The most recent Comment from Incisive Media

Accounting: Off balance – the future of off-balance sheet transactions

Peter Williams — 2009-07-03T11:33:00.000Z

Peter Williams, Financial Director, Friday 3 July 2009 at 11:33:00

Few would argue that off-balance sheet finance needs fresh oversight. Perhaps the banks' views are out of kilter.

For a few years it seemed possible that off-balance sheet accounting had finally been vanquished. That view now seems naive. While it is clear that, in general, the quality and transparency of corporate reporting steadily improved in the 1990s and in the early part of the 21st century, the lure of off-balance sheet transactions never quite lost their shine. Maybe that statement needs one qualification: while it seems non-financials have lessened their dependence on off-balance sheet vehicles, the banking sector remains fiercely loyal.

By its very nature, it is impossible to define the size of off-balance sheet assets and liabilities, the number of organisations involved in the various schemes and, most importantly, the size and nature of the risks created by the practice. Talk to European standard setters and they will claim the US has more of a problem with the small matter of up to $5 trillion in special purpose entities which the Financial Accounting Standards Board is seeking to deal with.

What we do know is that those charged with having to clear up after the credit crisis believe that off-balance sheet financing was a material contributory factor.

In April this year, the global Financial Stability Forum (FSF) urged accounting standard setters to work together to improve the accounting and disclosure standards for off-balance sheet vehicles on an accelerated basis and move toward international convergence.

Willing as always, that is what the International Accounting Standards Board (IASB) is trying to do. It has started a project aimed at sharpening up the current requirements for the derecognition of financial assets and liabilities. The proposals, which would amend IAS39 and IFRS7, seek to improve the assessment of when a financial asset should be derecognised. The proposals are tying to improve the disclosures so that financial statement users are provided with more and better information about an entity's risk exposure. Trying to deal with o ff-balance sheet financing is no stroll in the park. This time last year, the UK's Accounting Standards Board's (ASB) Urgent Issues Task Force (UITF) decided that as the Companies Act 2006 failed to define an off-balance sheet arrangement so companies would not be clear over the amount and type of off-balance sheet disclosures they should make, there was nothing it could do.

The IASB is not cowed by such problems and is in a hurry to act – it is under pressure to move fast on this issue and to come up with the right answer. To help with its search for clamping down on off-balance sheet vehicles and transactions it held a series of public roundtables across the world, before the time for comment closes at the end of July. It wants to issue final amendments in the first half of 2010.

The banks are concerned that the proposals would have a material impact on the way they are required to present their financial statements and it is clear the banking industry will work hard to block any moves which they would see as detrimental. Banks are particularly concerned that their securitisation and repo (repurchase agreement) businesses, worth trillions of dollars, could be hit. You could argue that the more banks squirm, the sounder the IASB's suggestions become.

The crux of this question is simple: when should a bank remove a financial instrument from its financial statements? The answer is complicated when the bank has an ongoing involvement with the asset it has transferred. One example used by the IASB is when an asset is transferred in return for cash and a call option. How, asks the IASB, does the transferor account for the transaction: is it a sale or borrowing secured by the asset?

Under existing IASB provisions there are several derecognition concepts – risk and reward, control and continuing involvement – whereas under the new proposal derecognition would be based on a single concept of control. This would mean a company should derecognise financial assets when the contractual right to the cashflow expires and upon transfer, it has no continuing involvement. Or, the company maintains a continuing involvement but the entity that buys the asset has the 'practical ability' to transfer the financial asset for its own benefit.

The alternative approach suggested by the IASB is that a financial asset could be derecognised by a company if it no longer had access for its own benefit to all of the cashflows or other economic benefits of the asset.

In terms of disclosure, the IASB wants to see corporates commentating on the nature of the continuing involvement and the related risks of off-balance sheet components. It is convinced that enhancing the disclosure requirements would allow users to assess the risk exposure of a company resulting from its continuing involvement in derecognised assets. It was the failure to understand and communicate the risks involved that poured petrol on the flames of the credit crunch.

It is fair to say that the IASB had off-balance sheet finance, the banks' special structures and other complex financial arrangements on its radar pre-crunch. The financial meltdown has since strengthened the IASB in terms of what it can push through and when. Depressingly, though, banks are still lobbying against changes designed to improve corporate reporting.

