There was a time when Diebold Inc., a leading producer of ATMs and voting machines, was organized the way most other Fortune 1000 companies are. There was a CFO and a CIO, and both independently reported to the CEO. The CFO purchased technology solutions for finance, and the CIO bought the systems for the rest of the company. The CIO’s view didn’t carry much weight in the CFO’s choices, and the CFO was heard from on purchases outside of finance only when IT was over budget.
For Diebold, all that changed when Gregory Geswein walked through the door. Diebold CEO Walden O’Dell hired Geswein as CFO in 2000, after the U.S. corporate spending spree that preceded Y2K. Geswein arrived to find a company with systems that were diverse and scattered, thanks to a series of acquisitions, and an existing ERP system that he considered an unsatisfactory fit with Diebold’s strategic goals.
Given the desire of $2.1 billion Diebold to expand internationally, Geswein was worried that its technology might be a hindrance. There were also increasingly vocal demands from across the company for the latest task-specific best of breed software. “I said then that we were not going to do that,” he recalls. “We needed to pick a system that would give us the best value on a holistic basis.”
It was time for the CFO to impose some discipline. To do this, Geswein hired a new CIO, John Crowther, who would report to Geswein rather than O’Dell, and the two set out on the long journey toward technology rationalization.
Geswein and Crowther maintained their partnership as they embarked on the largest technology overhaul in Diebold’s history, replacing a series of far-flung legacy systems with a single-instance Oracle ERP system across all offices in the 88 countries worldwide where the company operates. Today, they meet most mornings over a cup of coffee and discuss the project. They almost cannot help but talk frequently since their offices are literally next to each other. “Really, it’s not an IT project,” says Geswein, who is project leader. “It’s about getting the whole organization, especially senior management, behind it to really improve processes and productivity.”
Tearing Down the Wall
Unfortunately, Geswein’s take-charge attitude when it comes to IT is far from typical across Corporate America. For many companies, the functions of finance and technology might as well be in separate buildings, if not in separate cities. But the walls that separate CFOs and CIOs are being blown over, and smart executives on either side of the divide are realizing they can no longer afford to be ignorant about what the other is up to. The main reason for the sea change in attitude is clear: the Sarbanes-Oxley Act and the manic need for tighter financial controls.
Consequently, CFOs find themselves front and center on the technology issue. As a result, it is getting far more common for CIOs to report to CFOs, a la Diebold. At the very least, at forward-thinking companies, there is certainly far more interaction. Such cooperation, however, is not always easy. “There’s a quite natural tension,” says Mike Sutcliff, global managing partner for financial performance management at Accenture. “The CIO is being asked to fill an endless series of requests from the business, and the CFO is constrained by not having enough capital to pay for it all. The IT organization usually understands not just what the existing product looks like but where it is going to be in 12 or 18 or 24 months. They are working with vendors to understand the development platform while the users just see the sexy sales message from the sales team.”
The challenge, says Sutcliff, is for both finance and technology executives to see past their very different views of the world in a collaborative environment aimed at optimizing available capital for the best possible result. That level of cooperation, however, doesn’t just magically appear. At many companies, the problem is executives with heavily “silo-ed” roles with their own turf to protect. That may be the biggest nonstarter when it comes to greater cooperation. Financial department heads have at times dug their own holes by relying too much on their own finance department’s IT staff in place of their company’s core IT department.
Working Side By Side
A shared vision is always a good place to start. “Trying to do more with the technology we have, rather than add on, is a big strategic initiative for our business,” says Brian Smith, CFO of Volvo Commercial Finance LLC, a unit of Sweden’s Volvo Group. Two years ago Smith, another finance executive who likes getting involved in IT decisions, faced an uncomfortable reality. He and other executives at the captive finance group, with $2.5 billion under management, realized their core data collection systems, meant to provide the basis for analytics on customer financial and buying trends, had grown completely unreliable. The problem was the multiple layers of hand-keyed information input at the company’s 300 dealership offices. The mistakes would frequently stop Smith and his staff in their tracks in such areas as pricing analyses when they tried to determine, say, portfolio returns based on customer finance terms. Inevitably, their work would grind to a halt when inconsistencies were found in their underlying in-house data reports. Things became so unmanageable that Smith decided to sit down with the company’s vice president of information technology, Bryan Thompson, to figure out a solution.
