Posts Tagged ‘IBM CFO’
Tuesday, February 21st, 2012
In my previous blogs I had brought out the importance of the CFO-CIO collaboration. We discussed and deliberated on the four mandates of the CIO - Leverage, Expand, Transform and Pioneer.
And I won’t be surprised, if CIOs today are implementing a cloud strategy or actively mulling one to leverage all the four mandates to create value for the organization at times when all of us accept that uncertainty is the new norm.
We need to ask a few basic questions - especially at a time when cloud computing promises to be a solid strategy for forward thinking companies.
- How can I enhance market share / consumer experience / demand
- How can I improve supply chain?
- How far or how soon can cloud reduce the overall cost – including IT?
- What are the risks associated with cloud?
- What if I don’t have a cloud strategy?
While attempting to answer these questions - I will be guided by two basic assumptions: a. My organization is a large and spread out across the globe b. My organization has the basic infrastructure and processes in place that are needed for a large organization to operate.
Enhancing market share
- Today 1 billion world population is connected through mobile telephone and the opportunity is to grow to 7 billion. So how does mobile companies, not only enhance connectivity and reach, but also grow different services verticals, targeted at different customer segments ?
- About 4 % of the Indian retail market is organized and more than 100 million Indians have access to internet according to IAMAI’s report. This is projected to grow to 175 million internet users by year 2014. This translates to a growing demand of goods and services, which is perhaps not possible to fulfill through traditional channels.
- The Indian automobile industry is growing at an average rate of 30% per annum. Car sales are expected to reach 5 million by year 2015 and 9 million by year 2020 according to a SIAM report.
So the question here is how will companies address the potential market? Growing systems and processes, organically, may not be a cost effective solution. The challenge is a. Bringing down cost per transaction b. Bringing down risk per transaction c. Enhancing satisfaction per transaction d. Enhancing and leveraging insights per transaction. So before jumping onto a cloud model, it is essential to delve deep into these parameters.
Improving supply chain
It is estimated that India loses about $ 65 billion annually in supply chain inefficiencies according to a CII publication of 2010. Among the major bottlenecks – one of the key bottleneck is low supply chain visibility. In other words, efficient planning and execution of logistics lags because there is limited control of goods between the source and the destination. This includes the storage and warehousing. With growing demand in the market, the complexity of supply chain also increases. There is hardly any company who would own the entire spectrum of supply chain. At the same time in an uncertain economy, the volatility of supply chain is greatly enhanced. In this scenario cloud computing can be very helpful to reduce the costs of planning and forecasting, warehouse and transport management, reducing sourcing and procurement costs and provide after sales services at reduced costs. The entire spectrum of the supply chain can be accessed in parts by relevant groups – while the transparency is visible to all the stakeholders in the supply chain.
However, there are several caveats. It is essential for a CFO to be convinced on the cloud based supply chain strategy and ask oneself - What is the permissible level of compromise in a shared environment ? How much of capex can be converted to opex? Is the risk due to liability reduced ? Is there a significant reduction of cost overall?
How far or how soon can cloud reduce overall cost
Let me bring a very simple analogy here. You travel frequently between two cities A and B. In the first case, you travel from your house in city A to the airport in you own car, park the car at the airport, get onto your private jet, arrive at city B, your second car picks you up from the airport and transports you to your own second house at city B. In another scenario, you travel to the airport in city A by taxi, get onto a commercial jet, arrive at city B and again hail a taxi to a hotel. The first scenario makes sense, if in your entire career you travel between the same two cities. There are hardly any risk in time, since you are in control of all the components of your travel and stay.
That is what the nature of business was till the last decade. Today, uncertainty being the norm, you may not know if your source or the destination cities remain the same. Hence, the second scenario makes sense - but of course with added risks of taxi may arrive late or the flight may get delayed or hotels may be overbooked. The upfront costs here could be the time bound SLAs with your travel agent. Hence, identifying the risks and preparing what ifs in the second scenario is important. It is very natural that mistakes cannot be ruled out in a new model and there will be costs associated with mistakes. In the early stage of a learning curve, it would be most appropriate to plan for such mistakes and take learnings from such mistakes.
