From Tags to Riches?

Better days lie ahead for IT budgets; a new SEC program could spark interest in XBRL tagging; as M&A activity picks up, so do integration challenge...
CFO StaffMarch 15, 2005

It’s been a bit of a slog for XBRL, the computer code that “tags” a wide range of financial data so that it can be more easily shared and analyzed. Although proponents of the technology have been banging the drum for years, not much has happened. That may change this month, when a voluntary program launched by the Securities and Exchange Commission takes effect. Beginning March 16, companies can file, as exhibits, a range of financial data that’s been tagged in XBRL. According to the SEC, this will provide, in theory, a standard way for “registrants, investors, the Commission, and the marketplace” to understand and analyze that data, because XBRL facilitates an apples-to-apples comparison. Many of the components of a “property, plant, and equipment” listing on a balance sheet, for example, may be described differently by different companies, but when tagged in XBRL, a straight comparison becomes much simpler.

The benefits of XBRL don’t end there. It also eliminates rekeying or similar duplication of effort: a financial statement that’s been tagged in XBRL can be filed with the SEC, filed on a company’s Web site, shared internally for all sorts of analysis, and more, without worrying that one version doesn’t jibe with another. And when it comes to analyzing your next takeover target or the performance of your competitors, importing XBRL-tagged data should make such analysis far simpler.

But lacking a need to do so, and with plenty of other things to worry about (like Sarbox), few companies have begun to seriously kick the tires on XBRL. As well, the taxonomy, or vast list of specific tags, has continued to evolve, adding impetus to the wait-and-see approach. “We truly hope that over the next year we get a significant amount of participation,” Donald Nicolaisen, chief accountant at the SEC, told attendees at the AICPA National Conference in December. To facilitate that, the SEC offers limited liability relief, the ability to file using Form 8-K, the freedom to tag just a portion of data, the freedom to start and stop versus continuously filing in XBRL format, and other sweeteners to encourage participation.

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“The SEC program will be a definite catalyst,” says Paul Penler, a principal at Ernst & Young and chairman of the XBRL U.S. Consortium. “When I began working with XBRL in 1999, I knew it would take 6 to 10 years to take off. It’s like building an airport—there is a huge amount of infrastructure needed before planes can take off and land.”

Software such as Dragon Tag from start-up Rivet Software allows for quick conversion of spreadsheet data into XBRL format, and many existing vendors have or will soon modify existing programs to add XBRL capabilities.

Budgets Brighten

Several surveys suggest better days ahead for IT budgets, with results ranging from cautious optimism to very cautious optimism.

A recent survey of 225 large-company CIOs conducted by Morgan Stanley found them holding fast to their September 2004 estimate of 6 percent IT budget growth in 2005. That’s in line with a survey of 1,300 IT executives conducted by Forrester Research, which found that respondents expected to increase budgets by 7 percent.

But a survey of a different population of 1,300 CIOs conducted by Gartner uncovered just a 2.5 percent anticipated rise. Meanwhile, IDC’s February poll of technology buyers uncovered a 5.6 percent planned increase, a decline from the 7 to 9 percent buyers had been predicting for 2005 toward the end of last year.

Despite these differences, the surveys paint a collective picture that is rosier than it has been for some time. Our November survey of CFOs found that 28 percent planned to increase budgets by 6 percent or more, while 32 percent expected a rise of 1 to 5 percent, also a brighter picture than a year earlier.

A generally improving economy deserves most of the credit for this modest rebound. But all of the surveys indicate that after several years of making do with what they have, many respondents plan to upgrade expensive enterprise software suites such as ERP and CRM, while computer security remains an area companies seem loathe to cut back on.

All Together Now

With M&A activity surging, many CFOs will once again grapple with the issue of how (or whether) to integrate disparate IT systems. Horror stories abound and generally fall into two camps: we moved too fast, or we moved too slowly. For guidance, McKinsey consultants Lisa Aberg and Diane L. Sias suggest a look at the banking sector, where mergers are common and IT is at the heart of the business. In looking at successful mergers, the two found that the proper pace of IT integration can be achieved by moving quickly to identify systems platforms, product gaps, migration routines, and other aspects of synergy, and then developing a detailed migration plan that is followed meticulously. This keeps customers happy (fewer snafus) and captures the anticipated benefits of merging before they slip away. Since power struggles often derail integration (what’s best for the IT staff may not be best for customer service, for example), a steering committee should involve all key constituencies and focus on four goals: settle on a target product set that will give customers service equal to or better than what was provided premerger; pick a systems platform that is robust enough to support the merged organization now and in the future, but not so complex as to exceed the skills and resources at the company’s disposal; identify gaps between the offerings of the two organizations and decide whether or not to close them; and choose a method of data transfer (manual or automatic) that best meets the needs and capabilities of the merged organization. If that sounds simple, please reread.

