BusinessCompany NewsWeb seminar: To cut or not to cut

Web seminar: To cut or not to cut

Our experts look at whether technology spend should be maintained in the recession

Are FDs prepared to invest in technology right now or are they simply
looking for different ways to say ‘no’?

David Dewhurst, finance director, Next Fifteen Group

As an FD my natural inclination is to hang onto cash and not spend it and to
justify that by asking: where is the return? It is in our blood to be that
cautious and I’ve had battles with my IT guys about spending money all the time.
But I think the speed with which you can now make decisions is the key to unlock
the spending.

We’re a relatively small company in market cap terms, but we’re a global
business with clients that are increasingly wanting a global solution from us.
We have to be able to get information quickly back to the centre to make
decisions. So any spending we are looking at is to keep the communication as
quick as possible, and shorten the decision-making process. It doesn’t
necessarily mean we’ll make better decisions but we’ll make more informed
decisions and more quickly.

The IT guys want a joined-up system because that is what we asked them to
build at the beginning of the process. So given that the software can do it why
aren’t we continuing the investment? That’s the kind of question that we are
currently faced with and we are going into a budget round just now. In the next
two or three weeks, I’ll be seeing the requirements coming through from the
different departments and IT.

Does this cause tension between finance and IT?

Paul Sparks, product director, Iris

We are working with the IT team and we are helping them build clear business
cases. Whereas you could have the position: ‘This sounds like a really good
idea, let’s invest that money now.’ Now the question is: ‘What is the business
case? How are we going to track those benefits? How are we going to make sure
each phase of the implementation of the project has clear parameters that we can

So tension is definitely there but there’s tension in most cases for a lot of
businesses. The ability to actually make a really clear case is paramount. If
that’s not there they shouldn’t be doing it.

The big thing over the last 12 to 24 months is that everything has to be
cloud, everything has to be internet-based or whatever. What we have found when
we have spoken to customers is, actually, it’s about what it is that they do.

For medium-sized and larger businesses that is an area where they feel
comfortable. For smaller businesses it’s very different.

Can you afford not to invest?

Peter Simons, technical specialist, CIMA

I can understand that everybody wants to sit on the cash – but there is also
a danger there of false economies. We see it on a personal level with people
being let go, yet a few months later companies are looking for someone with
those qualities to bring in.

It is very easy to have an embargo on capital expenditure, it is a simple way
of controlling the cash and it is a priority. But once you have figured out that
you can survive, the next thing to ask is how do we ensure that we prepare
ourselves for the future?

There is a quote from Barack Obama’s chief of staff where he says a crisis is
a dreadful thing to waste. Crisis provides you with a burning platform for
change. If you have always been keen to invest more in technology, cut costs,
this is the chance to win buy-in to that change programme and this is what we
have to do. We have to sit on the cash, but we also have to ensure that we
develop the business for the future and that tension is really exciting.

The finance function may have two futures. We have a future back office which
is around technology automation and shared service centres and a future for the
front office which is around taking information from those accounting operations
as a starting point and parting with the business.

How can you best manage the competing pressures of retaining cash and
making necessary investments?

Ryan Shuttleworth, chief technical officer, Validis

It is really important that you have different disciplines involved in the

I don’t think it’s the case now where an IT director can simply build his
business case: the IT department builds it and the FD signs off on it. The FD
needs to be involved in that process.

It is difficult for companies that maybe don’t have internal management
accountants and are using accountants in practice to get that sort of
integrated, really close advice and knowledge about their business because
decisions do need to be made fast.

But unless your FD is involved all the way and understands the reason for
this change, there is a sort of silo and traditionally-led projects can often
fail and you won’t realise that return on investment.

If you are shopping around at the moment, you can actually get some pretty
good deals, and if you are prepared to make the move onto some new technology
platform or upgrade your infrastructure in some way, then now is a pretty good
time to do it.

Is less money being invested in IT?

James Griffin, head of hosting strategy, Star

We are not seeing budgets shrinking. But we are not seeing them rise as much
as the cost of servicing in-house. I’ve seen some reports that suggest that
budgets are rising by around 6% whereas IT costs on premise are rising around
20%. What we are seeing is that you have to make a much more robust case.

So IT directors two years ago had fairly free rein to go and spend their
budget. Now even though it is their budget, they are then having to take that
back to the board. Are there any capex blocks? Are there an opex blocks? It’s a
longer decision.

So rather than the IT guy having a discussion with his FD about getting more
budget, he is just making better use of what he has got. That trend is growing

Chaired by Damian Wild

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