IT Revolution 2.0: What CFOs Must Know

Just as e-mail, ERP and relational databases transformed business in the '90s, a new wave of emerging and rapidly maturing technologies is revolutionizing organizations today. The implications for finance departments are profound, says IT thought leader Phil Simon. To kick off our upcoming series of extracts from his book "The Next Wave of Technologies: Opportunities in Chaos" (Wiley, 2010), Business Finance talked with Simon about the IT innovations that will reshape management in the new decade.

Business Finance: Many of the "Enterprise 2.0" technologies that you describe — software as a service (SaaS), business intelligence (BI), open source — are familiar to CFOs. Has finance been at the forefront of adoption?

Phil Simon: I'm sure that in some companies that's the case, but in my experience it's very difficult to generalize. Many of these technologies are not new, but large organizations tend to be at the right side of the technology adoption cycle. They're not dot-coms, and they don't want to adopt new technologies that are possibly going to cause significant harm to their business if they're not done right.

Enterprise 2.0, if you want to use that moniker, does encompass things that have been around for some time. Take for instance cloud computing; it's been around basically since the early '70s, when it was called utility or grid computing. But back then it really hadn't become mature, and there wasn't much of a need. You didn't have a lot of broadband penetration, you didn't have a lot of cloud providers, and storage was expensive. And then, of course, mobility happened, which really emphasized the need to access, at least on a limited basis, your apps and your data anywhere.

This gets to a larger issue, which is the IT/business chasm. Does IT drive the technology of the organization, or is it responsive to it? In my book, I draw three analogies based on politics. At the "far left" you have IT departments that are very involved; there's a lot of control over who gets to do what, things are locked down. At the other end — the right wing if you like — you have almost a libertarian IT department; they basically get the hell out of the way, and they only respond when there's some sort of crisis like a network emergency or security breach. In the middle you have a moderate view of IT as a business partner: IT should own the data, but they tend to be the people who are forced to deal with it.

I've worked on projects in which individual departments like HR and payroll really drove it. I've worked in organizations as a consultant in which the CIO has basically bullied the organization into implementing a system. Sometimes IT is reactive, sometimes it's proactive.

BF: Why do many companies still shy away from these technologies?

Simon: Well, take ERP [enterprise resource planning] and CRM [customer relationship management] systems, which have been around for the best part of 20 years. Now, yes, there have been minor changes in accounting, payroll, inventory, and management in that time. I would argue, however, that those disciplines are not fundamentally different from twenty years ago. Yet, as I discussed extensively in my first book, Why New Systems Fail , IT projects of those sorts tend to have a greater than 60 percent failure rate. So it's understandable that IT organizations in general are not really frothing at the mouth to jump into cloud computing, SaaS, or BI. They don't have a great batting average.

Sure, the economy matters; IT budgets were slashed in 2008 and 2009. But I felt that there was something else going on. The burnt hand teaches best. If you can't get payroll or inventory management right, what are the odds that you'll want to turn over all your apps to the cloud? Or that you'll want to move away from a proven commodity go with an open source alternative? My book tries to provide some guidance in what is a very chaotic time.