View from the board: just say no... but nicely

Mark Freebairn — 2009-07-02T18:25:00.000Z

Mark Freebairn, Accountancy Age, Thursday 2 July 2009 at 18:25:00

‘I don’t like finance - they just say no all the time.’

'Finance come in and act like the Monday morning quarterback. It’s easy to say what went wrong after the event it’s getting help beforehand that we need’.

No. I haven’t had a break down, and I’m not writing this in the small hours of Sunday morning. I’m just repeating a couple of the quotes that I have heard recently from some of the operational management with whom I deal. And they make an important point. Not necessarily that what they are saying is true they could be talking rubbish for all I know.

Finance people the world over could be reading this saying that it isn’t fair. In this market, of course someone in finance has to say no more often than before.

But that doesn’t, sadly, matter very much. Because, as Jordan and Peter Andre are proving so wonderfully, right now, it’s not the truth that matters but the perception of the truth.

Are finance departments saying no more often than before? I hope so. If they aren’t then I should be even busier than I am replacing many of them. We are in the middle of what’s being recognised as the worst recession of the last 30 or 40 years. If finance isn’t saying no a lot more than during a ten year growth phase, then we’ve got bigger problems coming.

But and this is the critical point marketing managers, salespeople, R &D Directors or whoever don’t care about that, not when they are talking to you to try to get the money for their favourite project. They want to get sign-off on this one thing and you are the gatekeeper.

And that’s when perception matters because you are going to say no, and deep down, they probably know that. The important thing, though, is how you do it. Right at that moment, you have the ability to make ‘no’ seem like a good thing.

Right now, when all they are hearing is no, you have a vital role to play in making them feel positive about the business, the product, the market, and most importantly, about the finance function. If they walk away from you unde rstanding the reasoning, they will defend you and the function to anyone that complains. But if they walk away and all they have heard is no, the perception of finance will conform to the old stereotype, and the carousel will start turning again.

Having spent ten years fighting our way off that particular merry-go-round, please let’s not turn straight back onto it.

Mark Freebairn is a partner at Odgers Ray & Berndtson

Worrying noises in the engine of the economy

Accountancy Age — 2009-07-02T18:24:00.000Z

Accountancy Age, Accountancy Age, Thursday 2 July 2009 at 18:24:00

The number is almost too big to fully comprehend

Almost two million companies in the UK have poor credit ratings labelled high risk or above normal risk, their low scores come about largely because they do not makemanagement accounts available to third parties.

Even if no one else will say it, the number verges on a crisis. With such poor credit ratings vast numbers of businesses will be unable to access funding, arrange trade credit insurance or satisfy the inspection of potential business partners.

As the companies involved mostly range up to the audit threshold of £5.6m in size, we are talking about the engine room of the UK economy being badly affected by what are procedural matters regardless of whether current trading conditions are also causing damage.

What should be done? One way around this is for the companies with low ratings to simply bite the bullet and start making management accounts available. This will be an extra burden, but the burdens are not insurmountable.

Perhaps the biggest obstacle is not necessarily putting the accounts together but the cultural issue of making information available to people who would not otherwise see it. SMEs have always been shy about revealing their numbers. The current Companies House demands for abbreviated accounts allows inhibitions to be indulged.

It looks like companies will have to overcome their shyness. There was a time when it could be argued that management accounts might not be so useful anyway. But that argument is beginning to look weak in the face of a mounting crisis. Besides the choices are stark. Keep your numbers under wraps or survive. Not much choice in that.

comment@accountancyage.com

This week's blogs: too cool for school

Our bloggers — 2009-07-02T18:23:00.000Z

Our bloggers, Accountancy Age, Thursday 2 July 2009 at 18:23:00

The end of exam season and the plight of LDV are the talk of the blogosphere this week

I hope my colleagues don’t mind if I keep humming ‘School’s Out For Summer’ by Alice Cooper. Yes, at long last, I’ve passed my final case study. And not only do I never again have to sit another exam (and what a satisfying feeling that is), I am also set up for life! Well, that might be an exaggeration, but that’s the sort of sunny mood I’m in.