What are the risks
Most often you may have heard that cloud and risk are the two sides of the same coin. A discussion in cloud is never complete without a prolonged discussion on risks. I would not get into the debate of the technical risks - which every CFO would be aware of and to a large extent those risks can be managed well if not eliminated altogether. However, some risks are very clear and present.
- Risk of an inappropriate cloud partner can perhaps be the biggest risk. Your cloud partner must know your business well and should have the capability to walk with you.
- An inappropriate cloud strategy can be equally frustrating. What is needed is a strong cloud partner to help you in your business objectives.
What if I don’t have a cloud strategy
With data explosion and a dire need to integrate several channels of communication with business stakeholders - it is important for companies to understand how a cloud can help address challenges in volatile times. I would recommend a few readings at your convenient time:
- An HBR article on “What every CEO needs to know about the cloud” http://hbr.org/2011/11/what-every-ceo-needs-to-know-about-the-cloud/ar/1
- “Cloud Decision Time for CFOs” an article by Computerworld http://www.computerworld.com/s/article/9223527/Cloud_Decision_Time_for_CFOs
- “Overcoming obstacles to cloud computing” http://www-935.ibm.com/services/us/cio/reader/build/media/cloud/overcoming_obstacles_to_cloud_computing.pdf
Tags: CFO, CFO IBM, cloud, cloud computing, Cloud For CFOs, IBM, IBM CFO, IBM India, Robert Parker
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Thursday, October 6th, 2011
Over the years, Finance organizations have contributed significantly to improve operational performance, drive cost reduction, identify new revenue opportunities and forecast future performance. This has necessitated transformation and in the process the free up of resources from traditional accounting transactions to shoring up resources for decision support systems.
The IBM 2010 Global CFO study with over 1,900 participating CFOs and senior finance professionals, support the fact that by adopting Service Delivery Models (SDMs) we can drive better value, scalability, efficiency and controls. Benchmarking data shows that finance organizations that have adopted SDMs – meaning shared services, outsourcing or a hybrid combination experienced material improvements in efficiency and reduction of 50% or more in costs associated with performing finance an accounting operations.
Its not that every organization aspires to be “world class” but for those who do, IBM examined the top quintile performers in SDM peer groups and found that they are 200% more likely to achieve “world class” performance, compared to those without shared service or outsourcing model.
However, adopting outsourcing or shared services or any sort of hybrid model itself, does not guarantee improvements. SDMs are infact optimized when deployed in conjunction with several other enablers e.g. culture and discipline across organization and common technology platforms. A service delivery model itself is not the whole solution.
For the benefit of this discussion, let me reveal some interesting facts:
- The SDM peer group demonstrated an overall 63% decrease in personnel cost. This suggests that broader benefits from standard processes and procedures, data and operating model, do generate tangible efficiency improvements.
- A long-standing objective of many finance organizations is to reduce the overall accounting period close cycle. The SDM peer group demonstrated, speeding up the annual close by 41%. Examining the overall cycle time from starting the annual close to earnings release, the SDM peer group runs about 28 days as against 47.5 days against non-SDM peer groups.
- There may be several reasons why an enterprise may want to enhance financial close cycle. One may be to increase time spend on financial review, performance analysis, preparation of management discussions and analysis for earnings release. The other may be to release earnings ahead of others. The SDM peer group is consistently demonstrating that time spent on transaction side is lowering and the time spent on reporting, analysis and preparation for earnings release is increasing substantially.
- Revenue accounting was examined across two key stages of cycle – managing sales order and managing and processing collections. The SDM peer group has 76% fewer people in managing sales orders and in managing and processing collections, the SDM peer group demonstrated 56% fewer people.
- Analysis of account payable showed similar results. The SDM peer group’s cost of account payables is 33% lower and shows a 43% improvement in transaction processing efficiency.
- In payroll processing, the SDM peer group shows a 45% improvement overall as measured by the ratio of payroll employees to the number of employees paid.. For reporting time, the SDM peer group’s total process costs are 29% lower and personnel costs are 84% lower. For managing pay, the total process costs are 43% lower and personnel cost component is 38% lower. On the quality side, the SDM peer group has a 47% lower occurrence with the number of voided payments.
