Cover Story: IT to Finance: GST is not our problem!
- 23 October, 1999 12:01
The message from CIOs and IT managers is clear: the GST is a collective business project and IT should not -- indeed must not -- be expected to 'own' it. Sue Bushell reportsWith not much more than nine months to go before the total re-engineering of business around the GST has to be complete, CIOs and IT managers are warning companies that they cannot abrogate responsibility for the GST by dumping the whole issue into IT's lap.
And they are telling business in no uncertain terms that it should lead the GST steering committee and accept sponsorship for the project.
"Whenever there's a problem that seems to be even slightly related to computers, the CIO gets it, whether he wants it or not," says one CIO in the manufacturing sector, who prefers to remain anonymous.
"That's just the usual abrogation by business . . . we're very keen on engaging the business in solving [its] own problems. We've made it very clear that it is a business issue; and having SAP makes that argument a lot easier, because SAP is a business system and it's run in general by the business people."
Business is slowly waking up to the fact that GST is far more than just a systems problem, with organisations needing to embrace a host of business, legal and cash-flow issues; to identify commercial opportunities, capture cost savings, and allow for long-term GST compliance.
Along the way organisations will have to assess the GST implications of every aspect of their operations, not only GST transaction interfaces such as procurement, supply distribution, sales and finance reporting, but also core business processes, customer service, staff training, and information systems.
When it comes to systems, GST-compliance is not a simple matter of identifying whether or not there's a GST component. Instead, there are five styles of transaction -- some taxable, some not, some a mixture of both.
Some retail sales will include GST on one component and not on others.
"[Our] business certainly understands this is a business issue," says Mobil GST project manager Eric Zwar.
"We have an executive sponsor who's the project champion and the project sponsor at the executive leadership team level; we have formal team leaders appointed for covering a number of different areas of the business.
"The mechanics of managing a large complex project are in place; we have a project plan developed at a number of levels of detail; we have critical success factors identified and agreed with by all the business owners; and we've presented to the board."
While consultants and analysts say corporate Australia is slowly realising the size of the task ahead, even chief financial officers are finding they're facing an uphill battle to educate their organisations about the complexity of the task ahead.
"I think initially business thinks [the GST] is just a pure taxation-IT issue. My role is to educate management and staff," says Mark Ludski, Group Corporate Accountant for poker machine manufacturer Aristocrat.
"It's a new tax similar to Fringe Benefit Tax where they think it will just happen and there's not much need for major change to business in regard to it.
"But it just ripples through the whole business -- the way you do business -- it's a re-evaluation process of the whole organisation.
"I'm attempting to educate them to that. The problem is day-to-day issues don't disappear; but they focus on day-to-day issues and the strategy of where the company is going and it's important they understand that GST is going to effect every decision they make in the future."
The good news is that most IT executives seem relatively relaxed about the GST challenge ahead of them, recognising that their role is to complete just part of the GST puzzle and knowing that on this issue at least IT won't cop the blame for compliance efforts that go belly-up.
"We've pushed at the steering committee level that they can't drop it on IT and give it to us three weeks out, because it will not happen," says one CIO, who can't be identified.
"But I really don't think it's going to give our IT division another focus after Y2K. I don't think it's going to be the disaster some of the claimants are posing."
Another says: "The issue, perhaps, that people haven't cottoned onto is that the GST is being modelled around the New Zealand and the UK models, and anybody with any international presence is already dealing with GST in those countries as we are."
When Peter Hind, manager of user programs at IDC Australia, held a GST information session recently, the unusually low attendance suggested IT was suffering relatively little angst over the GST marathon ahead of them.
"If people were really anxious, attendance should have been higher," Hind says.
"I get the feeling they just think: it's part of our job, let's get on with it."
Hind says CIOs had little choice but to accept full responsibility for Y2K compliance, since in that case they could, with some justification, be seen as having to pay for the sins of their fathers.
The GST is different: not only because politicians from both sides pledged for years there would "never, ever" be a GST -- so business can't possibly expect existing IS systems to be GST-compliant -- but also because GST is much less an IT-centric issue than Y2K.