It’s funny to think that I am now a fully qualified chartered accountant. Joining this select group of respected people feels like one of those achievements that are milestones in your life, and it was a particular relief to learn that a bowler hat and black umbrella are no longer compulsory parts of the uniform. We are even allowed to be interesting these days, apparently.

Anyway, now that the world is at my feet, my initial plan is to try and get a secondment within my firm.

At the moment, corporate recovery looks like a good bet, not just because the economic crisis is causing something of a boom in that area of business, but also because the work itself looks interesting, varied and you get to help struggling businesses back on their feet. It sounds like a good way to get job satisfaction, doesn’t it?

Daniel Chown, qualified CA at PKF

younggun.accountancyage.com

There is renewed hope that LDV could yet be rescued, with a number of ‘very credible parties’ bidding. One factor that might encourage retention in the UK is LDV’s special vehicles operation, which makes tailored vans for customers such as Royal Mail, on the track without the delay and cost of converting finished vehicles.

But, if a better offer comes from someone planning to rip out the Maxus presses and tooling and shift it all abroad, that’s what will happen. The administrator wants to claw back as much money as they can; they are not paid to have consciences, no matter how much they might want a happy outcome for LDV, its 850 employees and suppliers.

This raises the wider question of whether the UK has the right institutional arrangements in place for dealing with these situations, though this is not to question the professionalism and skill of the PwC administrators.

The point here is that there is no evaluation of the public interest in the UK’s administration process in terms of jobs and economic development. All in all, we need a review of how well the administration process works and whether we can learn from procedures elsewhere. The danger is that without such a change, we will continue to lose viable companis that might have been saved.

Professor David Bailey works at Coventry University Business School

blogs.birminghampost.net/business

On the money with Gavin Hinks

Gavin Hinks — 2009-07-02T18:21:00.000Z

Gavin Hinks, Accountancy Age, Thursday 2 July 2009 at 18:21:00

A few months ago I wrote in this column about the toll the credit crunch was taking on accountants – or mainly finance directors at the time

They were carrying the can for the damaging effects of the crunch and having to resign in droves.

We have a new phase on our hands at the moments – accountants facing criminal charges for their actions.

OK, it’s not here in the UK, but events in the US will act as a warning for many. Allen Stanford gave himself up to the FBI but two of his accountants are already facing charges for their part. The chief financial officer, James Davis, is already facing fraud charges, though he is cooperating with the authorities. In the Madoff

Ponzi scheme, the auditor is up on charges.

It doesn’t say very much for accountants except that, if you want to pull off a big fraud, you need them to manage, even help design the scheme.

It’s in stark contrast to the other trend of the recession – that being the emergence of the essential nature of finance directors and accountants to keep a lid on the things. That’s the legitimate activity of the company, I mean. Managing cash flow, holding spending down maintaining up to the minute information so that everyone on the board knows exactly where the company is. He or she is a guardian, an essential part of the effort to survive the recession.

But then a few bad eggs come along and spoil it for everyone. The fact is, though, the bad eggs are the reason the authorities believe accountants are so important in spotting and reporting financial crime. That’s why the pressure will always be on them.

The Serious Fraud Office, for instance, is having a close look at hedge funds. Who’d be surprised if they wanted to speak to the accountants concerned.

Gavin Hinks is editor of Accountancy Age

Tax increase: shot in the foot

Anthony Harrington — 2009-07-02T18:19:00.000Z

Anthony Harrington, Accountancy Age, Thursday 2 July 2009 at 18:19:00

Tax increases on the pensions of the rich will backfire

When Alistair Darling announced in the Budget that he would be depriving those earning £150,000 or more of certain tax advantages associated with pension contributions he said, by way of justification: ‘It is only right that those who caused the downturn should bear more of the costs.’

On one level, this was simply playing to the gallery, since even Darling has to know that not every high earner in Britain is a banker. On another level, it exposed the fact that the move was pure political expediency and an attempt to milk the public furore over the outlandish pension accorded to former Royal

Bank of Scotland chief Sir Fred Goodwin. What many missed is that a pension on this scale requires a pot far above the 2009/10 £1.75m lifetime limit and is, therefore, wildly tax inefficient. As such, it would generate tremendous revenue for the chancellor in punitive taxes. In a rational world, the chancellor would want every top executive to seek such a pension, since the additional taxes raised would ease the national debt.