The findings provide quantitative validations supporting the value of deploying service delivery models across most General Accounting and Finance Operations functions. These examples demonstrate significant savings which provides opportunity to invest in other finance transformations – such as those focused on analytics and enterprise support that can make finance a better and stronger business partner.
Excerpts, comments and quotes from “IBM benchmarks demonstrates the effectiveness of service delivery models for finance and operations functions” Copyright IBM Corporation 2011.
Tags: CFO, Finanace and Operations Function, IBM, IBM CFO, IBM India, Robert Parker, Service Delivery Model
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Friday, August 26th, 2011
Sustainability is more than legal compliance or philanthropy. Enterprise sustainability is a strategic business imperative. Today, well informed consumers are interested to know about a company’s track record on actions pertaining to ethical behavior, community relations, health and safety programs, environmental protection, financial stewardship and employee and supplier diversity. The increasing demands of consumers hold companies accountable for credibility of the programs and interactions with society.
In fact embedding effective sustainability provides numerous benefits. It creates a competitive differentiation and a positive brand image. Enhances cost efficiencies in energy, water and waste management. And it creates potential for gaining new share in growing markers.
Innovative leaders have always been in the forefront and have successfully differentiated on the basis of managing risks and establishing organizational and network alignment. Innovators have also differentiated based on incorporating sustainability benefits into customer value proposition and developing strategies for adding attributes to the brand.
Cost efficiencies have been achieved successfully by innovative leaders. Successful innovators have been able to develop appropriate metrics and scorecards in line with their business objectives and have relentlessly pursued the targets resulting in cost efficiencies. In addition, innovators excel in communication efforts. They strive to establish organization alignment as well as engage and communicate with their employees, value chain network partners and customers. They also develop and implement broad corporate level sustainability marketing and communication initiatives, communicating with and educating their stakeholders to promote their sustainability agenda.
IBM’s environmental policy objectives address topics from workplace safety, pollution prevention, energy conservation and smart buildings to product design for the environment and the application of IBM’s expertise to help address some of the world’s most pressing environmental problems. This comprehensive environmental affairs policy is supported and implemented by a global environmental management system (EMS) that governs IBM’s operations worldwide. The EMS integrates the company’s various environmental requirements, incorporating specific mechanisms for setting environmental policy, strategy and planning; implementation and operation; measuring and monitoring; and management review. Such efforts helped IBM become the first major company to obtain a single global registration to the International Organization for Standardization’s ISO 14001 in 1997.
Also committed to working with environmentally responsible suppliers, IBM introduced its supplier environmental evaluation program in 1972. In 1998, IBM explicitly encouraged suppliers to align their environmental management systems with ISO 14001 and to pursue ISO registration. And in 2004, IBM published its Supplier Conduct Principles to articulate the company’s supply chain social and environmental requirements. In 2010, IBM issued new requirements and objectives, calling for suppliers to deploy a corporate responsibility and environmental management system, measure performance and establish voluntary environmental goals, publicly disclose performance results and cascade this set of requirements to their own suppliers that perform work material to products and services supplied to IBM.
Similarly focused on promoting energy efficiency across the hundreds of facilities that support its global operations, IBM has taken a leadership role in implementing energy conservation and building management practices. For example, using a solution that integrates asset and service work-order management with energy and sustainability management analytics, IBM’s Rochester, Minnesota, campus realized an estimated 5 percent year-over-year incremental energy savings, an 8 percent annual savings from equipment operating costs (based on pilot program observations), improved asset reliability, longer asset lifespan and decreased operational costs. IBM’s proactive environmental and sustainability initiatives have served the company well; further illustrating that strong environmental leadership fosters business efficiency and effectiveness.
Some questions to be considered:
- Are product and service lifecycles designed for sustainability?
- Are your company’s processes optimized, applying lean sigma principles?
- Are you using advanced analytics to model energy efficiency and impact? Do you use predictive analysis for environmental impact management?
- Do you have “smarter buildings” for energy efficiency and “green data centers” for energy efficiency?
- Have you re-engineered manufacturing process and supplier compliance for water, energy and waste reduction?
