, CSC believes that most entities still have a significant opportunity to simplify and reduce the number of different systems without compromising the requirements of the various business units.

Size

Financial Financial Systems Accounting Entities Environments

Less than $100M

4.4

1.9

$100M – $499M

13.2

2.8

$500M – $999M

8.8

5.7

$1B – $5B

27.8

4.6

Greater than $5B

37.8

11.8 Mean Value

Question 4.11a. Is your organization currently implementing or planning to implement an enterprise resource planning (ERP) solution within the next year (e.g., SAP, Oracle)? Thirty-five percent have an ERP project planned or in progress. Response Commentary: The overall ERP activity level is largely unchanged compared to the prior three surveys. On an overall basis, about 12 percent of respondents have a new implementation currently in progress, while another 8 percent have an implementation in the planning stages. Another 8 percent are upgrading to a newer release, while 7 percent are expanding their ERP footprint.

No current activity* Yes, new implementation in progress Yes, upgrade in progress Yes, planned implementation

Company Size Less than $100M $100M – $499M $500M – $999M $1B – $5B

Yes, expansion in progress *Includes 0% 40% 20% completed ERP implementations Percentage of Respondents


Greater than $5B 60%

80%

32

4.


Question 4.11b. If you are planning an ERP implementation, what is the scope? Somewhat fewer than half of the in-progress and planned implementations are full suite. Response Commentary: As we have noted in prior surveys, the term ERP better describes the software vendor than the scope of implementation. We have asked this question for a number of years, and each year about half of the implementations are full suite. This indicates that many are using ERP products in a best-of-breed way.

Financials only

Financials plus selected other application areas

Company Size Less than $100M

Full suite

$100M – $499M $500M – $999M $1B – $5B

Other

Greater than $5B 0%

40%

20%

60%


Question 4.11c. What is the total estimated project cost? Estimated project costs are highly variable. Size

Response Commentary: Each year we are somewhat reluctant to include the results of the planned ERP spending since the results are “all over the board”. Part of the reason is that the results include the four categories from Question 4.11a (spanning new implementations to upgrades) since the sample size would be too small to do it by category.

Minimum

Average

Maximum

Less than $100M

$50

$1,058

$10,000

$100M – $499M

–

$2,522

$20,000

$500M – $999M

$200

$8,002

$40,000

$1B – $5B

$500

$16,010

$100,000

$1,000

$111,000

$400,000

Greater than $5B

Dollars in Thousands

Question 4.11d. What is the planned project duration? Planned project durations increase with company size but are also highly variable. Response Commentary: The chart presents the project duration by company size, displaying the mean and median durations. Recognize that each implementation tends to be somewhat unique and is influenced by a long list of factors (in addition to the four categories of implementations that are presented on a combined basis). Accordingly, the individual project schedules are highly variable.

Revenues Less than $100M $100M – $499M $500M – $999M

Median Mean

$1B – $5B

Greater than $5B 0 Months


10

20

30

40

33

4.


Question 4.11e. If not implementing ERP, why not? No cost/benefit and satisfaction with existing systems are the main reasons for not choosing ERP products. Response Commentary: As discussed in question 4.4, ERP is not the dominant approach across organizations. This is not to suggest that many larger enterprises have not implemented ERP-like systems in one or more of their business units but rather that many aren’t pursuing an ERP strategy. For those that have not implemented ERP within their enterprise and have no current plans to implement (about 40 percent of respondents), the reasons cited are centered around the lack of a return on investment related to moving to ERP.

Integrating existing systems is preferable to ERP 18%

Cost/benefit analysis does not justify 32% There is low functionality fit with our business 22%

Satisfied with current systems 28%

Percentage of Respondents (of those not using or planning to use ERP)

Question 4.12a. If you have already completed an ERP implementation, what was the scope? Somewhat fewer than half of the completed ERP implementations are full suite. Response Commentary: Financials plus selected other application areas 44.0%

Interestingly, there has been a significant change in the proportion of full suite implementations among this year’s respondents versus last year. Among last year’s respondents, 57 percent indicated full suite implementations (the highest ever reported), while this year only 44 percent reported full suite implementations (the lowest ever reported). We must conclude that this is primarily due to differences in the participants in the two most recent surveys since all of the prior surveys indicated that about 50 percent were full suite.