It is almost impossible to find a pensions expert who has anything positive to say about Darling’s wheeze – other than the odd, honest admission that it plays wonderfully for the advisory community.

There is no doubt that it puts those who can most afford pensions advice deeply in need of that advice. In an economic downturn, Darling has tossed them a particularly tasty bone and given them a wonderful reason to tighten their links with the country’s richest people.

Gary Heynes, tax partner at Baker Tilly, points out that even higher earners need to be providing for their future and the proposed changes are ‘a huge disincentive’. He says the legislation introduces ‘huge complexity’ into the tax legislation.

KPMG pensions partner Lee Jagger says the government could find unintended consequences coming into play. At present, a range of normal corporate activities, including promoting executives and allowing early retirement, could trigger liabilities under the proposals.

One of the most critical points about the changes introduced by the Budget was made by Stephen Haddrill, director general of the Association of British Insurers, after the Budget. He warned that the chancellor ‘had sent an alarming message that [the government’s] pension promises can be easily broken.’

Anthony Harrington is a freelance writer

Analysing energy efficiency of green products and services

Melvyn Wray — 2009-07-02T15:51:00.000Z

Melvyn Wray, CRN, Thursday 2 July 2009 at 15:51:00

Melvyn Wray discusses how to separate environmental facts from greenwash

Products may often be installed with a working life expectancy of three to five years, so many network administrators must guess which functions will serve them best in the long term.

This has led to a complicated trade-off between a cheaper product that meets today’s specifications and an over-specified, pricier product that should be future-proof. The finance department will often be left to choose, making a Return on Investment (ROI) call.

New environmentally friendly ranges of networking equipment, developed for a more energy-conscious marketplace, make things trickier still.

The hype surrounding energy efficiency means many manufacturers are jumping on the bandwagon, leaving customers with a bewildering choice.

If a network administrator is truly keen to save power, they should first recycle responsibly and choose a product manufactured using environmentally friendly materials.

In fact, the most important issue for the network administrator when choosing greener networking solutions is its efficiency in use, because this can also save money.

Determining the power efficiency of networking equipment is an essential part of figuring out how green a product may be.

Power supply efficiency indicates how much energy is wasted when powering the electronic components of the networking equipment. Power supplies can vary in efficiency from between 40 per cent and 80 per cent, which is considerable.

A highly efficient power supply can halve the total power needed by a switch. In addition, inefficiency generates heat, which in many cases must be extracted from a building or a server room using air conditioning.

This further increases both CAPEX and OPEX costs and clearly is less environmentally friendly. Network administrators must verify power consumption by comparing this on the product’s datasheets against other products of its type.

Environmentally friendly networking equipment should also include power saving functions.

Green switches use a variety of mechanisms to save power and these must be scrutinised when picking the greenest product on the market.

Such features include the ability to power down ports when they are not in use. This is an important item on the green checklist – many network administrators use 75 per cent of the total number of ports on a switch, withholding the remaining 25 per cent for future network expansion.

If these ports cannot be put into a power down mode or disabled manually, they will consume power even when they are not connected.

The length of the cabling is also a key specification for power saving, and switches that can detect cable length to drive less power through them.

So if the physical configuration does not demand cables of 100m, products that support this could yield incremental power savings.

Equipment that can switch off LEDs during a 24-hour cycle can also help cut power consumption, as often LEDs are not monitored so this can be an easy way to save power.

In addition to power consumption and efficiency, green products should also be economical for the wide range of network loads they must support.

Many power supplies are less efficient at low or full loads. Therefore, theor power saving features must operate efficiently from zero load, where there are no cables and there is full power saving functionality, to full load, where all ports are functional with 100m cables and all LEDs on.

Datasheets must also be checked for power consumption at various load levels. The networking administrator must therefore ensure they have checked the maximum power consumption, which should ideally stand at around 75 per cent loading for normal business use and five per cent loading in overnight mode.

If datasheets are examined carefully, a green networking product can be both effective and easy to use.

Melvyn Wray is senior vice president of EMEA marketing at Allied Telesis

Rally the troops for war on cyber crime

Computing — 2009-07-02T06:45:00.000Z

Computing, Computing, Thursday 2 July 2009 at 06:45:00

The government's new cyber security strategy faces plenty of challenges

“Divide and conquer” is a battle plan that probably goes back further than the Romans, and it is one on which e-criminals and cyber saboteurs have been all too happy to rely in the UK.