References and Quotes from “Driving Performance through sustainability” Copyright IBM Corporation 2011.
Tags: Brand, Business Insights, CFO, CFO IBM, CFO India, cfospeak, Eco-Efficiency, Finance, IBM, IBM CFO, IBM CFO India, IBM India, India, Indian Economy, Robert Parker, value integrator
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Thursday, July 14th, 2011
Not many would know that computers did not exist when IBM was formed. The company started its journey as a computing, tabulating and recording company providing simple business solutions for repetitive tasks. But while evolving and making its impact on mankind, I find a few nuances that touched me and I would like to share these with you.
As narrated by the authors – the company’s sales executives met every day at 8.00 AM to talk about new developments and ideas. On one gloomy winter day in 1911, the team could not come up with a discussion topic. Thomas Watson Sr. the founder of IBM strode to the podium and urged them to think. “The trouble with every one of us is that we don’t think enough. We don’t get paid for working with our feet. We get paid for working with our heads. Feet can never compete with brains”. Watson then softened his tone and spent 10 mins lecturing on the usefulness of thinking. “Knowledge is the result of thought and thought is the keynote of success in this business or any business”. From that day “Think” became the company’s slogan and till today it is “Think” that drives our action for the benefit of our stakeholders.
Many of the policies that Thomas Watson Sr. created to shape IBM grew out of respect for his employees. He considered all employees to be equal, laying out what he called “the Man Proposition” in his speech in year 1915 to all executives, sales people and factory workers. On a large sheet of paper, Watson wrote out a list of roles in the company, including “sales manager”, “sales man”, “factory manager” and “factory man”. Then he crossed off everything except the word “man”. He told the people “We should keep in mind at all times regardless of what our occupation or duties are – we are just men – men standing together, shoulder to shoulder, all working for one common good; we have one common interest, and the good of each of us individuals affects the greater good of the company”. This attitude was very different from industry captains from that era.
“The Man Proposition” also applied to women. In 1935, much before the World War II, IBM started recruiting women. He said in the same year that “men and women will do the same kind of work for equal pay. They will have the same treatment, the same responsibilities and the same opportunities for advancement”.
What makes the difference was that IBM from the beginning was a people’s company, inspite of being a machine and business solutions company. Even after having presented solutions which can replicate near human capabilities, IBM will always rely and be led by the culture of “Think” by its people. Respect of people – irrespective of race, culture, gender, geography is the primary culture of IBM and this will drive IBM for many more centuries.
Reference and quotes from : “Making the World work better – The ideas that shaped a century and a company” by Kevin Maney, Steve Hamm and Jeffrey M O’Brian with copyright of International Business Machine Corporation
IBM has completed 100 years and not many people know that IBM has been much more than computers. Recently I got copy of the book “Making the World work better – The ideas that shaped a century and a company” by Kevin Maney, Steve Hamm and Jeffrey M O’Brian with copyright of International Business Machine Corporation. It’s a mind blowing revelation of how IBM shaped business and influenced mankind over a century.
Not many would know that computers did not exist when IBM was formed. The company started its journey as a computing, tabulating and recording company providing simple business solutions for repetitive tasks. But while evolving and making its impact on mankind, I find a few nuances that touched me and I would like to share these with you.
As narrated by the authors – the company’s sales executives met every day at 8.00 AM to talk about new developments and ideas. On one gloomy winter day in 1911, the team could not come up with a discussion topic. Thomas Watson Sr. the founder of IBM strode to the podium and urged them to think. “The trouble with every one of us is that we don’t think enough. We don’t get paid for working with our feet. We get paid for working with our heads. Feet can never compete with brains”. Watson then softened his tone and spent 10 mins lecturing on the usefulness of thinking. “Knowledge is the result of thought and thought is the keynote of success in this business or any business”. From that day “Think” became the company’s slogan and till today it is “Think” that drives our action for the benefit of our stakeholders.