Giving (Some of) It Away

“It’s a challenging area, and new threats seem to be emerging all the time…but I’m optimistic…that we’ll be able to mitigate the security problems and…allow for fantastic things to happen.” George Bush on Iraq? No, Bill Gates on computer security.

Speaking at a conference sponsored by RSA Security, Gates outlined a number of steps his company is taking to plug the holes in Windows that viruses, spyware, and other forms of malware (that is, malicious software) love to exploit. Microsoft has made six million copies of its AntiSpyware product available for free in what it bills as a very large beta program. The product was developed by Giant Software Co., which Microsoft bought in December.

Microsoft made an even splashier acquisition when it bought antivirus software maker Sybari last month. That raised the specter of Microsoft competing directly with Symantec, McAfee, and other major computer security firms, some of which it has longstanding partner relationships with. Gates said Microsoft will offer new antivirus tools later this year but didn’t say how (or whether) they would be priced. Analysts also expect the company to roll out new tools aimed at the corporate market, but no one expects those to be free.

This summer Microsoft will begin to test a new version of its Internet Explorer Web browser that features security improvements. It will work only with the latest version of Windows XP—the one with the Service Pack 2 upgrade, which also plugs a number of security holes. Do we detect a theme?

Finders Weepers

Because IT plays such a central role at both the macro and micro level of American business, it is perhaps the most heavily scrutinized, analyzed, and surveyed sector of the economy. Everyone from research scientists to vendors to end users is constantly being polled about new technologies, spending plans, deployment strategies, the paradigm shift du jour—you name it. But no one thought to ask taxi drivers for their perspective, until now.

Thanks to Pointsec Mobile Technologies, we now know that forgetfulness qualifies as a major IT concern in 2005. The company contacted taxi companies in nine countries, from Australia to Scandinavia, asking them how common it is for customers to leave cell phones, PDAs, laptop computers, and other accoutrements of the mobile professional behind in cabs. The results were staggering. In Chicago alone, the survey sample suggests that more than 100,000 such devices were left behind in a six-month period. The news isn’t all bad: on a global basis, passengers were reunited with their cell phones 80 percent of the time, and with their laptop computers and PDAs 96 percent of the time.

But Pointsec notes that as the memory of such devices increases, and as workers become ever more reliant on them, it behooves them to take advantage of the password and encryption features that many of the newer devices offer, lest those unreturned items lead to critical security breaches. The survey found that in most cases, items were returned thanks to the efforts of the taxi drivers themselves, something worth remembering the next time you debate how much to tip.

Getting the Goods On the Goods

Counterfeiting is hardly a new or high-tech crime. In fact, only three years passed from the time the United States created a national currency in 1862 until it created the Secret Service for the express purpose of stamping out counterfeiting. But there’s no doubt that technology not only makes traditional forms of counterfeiting easier (laser-printed currency) but ushers in entirely new forms, such as selling fake merchandise online.

Legal departments routinely search the Web for any clues that a company’s name, products, trademark, or sales channel are being abused; now, specialty firms such as Net Enforcers, Cyveillance, Envisional, and others will pound the electronic pavement on their clients’ behalf. For a monthly retainer (the most common arrangement), these firms will alert clients to phony goods and other misrepresentations, a form of outsourcing tailor-made for the times. Net Enforcers plans to add patent and licensing investigations and a service that monitors how much different retailers charge.

Spammer Lands in Can, But Flood Continues

The U.S. trade deficit may have hit an all-time high last year, but don’t blame spammers: U.S. computers were responsible for more than 42% of all spam worldwide, more than triple the amount produced by second-place South Korea, according to security software maker Sophos. New legislation was supposed to limit spam’s prospects as a growth industry, but many observers claim that the law has done the reverse: by clarifying just what is and isn’t legal, legislators have inadvertently helped spam, ah, mushroom from 50 percent of all E-mail sent in 2003 to 80 percent by the end of last year, according to figures from antispam software company Postini. True, the CAN-SPAM Act has led to plenty of lawsuits, yet spammers have managed to thwart the law by not only staying within it (adhering to prohibitions against misleading send and subject lines, including a link to unsubscribe, and so on) but also by tapping the power of technology (routing it through the computers of Internet service providers, for example, as the Washington Post reported last month). On the plus side, a notorious spammer did receive a nine-year prison sentence last November. But the Spamhaus Project, a leading antispam advocacy group based in the United Kingdom, maintains that U.S. attempts to regulate rather than ban spamming are doomed to fail. State laws have proved tougher, but none equal an outright ban.