CSC research shows most companies continue investing in IT without strategic plans

Continuing a theme begun last year, information security emerged as the most pervasive concern in the eighth annual Technology Issues for Financial Executives survey.

The survey, conducted by Computer Sciences Corporation in association with the Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International (FEI), and the Committee on Finance & Information Technology (CFIT), also revealed that the majority of companies represented continue to lack strategic information technology (IT) plans.

"Information security persists as an area of significant concern for financial officers due to the growing number of audits evaluating security measures, the frequency of security breaches and broad press coverage of those breaches," said Jerry Boltin, a senior partner and the Business Intelligence practice leader in CSC`s Consulting Group.

Only about one in five CFOs are "highly satisfied" with their security programmes. "This is not a surprise when one considers the potential for business interruption and/or negative market consequences if confidential information is compromised," said Boltin. Approximately one in 10 respondents reported a major business interruption as the result of cyber intrusion.

Most respondents - approximately 60% - still do not have a written strategic IT plan, despite the fact that many are making large investments in technology. Even among entities with more than $5 billion in revenue, only about five in eight (63%) have a formal plan.

"As we`ve said in previous survey reports, this is paradoxical given the size of the IT investments and the potential consequences of these decisions," said Taylor Hawes, chairman of CFIT. "It also may help explain the variability in return on IT investment and project success rates. This year a number of respondents reported success rates in excess of 90%, while another significant group reported success rates of less than 30%."

The area in which financial executives say they are most constrained by lack of technology solutions echoes the same theme voiced for the past several years - the need to leverage analytical information to improve business performance and drive shareholder value. Like last year, only a small minority - about 8% - indicated they had made substantial progress toward this goal. Sixty-four percent plan to invest in their analytical and decision-support capabilities this year.

"The planned spending levels to achieve this business intelligence goal continue to be remarkably high," said Boltin. "Medium-sized to very large companies plan to spend, on the average, between $1 million and $15 million each, with maximum planned expenditures for some of the largest reaching close to $100 million."

Entities currently upgrading analytical and decision-support capabilities are focusing largely on projects that support planning accuracy and/or measure business performance and effectiveness. The top two analytical areas cited for upgrades are "planning/budgeting/forecasting" and "management dashboard".

The survey also found that overall IT spending is again expected to increase modestly in the next year, and companies are planning a substantial number of new or expanded outsourcing and in-sourcing (shared services) arrangements.

All forms of outsourcing are expected to continue growing with some areas likely to see substantial increases. As reported previously, payroll and IT are the two most frequently outsourced areas. In this year`s survey, 57% indicated payroll and 27% cited IT among their current outsourcing arrangements. Payroll outsourcing dominates the smaller entities, while IT is the most common area among larger entities. IT and human resources are the areas with the most planned outsourcing activity. Approximately 7% of respondents plan to outsource some portion of their IT in the next year, while about 6% plan to outsource some portion of their human resources.

"We suspect that one of the drivers toward outsourcing is the consistently high overall ratings it has received from those that have done it," said Boltin. Again this year, about 90% of respondents rate their outsourcing arrangements as successful.

Unchanged from last year, the top three areas where CFOs consider their IT organisations deficient are "project management", "understanding the business/IT relationship" and "communication". "Roughly one out of three IT projects are considered less than successful by senior management, and that is a direct result of these deficiencies," said Boltin.

The survey examined a variety of additional pertinent issues, including financial executives` views related to financial management, IT strategies, use of technology applications and managing the IT function.

Other specific topics explored include measuring return on technology investments, identifying the implications of mandates and legislation (such as Sarbanes-Oxley), addressing systems integration issues, assessing the effectiveness of ERP implementations and evaluating the use of offshore resources.

Participation in the eighth annual survey produced another strong turnout -- 708 surveys were received -- about a 6% response rate of the population surveyed. Respondent demographics match the overall make-up of the FEI membership in terms of industry, company size and location of respondent. Consistent with previous surveys, only the responses of the most senior FEI member in each entity were included.

FERF and CSC also limited the survey population to those currently serving in financial officer roles.