The government’s new Cyber Security Strategy not only sets up two new organisations to help protect the country against the growing digital threats we face, but identifies 16 other bodies that already have responsibility for dealing with such attacks.

Nobody is trying to pretend that cyber defence is easy, and perhaps there is a very good reason why we need 18 different organisations working together – or at least, trying to.

But as most IT security experts know, it is human factors that the best hackers target, and even with the best will in the world, 18 different groups with 18 different priorities and prejudices mean an exponential increase in the potential for gaps through which cyber criminals can attack.

In theory, the new Cyber Security Operations Centre (CSOC) to be set up at GCHQ will be responsible for co-ordinating all these organisations in a coherent way. Good luck with that.

But what this means is that the success or failure of the government’s plan will depend entirely on the authority and accountability vested in CSOC. The centre’s location at the government’s top-secret communications monitoring site rather suggests its focus will be on high-level cyber espionage and terrorism – somehow it seems unlikely it will be that bothered about the sort of low-level, frustrating hacking activity that is the daily bane of most businesses’ life.

It would be churlish to criticise the Cyber Security Strategy because it has so plainly been needed for so long, and its arrival is to be welcomed, even though it is belated. But to counter the increasingly sophisticated threats the UK faces, we need a simple, streamlined, co-ordinated operation that has the real teeth needed to take action.

If one does not emerge, those gaps will loom ever larger for both the casual hacker and the malicious cyber attacker.

The digital divide must be tackled early in life

Valerie Thompson — 2009-07-02T01:30:00.000Z

Valerie Thompson, Computing, Thursday 2 July 2009 at 01:30:00

The digital divide must be tackled early in lifeIt is essential that all schoolchildren have the opportunity to learn IT skills, says Valerie Thompson

When the e-Learning Foundation started in 2001, its mission to ensure every schoolchild in this country has their own computer and broadband access at home, regardless of the income of their family, might have been regarded as unrealistic. Today, not only is that dream realistic, it is close to being a reality.

We have helped more than 100,000 children gain access to the learning technologies they need to support their education beyond the classroom. That work is about to gain a boost with a £300m Home Access programme due to be rolled out nationwide in the autumn, following a successful pilot in Oldham and Suffolk earlier this year.

The programme, being managed by government agency Becta, provides families whose children are eligible for free school meals with a pre-paid debit card that entitles them to an IT bundle.

This includes a suitable computer, 12 months of broadband access, warranty, support and e-safety measures.

Technology is increasingly being used in and out of the classroom for studies. Without access to a computer and the internet at home, many children are falling behind. It is ºlittle surprise that a child from a disadvantaged family is half as likely to achieve five higher-level GCSEs than their peers.

The e-Learning Foundation will work with schools across the country to encourage them to get involved in the programme. Only when there is a strong link between home and school can a young person be properly supported in their learning. And technology offers a unique opportunity to improve that vital communication channel between school and home.

The 21st century has brought with it many technological advances, but there is still a very obvious digital divide in this country. The Home Access Programme will go some way to erasing it and helping provide children, regardless of their background, with the skills they require for the workplace and challenges of tomorrow.

Valerie Thompson is chief executive of the e-Learning Foundation

Hot Seat: Roger Bearpark

Computing — 2009-07-02T01:15:00.000Z

Computing, Computing, Thursday 2 July 2009 at 01:15:00

Roger Bearpark is assistant head of ICT for the London Borough of Hillingdon, where he oversees innovation and green IT

What was your first job and how did you get into IT?

After leaving school, I saw an advert for a trainee hardware engineer that included a company car, which was the biggest pull. However, once I joined they told me I wasn’t old enough to be included on the company car scheme so they gave me a car allowance instead. I went out and bought a sporty Fiesta.

Which IT vendor do you think has been the most influential in the past 20 years?

There have been many, but if you look at the past five years I rate server and storage virtualisation vendors such as VMware and Compellent as examples of companies that are changing the way we think about, and use, technology.

Which mobile device do you currently use?

