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''Most of us buy on emotion and justify on fact,'' says a reader. More letters to the editor: what good projects look like; the early days of mobile computing.
CFO Staff, CFO IT
November 17, 2003
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When CFOs Get Emotional
CFO IT is a great publication that always gives me food for thought. I found the "IT Directions 2.0" survey to be eye-opening. The survey indicates that only 40 percent of CFOs feel that IT expenditures produce the anticipated ROI, yet only 36 percent of CFOs find an ROI analysis essential to IT investment.
CFOs are perhaps the most ROI-conscious people in the executive suite, yet most CFOs don't think an ROI analysis is essential in making an IT investment, even though IT has been one of the most scrutinized purchase areas in many companies over the past several years!
Does this mean that a brilliant ROI analysis doesn't count? No. It does, however, confirm what we have always known: regardless of our position in the company, most of us buy on emotion and justify on fact—and CFOs are no exception. CFOs buy on perceived merit, and that perception is probably more influenced by "educated gut feel" than by ROI. An ROI analysis is usually a great justification tool for a CFO—once he or she has decided what to buy.
Bob Wilson, Partner
Access Resources Inc.
West Orange, New Jersey
What Good Projects Look Like
The annual survey in CFO IT indicated that senior finance executives are prepared to raise IT budgets. Before raising budgets, they must first exercise the same due diligence that they conduct with non-IT projects to determine if any IT projects are out of control and burning cash. According to one study, 51 percent of IT projects go over budget and time, and 15 percent outright fail. When you cancel an internal IT project, you must expense it immediately (GAAP SOP 98-1). Also, because of Sarbanes-Oxley, you may have to report that material event within three days.
Many CFOs do not have the proper controls in place to prevent material events in their IT organizations. There are, however, two quick acid tests they can use to determine if an IT project is out of control.
First, ask your CIO for a copy of the current project charter and project plan. If they are not complete and up-to-date, chances are you're in for a rough ride. Second, ask for a chart of the project's planned task starts vs. actual task starts, and for planned task completions vs. actual completions. If projects are planned properly, planned starts over time should roughly look like a 45-degree line. Planned completions should look like the first line and lag by a week or two. The respective completions should look like small variances along the "planned" lines.
When actual completions hover around the x-axis and then shoot up (like a hockey stick), you have capital tied up in unfinished tasks. It's like having a lot of expensive parts lying around that still need to be assembled. You will probably see a reverse hockey stick on actual task starts (they shoot up the y-axis and then flatten out), meaning people are opening many new tasks while they are waiting for other tasks to move forward. This would be fine if quality is 100 percent and IT is just waiting for sign-offs. The problem occurs when IT has to rework tasks because some things are wrong. Then the project manager has too many open tasks to manage and no one knows the true project status. Chances are the project is on the road to hell—the CFO must spot this before more cash is burned.
Joseph J. Zucchero
Executive Vice President and Director
Project Turnaround Practice
The Casey Group
Parsippany, New Jersey
Mobile Computing: The Early Days
I enjoyed your interview with Dan Bricklin ("Spreadsheets Forever"). It brought back memories of when I actually taught VisiCalc to noncomputer folks in 1981-82. I literally packed up an IBM PC and traveled from St. Louis to Chicago to Fresno, making many round-trips before convincing the chairman of the company that there was a benefit to getting PCs for the divisions. We ceated spreadsheets that saved hundreds of thouusands of dollars. Dan Bricklin and Bob Frankston left footprints on the global economy equally as impressive as those left on the surface of the moon.
Regional Manger, Enterprise Systems Management
Patni Computer Services Inc.
Oak Brook, Illinois