Many of the policies that Thomas Watson Sr. created to shape IBM grew out of respect for his employees. He considered all employees to be equal, laying out what he called “the Man Proposition” in his speech in year 1915 to all executives, sales people and factory workers. On a large sheet of paper, Watson wrote out a list of roles in the company, including “sales manager”, “sales man”, “factory manager” and “factory man”. Then he crossed off everything except the word “man”. He told the people “We should keep in mind at all times regardless of what our occupation or duties are – we are just men – men standing together, shoulder to shoulder, all working for one common good; we have one common interest, and the good of each of us individuals affects the greater good of the company”. This attitude was very different from industry captains from that era.
“The Man Proposition” also applied to women. In 1935, much before the World War II, IBM started recruiting women. He said in the same year that “men and women will do the same kind of work for equal pay. They will have the same treatment, the same responsibilities and the same opportunities for advancement”.
What makes the difference was that IBM from the beginning was a people’s company, inspite of being a machine and business solutions company. Even after having presented solutions which can replicate near human capabilities, IBM will always rely and be led by the culture of “Think” by its people. Respect of people – irrespective of race, culture, gender, geography is the primary culture of IBM and this will drive IBM for many more centuries.
Reference and quotes from : “Making the World work better – The ideas that shaped a century and a company” by Kevin Maney, Steve Hamm and Jeffrey M O’Brian with copyright of International Business Machine Corporation
Tags: IBM, IBM CFO, IBM CFO India, IBM Founder, IBM India, Robert Parker, Thomas Watson Sr, World War II
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Thursday, March 31st, 2011
Going into 2011, I was fortunate to interact with several CFOs in the recent past. I can clearly discern the sense of excitement as 2011 promises to be a great year for business – at least for India. We now know very well that we have a domestic driven growth which can be better with the support of export let growth. CFOs have a great job ahead to ensure that not only shareholders expectations are met but critical organization initiatives are underway and there is sufficient provisions to reap in the upswing and as well as there is a fair balance between cautious optimism and business exuberance. So here is my documentation of some top CFO concerns based on my best understanding:
1. Regulatory, Policy and Corporate Governance
2011 is an interesting year as we will see roll out of the International Financial Reporting Standards (IFRS). While this will be a phased rollout over the next 4 years, the large organizations have a mandate to ensure start of this standard. While almost all large organizations are very confident, it is something like going into a world cup cricket match - one is very well prepared but it is still a match out there. There could be some initial hiccups but things should straighten out from the second half of this year.
GST rollout has been postponed for next year, but am sure this will gather a lot of steam towards the end of this year. This will have a lot of implications on how supply chain will pan out and if the supply chain gets a good boost, I can safely conclude that this was one of the best policy initiative in India. However, implementation of any new policy does have a few roadblocks initially and I would be happy to see that this fits in well – sooner the better.
Corporate Governance – as CFOs and custodians of the best financial practices we take pride in not only following the Government norms but instill a great deal of value and ethics in the business. But pure wish and determination is not sufficient – it needs to be implemented through rigorous organization policy and processes. It needs a lot of effort on creating an awareness and education and training to ensure that upkeep of corporate governance starts from individual efforts.
2. Risk Management
This is not only limited to financial risks but also about business risks. How do we ensure new projects are identified and executed with lower risk ? What are the critical risks in certain mergers and acquisition? How well are the business continuity plans for the organization tuned for year 2011? The answers are not simple and even constructing a response is not fraught with risk elements. With economy showing up – one thing I am certain about is that there will be more elements of risks involved. But are we asking the right questions now?
3. Business Insights
This is perhaps going to be the topmost worry for the CFOs this year. While every organization has processes for creating business insights – but the question we need to ask now is how accurate and efficient are these insights. Are these insights coming directly from the market with the least distortions? What are the levels and rigours of analytics in place to derive the insights? Again the answers are not simple. This is such an important issue that we need to delve deep into our financial structure and ask – Are my data reliable? Are my current processes reliable? Do we have the right skills? If not what are the skill gaps? How reliable and efficient is my technology? What are the levels of insights that can be built? Do these insights conform to the general business environment? Perhaps this is the right time to rejig and ensure that better quality decisions are possible in this interesting year.
4. Skills
Finance organizations in India are today many times mature than it was about a decade ago. Finance organizations today focus more on training and development of individuals on financial decision making and create leadership within organizations. Day-to-day and repetitive processes are either being fully automated or are being outsourced. While some of my CFO colleagues may disagree, I see more opportunities coming up for CFOs to focus on planning and progression activities rather than hands on execution. This environment is presenting opportunities for newer ways of looking at the finance organization and hence appropriate training and skilling of individuals as tomorrow’s finance leaders.