Financials only 11.0% Other 2.1%

Full suite 42.9%


Question 4.12b. How long did it take to complete your enterprise project? Implementation timeframe is highly variable but grows with entity size. Revenues

Response Commentary: As discussed previously, it is very difficult to present any normative answer with respect to implementation timeframes due to the many variables involved, including scope, industry, number of entities, locations, and surrounding systems environment/infrastructure, among others.

Less than $100M

Median

$100M – $499M

Mean

$500M – $999M $1B – $5B Greater than $5B 0 Months


10

20

30

40

34

4.


Question 4.12c. How does this timeframe compare to what was expected when the project was launched? Nearly half of the implementations take longer than originally planned. Response Commentary: As noted in previous survey reports, adhering to the planned implementation time frame seems to have been elusive for many. Only about 4 percent of respondents completed their implementations in less than the scheduled time frame, while 49 percent exceeded the planned time frame (including 20 percent who exceeded the planned time frame by 30 percent or more). This is not to suggest these implementations were poorly planned. In some cases, the issues could not have been foreseen at the outset. At the outset of a large scale implementation project, whether ERP or not, there are often many unknown issues that will only become known as the effort proceeds.

Significantly higher (more than 30%) Somewhat higher (from 10% to 30%) About the same (within +/- 10%) Somewhat lower (from 10% to 30%) Significantly lower (more than 30%) 0%

10%

20%

30%

40%

50%

Percentage of Companies

Question 4.12d. What was the total approximate project cost (including internal resources, hardware, software and consulting fees)? Implementation costs show extreme variability. Implementation Expenditure in Thousands

Response Commentary: In most prior reports, we have chosen not to include the results of this question because the results tend to raise more questions than provide answers. This year we present the results by company size and scope of implementation, displaying the smallest expenditure, the average expenditure, the largest expenditure, and the number of responses in each category. Each year many of the survey participants provide information about the scope of their completed implementation but do not provide the cost of the implementation. As a result, in some cases the sample sizes are very small. Recognize that each implementation (new, upgrade, expansion, etc.) tends to be somewhat unique and is influenced by a long list of factors.

Average Lowest Highest Count Average Financials plus Lowest selected other application areas Highest Count Average Full suite Lowest Highest Count Average Other Lowest Highest Count Financials only


$5B

$115,000 $115,000 $115,000 1 $64,000 $35,000 $100,000 5 $46,000 $42,000 $50,000 2

35

4.


Question 4.12e. How does this amount compare to the project’s original budget? Somewhat over half exceeded the original project budget. Response Commentary: This year’s results are very similar to last year. Only 3 percent of the completed implementations came in under budget, while 56 percent exceeded the original budget (including 16 percent that exceeded the original budget by 30 percent or more). This outcome is not unique to ERP but rather a common outcome of most broad scope, long duration development and implementation initiatives.

Somewhat higher (from 10% to 30%) 40.0%

Significantly higher (more than 30%) 16.1%

Somewhat lower (from 10% to 30%) 2.6%

About the same (within +/- 10%) 41.3%


Question 4.12f. To what degree was the ERP system modified? Only about one in nine made no modifications to their ERP system. Response Commentary: Organizations often talk about implementing the “vanilla” version of the ERP system prior to implementation but that goal seems to get lost along the way. Only about 11 percent of the respondents have stayed the course and made no modifications, while the remainder have modified their ERP system to varying degrees (possibly for good reasons), including 17 percent who report making significant modifications.

Moderate modifications 30%

Significant modifications 17% No modifications 11%

Minimal modifications 42%


Question 4.12g. How would you rate the project? As we have said before, “All is well that ends well!” Response Commentary: Not withstanding the schedule and cost overruns, somewhat over three out of four ERP implementations are viewed as successful. This suggests that after enduring the budget and schedule overruns, most obtained the benefits that they were seeking.

Neutral 11% Moderately successful 42%

Moderately problematic 11%

Failure 2%

Highly successful 34%



36

4.


Question 4.13. Describe your organization’s general practices regarding implementing new releases of package software. Relatively few companies implement new releases as they become available. Adopt as new releases become available 13%

Response Commentary: Very few entities move to the new release to stay current with their vendor. Not surprisingly, most organizations indicate that they need a business reason (substantial new functionality) to move to a new release from their package software vendor. It’s somewhat surprising to note that about one out of eight moves to a newer release only when their existing release will no longer be supported. Could this be that they did significant modifications during implementation?

