CFOs on e-business: Not so fast

Chief financial officers at a conference that's being held here today by BusinessWeek magazine said many of their companies -- especially so-called Old Economy ones -- continue to be wary about braving the e-business waters.

In a poll of the more than 100 attendees that was conducted via wireless devices handed out at the magazine's 10th Annual BusinessWeek Forum of Chief Financial Officers, 24 percent of the respondents said their companies aren't yet involved in any kind of online business activities. That includes even relatively mundane business functions such as electronic invoicing.

Part of the problem, according to many of the CFOs here, is that it's probably going to take at least another couple of years before successful e-business models have been firmly established and can be easily implemented by companies.

That's true even at some businesses that have their feet in both the brick-and-mortar and online worlds. "I think we're going to have to wait a few years to see how all these [Internet-based] business models shake out," said Ray Arthur, chief financial officer at Toysrus.com Inc., the online affiliate of retailer Toys R Us Inc.

Other companies that have been aggressive about championing e-business strategies have run into some snags. For example, James Parke, vice chairman and CFO at GE Capital Corp., said the company has faced challenges in getting its "hands around [the] systems that worked well in the legacy world but had to be Web-enabled."

In addition, Parke said, "a lot of process and cultural changes were needed" before GE Capital was ready to do business online -- and that effort is still continuing even though the financial services arm of General Electric Co. has successfully implemented some e-business initiatives.

In one case, it took less than six months to achieve a return on a US$1.5 million software investment that was made to Web-enable data gathered from private-label credit cards GE Capital supports for The Home Depot Inc. in Atlanta and other corporate clients. But Parke admitted that it's hard to quantify how much such moves are contributing to GE Capital's bottom line. "The industries that we're in have not been transformed by e-business," he said.

But some have been. Patrick J. Spain, chairman and CEO of Hoovers Inc. in Austin, Texas, said the provider of company-specific research is now generating 98 percent of its sales online, compared with zero just a few years ago. That hasn't come easy, though: Spain said it has "been a continuing challenge" to get writers and researchers to conceptualize their work from an online standpoint.

One of the fundamentals that financial executives are discovering about e-business is that the same principles apply as in the physical world: companies still need to make money.

"The laws of economics have not been repealed, [and] the basic methods for making money have not really changed," said Thomas W. Malone, the Patrick J. McGovern professor of information systems at the Massachusetts Institute of Technology's Sloan School of Management.

But what is changing, Malone added, is that CFOs are being asked to act as "process architects" for their companies. That emerging role focuses on internal processes that cut across different departments, in an attempt to ensure that customers, suppliers and other business partners are linked together, he said.

Malone likened that effort to the way an enterprise resource planning (ERP) system is designed to integrate applications. One company that he cited as an example is The Dow Chemical Co. in Midland, Mich., which is installing SAP AG's ERP software and creating detailed process models that cross-link various departments and supply-chain partners.

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