I would be keen to seek your views and comments on this.
Tags: Business Insights, CFO, CFO priorities, cfospeak, Corporate Governance, GST, IBM, IBM CFO, IBM India, IFRS, Policy, Regulatory, Risk Management, Robert Parker
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Thursday, March 24th, 2011
Recently, I had the honour to address a very elite group of CFOs and business leaders from Kolkata on a CII platform. The backdrop of discussion was “Transforming while Performing”. I was really impressed with my co-speakers and panelists and am taking this opportunity to share some interesting thoughts that emerged in the discussions.
I was very impressed with Mr. MR Nayak, Executive Director, Allahabad Bank who during his keynote address emphasized the need for technology capabilities and global integration as the topmost priorities for a continual transformation in current times. While India may take a consolation compared to other economies on stability, we still have a long way to go to prove that our priorities are in the right direction. He highlighted the need for leadership priorities to demonstrate sense of urgency, communicating the change vision, top down and facilitating to remove obstacles for growth. Efficient product pricing and strategy, identifying and encouraging winning teams, consolidating gains, efficient risk management and encouraging new and vibrant culture in today’s organizations were some of the necessary steps in the transformation journey.
My esteemed co-speakers were chiefs of finance from Exide, British Oxygen, Mitsubishi Chemicals, Peerless and Haldia Petrochemicals who reiterated the importance of risk management, operational efficiency, precision and business insights and becoming a value integrator in the organization. As rightly articulated by the esteemed panelists, the current role of the CFOs was also critical in the transformation journey.
Highlights of what I shared with my learned peers were that new business models and new competitors are executing business disruption. And this trend will keep on increasing. Some key questions are a. How well do we know our customers and market? b. How efficiently and in least possible time can we go to market with our offerings and services? c. How do we ensure that our clients are able to provide the best to their clients? d. How do we embody creative leadership within organization? To answer these questions we need hard data and facts to support action. We are seeing an explosion of data of all sorts – in various media and in various forms – some data are useful, some are not and some are redundant. It is the ability to collect, process and utilize the relevant information in the best possible way, in the least possible time, is what is all about being truly interconnected, instrumented and intelligent. So the transformation journey is about enhancing these factors on a continual basis which hinges on effectively integrating organization strategy, performance and technology. Leadership building within the organization is another equally important criteria in the transformation journey. Innovation is perhaps the single most important criteria to create leaders and be ahead of competition.
I received very positive feedback on the need to have more such get-togethers discuss and debate key challenges that we have in hand and find solutions.
I am keen to seek your valuable views and comments.
Tags: Allahabad Bank, Business disruption, Business Insights, CFO, cfospeak, CII, Exide, IBM CFO, IBM India, Instrumented, Intelligent Innovation, Interconnected, Mitsubishi, Mr. MR Nayak, Peerless, Performing, Risk Management, Robert Parker, Transforming, value integrator
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Sunday, September 26th, 2010
CFO, once considered as an executive with proficiency in figures, is no longer confined to the game of numbers. Having undergone through changes over the period of time, they now play a major role in driving the business for their organization.
I am sure we all would agree with the fact that the role of a CFO is no longer the same, first the transition happened post liberalization and then the recent tragic financial turmoil changed it further, bringing the CFO on to the business intelligence desk.
“Don’t get boxed in. A mix of finance- and operational-related roles makes a better finance chief,” says IBM finance head, Mark Loughridge.
An article published in Financial Times, titled Number cruncher to co-pilot featured Mark Loughridge, CFO, IBM, as a part of a new breed of CFO. The article mentions various jobs that Mark had taken before taking the finance seat and how the diverse past experience helped him in his current role of CFO.