Implement to remain within one release of current 26%

Implement only when installed release is no longer supported 12%

Implement only when substantial new functionality is provided 49%


Question 4.14. Is your organization looking to extend beyond the transactional capabilities of the ERP system with your ERP vendor or with third party vendors? Many respondents are looking to extend their ERP solutions beyond transactional processing but not necessarily with their ERP vendor. Response Commentary: Respondents indicate a modest preference to extend with their ERP vendor when addressing consolidations or the extended supply chain. This is not a surprising outcome since almost all ERP implementations include the financial modules and most also include the production and distribution modules. In the other areas, the bestof-breed vendors tend to be preferred. As discussed earlier, we believe that this is largely a functionality-driven decision. If the entity has made a substantial investment in ERP and the ERP vendor has a product with comparable functionality to the best-of-breed alternative, the ERP vendor likely wins. Otherwise, the best-ofbreed vendor prevails.

Consolidations Analytical and/or decision support applications Data warehousing Supply chain planning and optimization Supplier relationship management

Third party vendor ERP vendor

Customer relationship management


0% 20% 10% Percentage of Companies

30%

40%

37

5. Managing the IT Function Question 5.1a. To whom does your organization’s most senior IT executive report and to whom do you think this person should report? Overall, the CFO is still the most likely reporting relationship for the CIO.

Reports to CEO

Reports to CFO

Less than $100M

Less than $100M

$100M – $499M

$100M – $499M

$500M – $999M

$500M – $999M

$1B – $5B

$1B – $5B

Greater than $5B

Greater than $5B

0%

10%

20%

30%

40%

50%

60%

0%

Reports to COO Less than $100M

$100M – $499M

$100M – $499M

$500M – $999M

$500M – $999M

$1B – $5B

$1B – $5B

Greater than $5B

Greater than $5B 10%

20%

30%

20%

30%

40%

50%

60%

40%

50%

60%

Reports to COA

Less than $100M

0%

10%

40%

50%

60%

0%

10%

20%

30%

Reports to Other Current Less than $100M Proposed $100M – $499M

y axes = Company Size

$500M – $999M

x axes = Percentage of Respondents

$1B – $5B Greater than $5B 0%

10%

20%

30%

40%

50%

60%

Response Commentary: By a substantial margin, the CFO is the most common reporting relationship for entities with $1 billion or less in revenues. Among entities with $1 to $5 billion in revenues, the CEO and the CFO are almost equally likely, while in the over $5 billion category the CEO is much more likely. Repeating an outcome that first occurred in last year’s survey is the number of CFOs who would like to take on responsibility for IT where they don’t have it currently. In prior surveys, very few CFOs recommended changes in existing reporting relationships and/or wanted responsibility for IT when they didn’t already have that responsibility.


38

5.

M A N AGI N G T H E IT F U NC TIO N

Question 5.1b. Where was the executive recruited? Only in larger organizations is it equally likely for the CIO to have come from within the entity as from outside. Response Commentary: It should not be a surprise that as the organization becomes larger, the likelihood of recruiting the new senior IT executive internally grows, and that among entities with over $1 billion in revenues, the CIO is equally likely to have come from inside the organization as from outside.

Question 5.2.

Inside the organization, but a department other than IT

Less than $100M $100M – $499M

Inside the organization s IT department

$500M – $999M $1B – $5B

Outside the company

Greater than $5B 0% 20% 40% 60% Percentage of Respondents

80%

100%

How are IT costs charged to user organizations?

Most organizations do not use chargebacks, and those who do employ a variety of methods. Service level agreement and price list for services 4%

Response Commentary: On an overall basis, only about 40 percent of respondents have implemented some form of chargeback process for IT costs. The use of chargebacks grows with the size of the entity and so does the relative sophistication of the methods used to support the chargeback. Among entities with less than $100 million in revenues, only about one in four use chargebacks, while among entities with over $5 billion in revenues, about four out of five use chargebacks. One of the primary reasons for chargebacks in larger entities is shared IT organizations that support multiple entities. In those instances, there is a need to distribute shared costs to the entities supported for financial accounting and/or tax reasons.

Other 8%

Actual usage at actual cost per unit 13%

Actual usage at budgeted cost per unit 8% Budgeted usage at budgeted cost per unit 9%

No charge back (all costs are taken as a corporate charge) 58%


Question 5.3. If IT costs are charged to user organizations, what impact does this have on investment decisions and technology adoption/use? Most respondents view chargebacks as having no impact. Response Commentary: The majority of respondents don’t believe that chargebacks have any impact on investment decisions or technology adoption. Among those that believe there is an impact, the impact is believed to be positive.