I rely heavily on two devices – my T-Mobile Vario 4 and my HP Tablet PC. I would be completely lost without the two of them. They let me work anywhere at any time, which is vital for my job.

What technology would you save in a fire?

If there were a fire, I would save my CD/radio player. Relaxing with some good music or listening to the radio really helps me unwind. Anything from Mozart to heavy rock does it for me.

If you were not in IT, what would you be doing?

I would be a deck chair attendant on a long sandy beach in Cornwall. That way, I could enjoy the summer outdoors and relax in the winter.

Is now a good time for people to enter the UK IT profession?

Yes. We are just beginning to see new people enter the market who have been learning about computers and IT at school from an early age. This will bring a fundamental change to the market. IT will no longer just be a business profession, as it has so many social implications. IT won’t just be a career choice, it will be a way of life for tens of thousands of people.

Digital Britain? In your dreams

Dave Bailey — 2009-07-02T00:15:00.000Z

Dave Bailey, Computing, Thursday 2 July 2009 at 00:15:00

Gordon Brown wants the UK to become digital capital of the world, but his government seems to be trying its best to make sure it can never be

Ever wondered why you dream? There’s no shortage of theories out there, from Sigmund Freud’s view that dreams are disguised fulfilments of repressed wishes, to one that views dreams as a test drive for new ideas, and another that thinks dreaming is just the brain cleaning up mental clutter ready for the dawn of a new day.

Taking Freud’s wish-fulfilment view, how many out there are dreaming of a UK-wide optical fibre-based network? Not many, I suspect, especially after the publication last week of Lord Carter’s Digital Britain report.

The thing that really gets steam coming out of my ears, is Gordon Brown’s speeches on how important all this is to the UK economy. Comments such as: “We can’t leave this to chance,” and: “The UK will become the digital capital of the world,” would seem to suggest that he understands how important this is to UK plc. The government’s actions fail to match such rhetoric.

Which other country still has an agency a Valuation Office Agency, to be precise that considers optical fibre in the ground as a taxable asset? In fact, the tax only applies when the fibre has data going through it, and it gets worse, because the rating system favours large carriers with large numbers of fibre connections. For small carriers rolling out a few fibres, the charges are harder to swallow.

There is simply no financial incentive for these smaller ISPs to roll out fibre to the 25 to 30 per cent of the country that Carter has said will miss out because it is currently economically unviable.

Let’s move on to one of the big winners of Digital Britain BT, and in particular its Openreach division. Ofcom is already consulting on proposals that would give Openreach control of those green cabinets you see located on most streets.

Openreach is the organisation that will be connecting up ISPs who want to roll out next-generation connectivity to your house. However, its record for doing the same for businesses in the UK leaves a lot to be desired, according to some ISPs I have talked to.

The main issue is a lack of transparency when it comes to connection charges. You can sign up to BT Wholesale for fibre connections, and then later down the line get hit by Openreach charges for connecting that fibre.

And some of these charges are no laughing matter. An ISP I spoke to recently had a nasty surprise after it checked out how much a fibre connection would cost in a large city centre. “You can use the BT Wholesale pricing tool and come back with a nice figure that looks very good, but when you order it, Openreach comes back with extremely high additional costs indicating excess construction charges,” said my source.

“Look at the charge for drilling a hole,” he added. “More than £300! What type of drills are they using gold-plated ones, badged by Armani?”

You get the picture by now, but remember the government and Ofcom has conceded that BT has to make a return on its investment; the question is just how much? If the Openreach charges relating to connecting up fibre for businesses are any indication, ISPs, and that includes BT Wholesale, should prepare to get stiffed big time.

So instead of dreaming about a Britain with state-of-the-art network infrastructure, I’m reminded more of the Ellen Ripley character in the Alien movies. In the last film of the series, Alien Resurrection, Ripley is once again trying to rid the universe of the bio-mechanoid killing machines. At one point she’s chatting to the obligatory android and says: “I don’t dream any more.” When asked why, she answers: “Because however bad the nightmares get, when I wake up the reality is always worse.”

Ring any bells?

Focus resources on what really matters

Martin Butler — 2009-07-02T00:15:00.000Z

Martin Butler, Computing, Thursday 2 July 2009 at 00:15:00

IT has become too caught up in the drive for efficiency, at the expense of business success

A firm’s success is generally not because of its efficiency. This may sound like blasphemy, but it is true. What makes a firm successful is customer preference for its products and services, and that it participates in growing markets. Everything else is secondary. I’m not saying efficiency is unimportant, it is just not critical.