Starting his career as a development engineer and then becoming a strategic planner, Mark feels that having a dual set of opportunities is not only good for the corporation, but it provides a much richer career path for the finance population as well,”
The IBM global CFO study launched few months back also highlights the nature of change in roles and responsibilities of a CFO. It was during this period, CFO’s were asked to take up the charge and support their organization sail through the gloomy period. The sudden exposure to such a critical and complex business environment transformed the whole outlook of a CFO and today at C suite level, CFOs are considered imperative as they help their CEOs is making financially viable business decisions.
In favour of the CFO study findings, I believe in today’s dynamic business environment that is full of complexities, CFO’s with their analytical skills, business intelligence and business insight can support the business development process in their organization.
I strongly believe that this transformation of CFOs from being the Score-keepers of their organisation to Corporate Co-pilot will further strengthen the relationship between them and their CEO’s.
However, I am sure that apart from helping the board in making business decisions, there is lot more to a CFOs Job and it would be really great to read your opinions and views on this topic.
Data Source/References/Quotes:
Financial Times
IBM.com- IBM CFO Study 2010
Disclaimer
The views and opinions mentioned in this blog are strictly my own and in no way reflect those of IBM or any other corporation or individual in any manner
Tags: CFO, CFO IBM, CFO India, CFO Study, cfospeak, IBM CFO, IBM India
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Friday, July 16th, 2010
As a matter of being up to speed to on what’s happening in the financial world around us, it is often my hobby to go through relevant editorials, which are of interest to me. One such global topic which has been the cynosure of the financial media worldwide, has been the crisis around euro, where matters came to a tipping point with civilians in Greece protesting in outrage over non-acceptance of the Euro as their official currency.
As this topic had been grabbing the headlines across financial media, I made it a point to go through interesting articles on this topic whenever I got the time but it was this article on CFO.com, which got me thinking about a different take that we as CFOs can take from this entire crisis.
At the outset, this is a crisis as the media has dubbed it, but every crisis is also the hotbed of opportunity and new innovations. Are there learnings from the Euro crisis that Indian CFO’s can reach out for? Having got the idea, I had mulled over it for a while before I came up with a few thoughts which I have now penned down to share with my larger peer community. Would be nice to know what you feel about this as well.
As the Euro crisis scatters to other European countries causing worldwide panic, I believe Indian companies may have a reason to worry a little. According to what RBI Deputy Governor Usha Thorat “Money probably tries to come to places where it gets better returns. So from the point of view of capital flows, you do have the likelihood of more uncertainty in the rest of the world and therefore more money coming to India,” RBI Deputy Governor, Ms. Usha Thorat told reporters in Mumbai. Thorat added that Indian banks have a healthy asset quality and “there is nothing to worry.” This is because the Indian economy is largely a domestic economy and is therefore cushioned against the blow from global crisis. Our exposure to the European market is merely 2-3%. Even during the subprime crisis, we bounced back into shape much quicker that the rest of the world. Source- Economic Times.
But having said this, I must add that, the insulation will only remain if the situation does not worsen. Like Mr. Pranab Mukherjee, Hon’ble Finance Minister of India pointed out at the annual general meeting of the Indian Banks Association (IBA), “If the crisis in Greece turns into a larger European sovereign debt crisis and possible fragmentation of the European region, there are chances of adverse capital flows. And such a scenario would be a major concern for India in the medium-term.” If the situation does worsen, then India would bear the brunt to. As an emerging economy we are integrated with the world and may suffer reduced cash flow into India. Another concern is the depreciation of euro by 9% against the dollar. The Euro which was quoting at around Rs.67 before the crisis is way below at Rs.55.92 currently. This becomes a stressful time from a currency management perspective than we used to have because we used to manage only the dollar earlier. Now we are dealing with the euro and British Pound and the Australian dollar. The sharp depreciation of the euro could ultimately have cash flow impact on the remittances. Source- DNA.
But having said this, there is also a silver lining that cannot be ignored. In an article published in livemint, the author has mentioned that the ongoing debt crisis could translate into lower valuations. “With better buying power of an appreciating rupee, it presents a second window of opportunity for most Indian firms that missed out on making major acquisitions in the US or Europe during the slowdown that started in 2008” , Source: Mint. As spending trends in the European markets have drastically dropped, Indian companies are seeing a blooming opportunity. Here is where I believe every CFO must align closely with his CIO to understand the IT needs of the company from a business growth and cost perspective. Necessary expenditures that would prove beneficial in the long run made in such economically tense environments should keep the health charts stable and the status-quo maintained. IT governance and costs need to be ascertained as much by the CIO as the CFO and it is here that the role of the CFO has to undergo a paradigm shift in terms of legacy to what it currently needs to be.
