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Readers comment on current issues in finance.
CFO Readers, CFO Magazine
July 15, 2011
CFO welcomes your letters. Send them to: The Editor, CFO, 51 Sleeper St., Boston, MA 02210
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Pricing software has now evolved to the point where it is accessible not just to large and complex organizations ("The Price Is [More] Right," June). Yes, transaction optimization that includes elasticity and forecasting information does still require a good amount of data. However, other "optimization" techniques, such as market-based research and simple calculations that are not available with offline tools such as spreadsheets and databases, are now integrated into many of the midmarket solutions. For example, there are now solutions for the midmarket that can handle the execution of market-based pricing strategies for both price-list setting and quotations.
The availability of this software is definitely moving to SMB companies, and those that execute continue to see a price advantage.
Vice President, Strategic Consulting
PROS Holdings Inc.
Price-optimization software works for midsize companies, too. It may have to exclude model-based [analyses] and statistics, of course (as there is often not enough data), but it can provide the execution functionality: simulation, workflow, and deal management, for example.
Ten years ago, people were saying the same thing about CRM [regarding its unsuitability for midsize companies], and look at what Salesforce.com has done. But you are right: market research, consulting, and new methods are also needed if a company (whatever the size) wants to succeed in such a project. Remember: software is only a tool.
There are five common failures that are part of any disaster that occurs in any business ("All in the Timing," June). The largest is failure to control critical suppliers. Most companies have identified and verified the business-continuity planning of their suppliers. Today, companies own less than 15% of their supply chain. The total impact from the events in Japan, recent tornadoes, and floods will be in the hundreds of billions of dollars. These consequences were predictable and largely avoidable — or could have been greatly mitigated by advance planning and monitoring.
James W. Satterfield
President and Chief Operating Officer
Keeping the Plan Alive
We chose to keep our safe-harbor match and cut hours or wages/salaries when the recession hit ("Rematch," May). We do not have to pay payroll taxes and workers' compensation on the match like we do on wages, so it seemed a bigger bang for our buck. While some employees cut back on their deferral amounts, no one dropped out of the plan.
On Site Management Inc.
Work with an Outcome
So often I've seen more work being created, but not more productivity as a result ("A Talent for Talent," May). This is so apparent in the recruiting and talent-management industry. There needs to be a direct correlation between the two.
Productivity leads to an end result. Work leads to a paycheck that will be jeopardized if there is no productivity.
President and Founder
Direct Approach Solutions
Irvington, New York
The Social Network
Many companies are stuck in a reactionary phase in their use of social-media sites, jumping on current trends or battling criticism instead of taking the initiative and promoting thought leadership in their field ("Bottom-Lining the Buzz," Topline, May).
We are beyond the point where a finance chief can completely ignore social media. In today's Web 2.0 world, every user has a voice, and this gives companies the unique opportunity to create one-on-one dialogue with their customers, investors, and analysts. Only time will tell the true value of this new metric.
Exchange-traded funds (ETFs) not only promise to lower 401(k) fees, they deliver on that promise ("A Sense of Disclosure," Topline, May). My firm has created almost 400 fee-disclosure and -comparison reports this year, and the reduction in total fees by changing to ETFs ranges from 30% to 70%.
The statement that ETFs come with hidden trading costs is incorrect. Mutual funds do have hidden trading costs that are not disclosed. If an adviser trades an ETF through an expensive broker or at the close of the market then the higher cost of trading is the adviser's fault, not the ETF's fault.
CEO & Founder
Invest n Retire LLC
Although economic-development incentives are very appealing to companies, additional consideration of a state's leadership should be equally considered ("States Show Their Claws," May). As we know, 44 states have deficits. Are the people in leadership positions being honest with the public? Do they have an effective plan in place to address their states' deficit?
The deficit issue the federal and state governments are facing is one of the biggest variables in our ability to have a sustainable recovery. The states that are honest with their people (such as stating that everyone needs to make sacrifices and that there is a need for spending cuts and tax increases) and have an effective, bipartisan plan will provide companies with confidence. Confidence in the future of a state should have equal weight with economic-development incentives.
James F. Wong
Clear Focus Financial Search
As someone who has written clawback provisions into the law, it is clear to me that their main purpose is cosmetic. They are there to show the public that the government is not going to pay something for nothing. But their real value is that they force companies to come back when they are having problems meeting commitments. The government usually comes up with a work-out agreement that demonstrates it can be a true partner with a business, seeing it through the good times and the bad. Of course, it's always easier if the work-out is agreed upon before the media gets hold of the issue.
M. R. Press Consulting LLC
It surprises me how many people live and die by the budget ("Fit to Be Tied," May). They act like it must always be adhered to, no matter what. The budget is a plan, and plans can change, the business environment can change, and the world can change. This technique allows for greater flexibility, and shouldn't that be a part of the focus of every company?
Let Employees Speak Out
While "Weaving a New Corporate Culture" (April) discusses openness, self goal-setting, and ownership, managers should go one step further.
Companies should seek to create an environment where employees feel comfortable speaking out against misconduct, and employees should be able to trust that management will take the proper action. By making integrity a part of corporate culture, companies will bolster corporate performance and even total shareholder return.
I'm not sure how the Dodd-Frank Act will play out, but companies are going to need to anticipate and embrace change, and the ability to manage change will continue to be important ("Bankers' Powers," From the Editor, April).
To survive, companies will need a no-compromise approach to financial modeling, process controls, and application choice. And they will need a financial-information backbone that can handle fast-changing and mixed-application environments. After all, three years ago many companies didn't know what the "cloud" was, but now they're storing their data there. If you had mentioned tablets back then, they might have thought that [referred to] instructions from their health-care provider [rather than] the iPad, Playbook, or other tablet computer.
In today's environment, financial applications must do much more than simple bookkeeping. They need to be exceptionally pliant and enable organizations to continually adapt to structural upheaval, whether it is caused by a reorganization, a merger, an acquisition, or a new line of business. And they need to understand and quantify the total cost of change.
Chief Executive Officer
UNIT 4 CODA Inc.
Manchester, New Hampshire
Peering Through the Cloud
The real truth is that "cloud computing" means different things to different people even in the technical community ("Sounds Great! [But What Is It?]," Topline, March). But the general concept of using external IT services to complement or replace some or all of [a company's internal] IT services comes under the cloud umbrella.
Salesforce.com is probably the most recognized "cloud service" that started as a SaaS (software-as-a-service) offering. Salesforce now has a cloud-service environment in which you can run your apps; no need to acquire and manage your own servers. Amazon, however, was a pioneer and perhaps has the most robust technical offering in this space. Amazon's cloud (Amazon Web Services) appeared long before others were even visible on the horizon.
There are many other offerings, such as Google Apps Enterprise, that also are players in the cloud computing space, so CFOs will need to become educated based on their particular situation or opportunity.
Cloud opportunities must be evaluated in the same manner as other decisions are made. Get the facts, run the numbers, make a decision.