We only have to look at US automakers to see the truth of this. One of these failing giants has spent in excess of $2bn (£1.2bn) on the global rollout of a large application suite to realise process efficiencies. Meanwhile, it continued to produce cars that people did not want – albeit very efficiently.

If we can accept that products, services and markets are the really important issues, we should expect our IT investments to shadow this fact. Marketing information systems (MIS), product lifecycle management, competitive intelligence and any other systems that help management deal with these issues would surely take priority. Clearly, this is not the case. Instead, we have a myopic fascination with process efficiency almost to the exclusion of everything else.

Business process management, corporate performance management (CPM), enterprise resource planning, governance, compliance and myriad other internally focused applications consume the majority of the IT budget.

We can blame this on the fact that the first IT systems dealt almost exclusively with internal processes such as billing, accounts and payroll. Forty years on and we cannot shake off this first love affair with IT it colours everything we do. The IT industry does not even offer marketing information systems as a mature, developed product, even though this should rank as number one in IT investment priorities.

There is some recognition of the fact that MIS is necessary, but the current emphasis is largely directed at tracking the performance of discount coupons or similar processes. MIS as the primary component in the success of an o rganisation is not widely debated, although an article I read suggested that accounts and finance were simply inputs to an MIS system. I am not sure the chief financial officer would like to hear this, but there may be more than a grain of truth in it.

Implementing an MIS has taken on a new urgency with the emergence of social media – specifically Facebook and Twitter. Mars successfully created a Facebook entry for its Skittles product – hundreds of thousands of Skittles fans linked to this entry and discussed the nuances of different flavours – sad but true. British Airways has created a forum for some of its more well-heeled passengers clearly an opportunity to network.

The myopic spiral of systems labelled with the words “management”, “process” and “enterprise” seems to continue unabated. I had a conversation with a consultant who worked for a supplier of such systems and without any prompting from me complained that it all seemed “a bit incestuous with no real output” his words not mine.

An interview with the IT leader of a large corporation that had just deployed a CPM system revealed that he had been able to reduce the number of reports he needed from 12 to six. This was cause for celebration but at such a cost.

If we continue to invest in IT purely as a means of managing internal processes, we can expect to see more large corporations go the way of the large US automakers. The emerging economies will happily supply the products and services that we all want if our traditional suppliers are busy navel gazing, using ever more sophisticated systems that help them produce unwanted products with breathtaking efficiency.

Martin Butler is the founder of analyst Martin Butler Research

Channel can deliver with mobile messaging technologies

Simon Paton — 2009-07-01T14:53:00.000Z

Simon Paton, CRN, Wednesday 1 July 2009 at 14:53:00

VARs should consider the opportunities around remote working via mobile devices such as phones or laptops, says Simon Paton

Any time, anywhere technology has obvious benefits, enabling home and remote working and making staff constantly available. But its use needs to be controlled.

A fear of being out of touch now outweighs the importance of focusing on the task at hand. Too many meetings are interrupted or compromised by people using mobile devices.

Simply turning the devices off during meetings is not the answer – it undermines all the benefits of ubiquitous availability. Staff also may forget to turn their devices back on afterwards.

However, resellers can deliver new levels of mobile device control, enabling workers to prioritise which calls, emails and IM are received and which will divert to colleagues or be met with a recorded message.

The process can be automated, offering instant response and continuous availability without compromising productivity.

For staff on holiday, only essential calls can be filtered through to their mobiles. The rest can be prioritised, based on caller, time of day or message content and either referred to another worker or to an ‘out of office’ response.

Obviously, users cannot be expected to spend hours updating and amending messages each time they change locations.

Instead, presence information can be filtered to determine which messages are delivered, which are diverted and what response should be delivered to the rest.

Meanwhile, more organisations are adopting mobile working to increase productivity, improve working conditions, boost staff retention and improve flexibility.

For organisations struggling to gain traction with clients in a tough marketplace, message management technology may help.

It also may help improve communication with clients, suppliers and colleagues. Individuals can prioritise communications and determine how much information is shared with external customers and suppliers.