The Euro Crisis is an eye opener on this. While the ramifications of this might not be felt directly by all of us here, yet here is a learning that we can all tap on as CFOs to understand how we need to rethink our role in an organization and thereby chart out those growth metrics where we need to focus on.
These are some of my rudimentary thoughts on how we can take a crisis and glean learning’s from it which can become intelligence for growth to us as a community. Let me know your thoughts on the same.
Sources/References/Quotes
CFO.com – A Big Fat Crisis Averted?
Economic Times – Euro crisis may trigger more capital flows into India: RBI
DNA – Prolonged Euro crisis could impact capital flows: Pranab Mukherjee
Livemint – European crisis presents buyout window for Indian IT companies
Disclaimer
The views and opinions mentioned in this blog are strictly my own and in no way reflect those of IBM or any other corporation or individual in any manner
Tags: cfospeak, DNA, Economic Times, Euro Crisis, IBM CFO, Pranab Mukherjee, RBI Deputy Governor, Robert Parker, Usha Thorat
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Tuesday, July 6th, 2010
Before I even start, I would like to take a moment to appreciate the creativity of the person who coined the term, “Cloud Computing”. I can’t be sure about the person who came up with it, since there is still a debate on it, but to my knowledge it is Eric Schmidt of Google. So kudos to you Mr. Schmidt for giving the world a term that is so empowering. However, the big discussion is – Is cloud useful ?
In the recent past it seemed that the most tragic shadow: security concern would obliterate the acceptance of Cloud Computing but with technology constantly reaching new heights, it seems security would be no fuss in the near future and companies would step forward to benefit from the quintessential features of Cloud Computing. The best being the ability to cut IT spend, which today is one of the most essential requirement for growth. In fact during the IBM Impact 2010, conference held in Mumbai, Craig Hayman, GM AIM brand, IBM in his key note speech also said, “In today’s environment it’s all about working smart and the first step towards working smart is to reduce the total spend on IT”.
Midst all discussion regarding risk factor related with Cloud, I came across this interesting article published in cfo.com, titled Certainties: Death, Taxes, and the Cloud. In the write-up Michael Hugos, a former chief information officer and a principal of the Centre for Systems Innovation asserts that cloud can decrease key risks. Giving an example, he said “for a company developing a new product with an uncertain long-term market, renting the associated computing capacity is far less risky than expanding the company’s data centre. The cloud provides a lot of flexibility to probe into new markets, ride them as far as they go, and exit without a bunch of sunk cost,” and I completely agree with his statement.
So it’s quite clear that risk is not the concern factor, so then what’s it? On this, I assume most of the IT evangelist would have the same thought as I do, that is “vendor lock-in”. The vision of being fully reliable on a single service supplier is objectionable to companies that depend heavily on IT service. Red Hat CEO James Whitehurst was recently quoted in the computer world, saying that Cloud is the mother of all Lock-ins.
I would like to know what the Indian CFO community thinks about the plethora of discussion which Cloud initiates almost every day. Is it worth it, or the traditional way of maintaining private data centre is better? Does it make sense to maintain a huge data centre when it can be outsourced? Your suggestions are of ultimate importance and will enable us, the community to have a better approach. I look forward to hear from you.
Data Source/References/Quotes
CFO.com – Certainties: Death, Taxes, and the Cloud
Disclaimer
The views and opinions mentioned in this blog are strictly my own and in no way reflect those of IBM or any other corporation or individual in any manner
Tags: CFO IBM, cloud, cloud computing, Craig Hayman, Eric Schmidt, IBM, IBM CFO, IBM Impact 2010, IBM India, indian cfo, new technology, websphere
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My name's Robert Parker, and I have been working with IBM India from April 2008 as a Vice President, Finance and Operations IBM India/South Asia. In my 23 years of career with IBM I had a wide range of financial positions within Australia, New Zealand and Japan.
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