Chargeback method Actual usage at actual cost per unit

Highly positive impact Moderately positive impact

Actual usage at budgeted cost per unit

Neutral impact Budgeted usage at budgeted cost per unit

Moderately negative impact

Service level agreement and price list for services 0%

20%

40%

60%

80%

100%

Percentage of Respondents that Use a Given Method


39

5.

M A N AGI N G T H E IT F U NC TIO N

Question 5.4. developments?

How effective has your IT staff been in keeping abreast of the latest technology

Financial officers are modestly positive regarding their IT organization’s ability to keep abreast of technology.

Very effective 14%

Response Commentary:

Moderately not effective 10%

Moderately effective 36%

Like last year, about half of the respondents give their IT organizations a positive score in terms of their ability to keep abreast of technology developments, while a large group is neutral in their assessment.

Not very effective 5%

Neutral 35%


Question 5.5.

In which of the following areas do you feel your staff most lacks necessary skills?

The top three areas of concern are skills fundamental for a successful IT organization. Response Commentary: The top IT skills deficiencies, by a substantial margin, are project management, understanding the relationship between the business and IT, and communications between the IT organization and users. These three deficiency areas have occupied the top spots for the past five years, yet they are fundamental skills for any successful IT organization.

Project management Understanding the relationship between business and technology Communication Newer technologies Customer service focus Ability to plan Ability to execute the plan Organization Professional approach or teamwork 0% 10% 15% 20% 5% Percentage of Respondents Selecting the Area as the Most Important


25%

30%

40

Computer Sciences Corporation Consulting Group Computer Sciences Corporation 200 Park Avenue, 32nd Floor New York NY 10166 212.251.6098 For more information on the report, contact: Jerry Boltin, Senior Partner 630.472.1246 [email protected]

Financial Executives International (FEI) 200 Campus Drive BOX 674 Florham Park, NJ 07932-0674 973.765.1000 www.fei.org

About CSC Computer Sciences Corporation helps clients achieve strategic goals and profit from the use of information technology. With the broadest range of capabilities, CSC offers clients the solutions they need to manage complexity, focus on core businesses, collaborate with partners and clients, and improve operations. CSC makes a special point of understanding its clients and provides experts with real-world experience to work with them. CSC is vendor-independent, delivering solutions that best meet each client’s unique requirements. For more than 45 years, clients in industries and governments worldwide have trusted CSC with their business process and information systems outsourcing, systems integration and consulting needs. The company trades on the New York Stock Exchange under the symbol “CSC.” Copyright © 2007 Computer Sciences Corporation Los Angeles, California All rights reserved. No part of this publication may be reproduced by any means without written permission from Computer Sciences Corporation. Printed in U.S.A.

About Financial Executives International (FEI) and its Committee on Finance & Information Technology FEI is the professional association of choice for senior-level financial executives. FEI’s membership comprises 15,000 financial executives in the highest echelon of corporate finance: CFOs, VPs of Finance, Treasurers and Controllers. They represent companies of all sizes, both public and private, crossing all industries. FEI has for 70 years been a powerful advocate for its members, speaking vigorously on behalf of the profession before regulatory and legislative bodies. FEI enhances member professional development through peer networking, career planning services, conferences, publications, and special reports and research. Members participate in the activities of 84 chapters, 73 of which are in the United States and 11 in Canada. FEI’s Web site, www.fei.org, offers deep informational resources and numerous opportunities for networking, professional development and career management. The Committee on Finance & Information Technology (CFIT) addresses the needs and interests of financial executives as strategic leaders, as they strive to realize measurable and sustainable performance improvements while maintaining financial control. These needs and interests include the development and application of information technology, systems, and other methodologies affecting the management of business functions, such as corporate performance management (CPM), sourcing, and IT governance, through research, surveys, advocacy, conference content, and newsletters. CFIT’s priorities will be driven by key trends in information technology as identified by the Committee. About Financial Executives Research Foundation (FERF) Since 1944, FERF has been an independent source of practical information, service and expertise for senior financial executives. FERF is primarily supported by voluntary, tax-deductible contributions from corporations, FEI chapters and individuals.

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