Together, the two executives–peers on a reporting basis–worked out a plan that would improve Volvo Commercial Finances’ technology at a minimal cost. Rather than replace all the systems involved throughout the company, which include separate pricing, credit and dealership documentation systems, the executives decided to buy a system-of-systems overlay that would tie everything together into a single entry point, known as the origination system. In the months since the new system was installed, data accuracy has shot up to near 100% and the company has a system of controls it now can rely on. “From our perspective the particular choice of technology doesn’t matter nearly as much as a proper understanding of the underlying business process,” says Bryan Thompson.
This thinking reflects an entirely new vision: Technology is the toaster, but what matters is the quality of the toast, not the toaster. The reversal is a natural consequence of Y2K overspending, the collapse of the tech-stock bubble and general concern that companies still pay a premium for the latest business technology that may or may not suit their needs one, two or five years out. These missteps have created an atmosphere in which the role of the CIO is being questioned. Such doubts came to a head last year with the publication of an article in the Harvard Business Review, called “IT Doesn’t Matter,” and now author Nicholas Carr is about to put out a book under a similar title.
Carr’s point is not that technology has nothing to offer business. Quite the opposite, he argues that at this point in history companies should realize the days of gaining competitive advantages over others with such systems, barring those that are proprietary or patented, are largely past, since most best IT systems and practices can be quickly copied. Therefore, it usually makes sense nowadays to hold off on installing the hot new product and wait for the competition to develop an alternative at a lower price. “You want to get those [technologies] at the lowest cost and lowest risk you can,” says Carr.
There are indications that such a shift, driven largely by vendor competition, is already driving windfalls to corporate customers. When Diebold’s Geswein went shopping for a new ERP system, one of the salesmen who helped close the deal was none other than Oracle’s chief executive Larry Ellison. In a series of meetings, Ellison made a compelling offer: For the same amount of money that Diebold was spending to maintain its IT function, the company could outsource a chunk of its IT department, and Oracle would deliver the software for a new ERP system. The deal obviously keeps Diebold’s costs contained, but it also puts the company light-years ahead in terms of efficiency and controls.
That view suddenly turns a technology buy into a project for finance and not IT. But IT is evolving as well. Today’s crop of IT executives is becoming more involved in key strategic aspects of running the business. Those that don’t have sufficient knowledge are seeking help. “Many of the internal conversations we have with clients [are] about IT’s understanding of finance,” says Lane Leskela, a vice president and research director at technology research group Gartner Inc., based in Stamford, Conn. “They don’t really understand the finance organizations very well.”
More companies are therefore taking time to sit IT employees down with their counterparts in finance to review issues of accountability, regulation and fiduciary duty, says Leskela. Many companies have no choice; the penalties related to lax controls as set by Sarbanes-Oxley are too severe. IT’s role in ensuring that the right material documents–often scattered across numerous systems–are accounted for and retrievable for review is considerable.
Working Towards Mind-Meld
For some companies, the burden of better educating staffs is also falling on newly visible compliance officers, who may be individuals grounded in the legal and financial obligations of the firm who can also relay that information to other parts of the organization, including technology staffs. In other cases, part of the answer involves bringing the CIO to the table when it comes to key senior management decisions, including regular updates at public companies for the board of directors.
If nothing else, Sarbanes-Oxley will show how the wrong technology can undo a company’s best planning, especially in areas of information flows and controls. Maybe that doesn’t require having adjacent offices. But it certainly means being on the same page.