Organisations will also need to address an associated cultural shift. Some people today feel compelled to constantly monitor their mobile devices and respond immediately to incoming messages – no matter what they are doing.

There is no doubt that staff need to be accessible to colleagues and clients. But overuse of mobile devices may actually damage business relationships.

Organisations need to impose clear working practices that ensure interruptions are minimised without accessibility being compromised.

Resellers could also offer seminars that outline changes to corporate strategy and approved ways of working.

Simon Paton is managing director at CommuniGate Systems UK

When Intel wakes up, Snapdragon will have a two-year lead

Guy Kewney — 2009-07-01T11:34:00.000Z

Guy Kewney, Personal Computer World, Wednesday 1 July 2009 at 11:34:00

The netbook world is going to get a surprise. Qualcomm’s speedy system-on-a-chip looks like it will blow away its Intel rivals

Intel, my sources tell me, may be frightened of Arm PCs running Linux. I saw several of these at the Mobile World Congress, and they were impressive. They are smaller and lighter than X86-based machines, have their own battery built in for a day (or two) of use and they are fast.

The unexpected factor in the Arm architecture is the decision of Qualcomm to license the instruction set. Not the design at all. Just the instruction set. It will run any code written for Arm processors.

The machines I saw were Snapdragon designs, built around a core processor called Scorpion. Apparently “Snap and Dragon sounded fast and fierce,” confessed one senior executive from San Diego.

Some benchmarks had to be attempted. They demonstrated one dual-core Snapdragon chip running at 600MHz, but capable of reaching 1.2GHz during 2009. Some of the speed must have been due to the exclusion of Windows Vista.

Compare the Linux performance as seen on some X86 engines in netbooks and it’s fast. Faster than the X86 chip could be.

Intel makes an Arm-based design, the X-Scale family – originally built by Intel itself and then, when the company finally accepted that its silicon skills were not appropriate, the fabrication was sold to Marvell.

Can X-Scale compete with Snapdragon? I would say not this year, and maybe not even next year either.

Inside Intel, my sources tell me of rage and fury, at the news that several popular Linux distributions are going to pre-install on these hand-sized boxes, with Arm-based silicon.

That isn’t what Intel has been sponsoring Linux for, and the sense of betrayal is deep, say insiders. “Why should we pour money into Linux developers just to see them divert the effort into stuff without X86 chips?” asked one engineer.

Many people I interviewed about Snapdragon were hostile to Qualcomm and felt they were being over-charged for Qualcomm-owned patents, but they are impressed with Scorpion cores, and amazed at Qualcomm’s roadmap for twin and quad-core devices on 45nm silicon.

One consultant said: “The rest of the world seems to have assumed, quite understandably, that Arm designed the architecture, and so that’s as good as the processor can get. I think Arm has taken its eye off the target. It should be re-engineering the baseband design.”

By the baseband, they mean the little tricks that speed up communication between processor and memory; between dual cores and I/O, between communications PHY and protocol stacks, and between OS threads and applications.

“It remains to be seen,” said one exec inside Qualcomm at the show, “whether other operating systems, like Symbian, can turn themselves into genuine multithreading platforms like Linux.”

“But where you have a genuine multithreaded OS, the new architecture of Scorpion means faster multitasking for the user.”

The world of netbooks is about to get a real surprise. We’ve got quite a few and they aren’t famous for performance. Light weight, yes. Low power consumption, yes. But blinding graphics? Stonking application processes? Native integration of CPU with comms processing? No, there have had to be compromises there.

Intel is very capable of pointing the total intellectual capacity of its chip designers at the X-Scale architecture and coming up with something at least as good as Snapdragon.

In reality, Intel has other projects, most of which centre around the X86 family. It has to fight off Via/Centaur, for example in the low-power market – where it has to do better.

I don’t believe in Mobile Wimax. And I don’t think Intel will turn to technology advances as its first weapon to bring Linux distributions in line.

I think it will use its financial muscle, playing favourites and influencing standards bodies.

By the time Intel wakes up, Snapdragon will have a two-year technology lead over all other Arm-based implementations, and a three-year lead in the netbook Linux market.

And by 2010, I expect that market to be very big, and quite possibly bigger than the Windows equivalent.