FD Insight: Solving technology headaches
Recent surveys have shown that IT is the biggest cause of sleepless nights for FDs, ahead of issues such as regulatory compliance.
Technology is evolving rapidly, infiltrating virtually every aspect of business life. FDs are reportedly worried that they aren’t up-to-date, don’t fully grasp the jargon and aren’t sure of the dangers which IT exposes the business to.
We raised the topic at a recent FD Recruit – FD & CFO Conference to find out how some of the UK’s most successful finance directors handle the issue.
Making purchasing decisions
Do you need to be fluent in tech talk to make a purchase or negotiate a contract? Many FDs worry that they do, but our FDs say that it isn’t necessarily so.
With IT purchases, the FD’s role is to ensure that the spend is necessary, good value for money and the scope of the purchase or rental is clearly understood.
When entering into a contract, it’s important to understand the expected cost, the potential for additional costs, and what will happen should the deal come to an end early for any reason. For example, if you’re paying a company to store your data, what happens to it when the contract ends and will you still have access?
When calculating value for money, it’s important to take into account any set-up costs that could be incurred, such as hardware required to run specific software, or user licenses. The IT director, or the purchasing team, should be able to put together a solid business case which covers these aspects.
It’s useful to take an interest in industry-related technological developments, but it’s not essential to understand every last bit of jargon. IT purchases are much like any other business decision. Does it make commercial sense? Are you covered when the contract ends, even if that’s early? And is somebody raising questions where something is unclear?
Handling security issues
Security is a real issue with IT. Leaking important information can be incredibly costly, in terms of reputation, compensation and even fines. In addition, outsiders can grind your operations to a halt with illegal access.
It’s the stuff of nightmares, and the reason why it’s estimated that 10% of IT budgets are spent on security.
So what can businesses do?
Security should be part of company culture, not an IT-specific issue. There are many ways to gain access to a system, and many of them involve user error, or hackers employing psychological tricks to be granted access to systems through unwitting employees.
It also doesn’t pay to assume any business is too small or unimportant to be hacked. You don’t need millions in the bank or a global reputation, just one disgruntled ex-employee or frustrated competitor.
Fortunately, there are many off-the-shelf security products that will cater for most business needs, when used properly. And our FDs recommend using third parties for functions such as handling payment transactions. Don’t try to build your own system if it isn’t necessary. For example, companies such as Sage and PayPal have already invested enormous amounts of resources in building payment handling systems that are already proven to be watertight. Outsourcing specific functions to trusted companies helps shore up potential weaknesses.
The easiest way to find that your security isn’t robust enough is to learn you’ve been the victim of a cyber attack. Fortunately, there are ways of doing this that won’t leave you at a loss. Ease concerns about your system by hiring “ethical hackers” to attempt to break into your system. They’ll report any vulnerabilities, without taking advantage.
Harnessing the power of data
Big data has evolved beyond a buzzword and asserted itself as an important tool for businesses, with a recent survey by Gartner suggesting that three quarters of organisations are investing in business intelligence tools.
Simply put, big data means compiling all the information you have collected about your business, including cashflow, lead times, the sales of season products, and anything else besides, and processing it all to find previously unknown trends, potential problems and exploitable opportunities.
Big data may promise big things, but our FDs say you don’t need to be a big business to take advantage. Using it to add value to your organistion requires the ability to ask the right questions (challenge everything you think you know) and the technical expertise to manipulate your data.
On this second point, even Microsoft’s Excel 2016 update promises a raft of new tools to help splice, analyse and report figures in new ways. There is also a range of specialist software packages, such as MicroStrategy, IBM Cognos Business Intelligence and Oracle’s Hyperion.
Gaining business intelligence through data analytics is something FDs should be strongly considering. It can make those working without it look like they’re just guessing.
Date Posted: July 31st 2015
Posted By: Phil Scott