"If Y2K didn't work, IT would have egg all over its face. If GST is a mess at the end of August next year, they're not going to look at IT and say: 'It's all your fault.'
"That seems to be causing much less anxiety. IT doesn't believe it owns this problem, and that seems to be letting it off the hook."
CIOs seem to agree. "I think the financial controllers are the ones who are going to be responsible for this," one said.
"They can say we didn't have the systems ready on time, but we're a cost-recovery organisation, and our divisions know they have to give us time to implement this stuff; they can't just come to us and say it has to happen tomorrow."
But business seems to have taken far too long to get the message that the breadth of GST systems implications needs to be addressed through a coordinated strategy. Ideally, this should be under the finance department head, involving all operational units of the business.
A July report from Ernst & Young, called Preparing for GST, an Australian Survey, found corporate Australia was poorly prepared for the introduction of the GST, even though implementation of the new tax was widely seen as a critical business issue.
Only half the organisations surveyed had set up a management structure like a GST steering committee, and IT was represented on the steering committee in just 62 per cent of those organisations. Purchasing was only represented in 51 per cent of cases, and sales and marketing in 42 per cent of cases.
Yet the report's authors insist that ideally the breadth of GST systems' implications should be addressed through a coordinated strategy involving all operational units of the business, preferably under a GST steering committee headed by the CFO.
A spokesman for Ernst & Young says business has moved on a little since the report came out, and is gradually gearing up its management structures for GST, but that more work needs to be done.
Meanwhile, CIOs know that on this one, it is the CFOs and accountants who'll pay the price if GST compliance efforts fail.
"Within our organisation it is definitely a business issue, it is not an IT issue," says one senior IT manager with a consumer products business, whose corporate policy demands he remain anonymous. There is a major IT component in a similar vein to the way Y2K has a huge IT component.
"But the reality is it is the business which is going to suffer if it doesn't implement GST . . . properly."
The IT manager says his organisation's divisional managers know GST compliance is their problem, and that they will have to sort it out in conjunction with their systems people.
"Now within our company we have our own internal tax division, and that is being pushed to the general management level of the divisions here.
"But it is their problem; they're the ones who have to sort this out, in conjunction with their systems."
International experience shows companies typically leave it until almost the last minute to turn their attention to the problems associated with a new tax system. Quoted in Computerworld's sister publication, CIO, in June, David Oliver, partner in transition taxes for PricewaterhouseCoopers, said most businesses waited until the last three months, then panicked.
"At least in Australia we'll have more than average time to prepare for the tax, and we're getting ample education," says QBE business information systems manager Ron Carr.
Having implemented the GST or its equivalent in New Zealand, Singapore, Canada, and the UK, Carr is fairly relaxed about the work needing to be done for GST, particularly in the insurance industry. He says in all the above countries business was given far less notice of the rules and still managed to cope.
He also believes some accountants, analysts and consultants are "beating up" the complexity of the issue.
"I've got no doubt that if you're a David Jones or somebody like that, then yes, it is a big issue; but they are large professional organisations with fairly substantial accounting departments and legal departments and all the rest of it, and I'm sure they can manage on their own.
"It is, after all, when you get down to it, only a tax. We're not changing the way the human body works."
Other IT managers are also sceptical about some of the wilder claims about the cost and complexity of compliance.
"I think it's classic Y2K stuff, to be honest, I really do," one said.
"The scare campaigns in the initial Y2K problem statement that came out in '97-'98, that it was going to cost you $13 million to make your SAP R/2 system compliant, were just ludicrous and I think this is a little bit the same."
Ludski says for Aristocrat, coping with the GST extends not only to its own business, but also to considerations of the way customers may be adversely affected through the way they finance their purchases.
For some businesses, cash flow will also be impacted for a short period due to timing differences between tax on purchases and sales.
Not only does the need for many companies to lock down for Y2K for several months impede companies' ability to respond, he says, but overseas experience tells us there will be winners and losers and the losers will get swallowed up.
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