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Financial Executives International

Committee on Finance and Information Technology

Committee Meeting

Hallmark Cards, Inc.

Kansas City, Missouri

December 9 and 10, 2010

 

MINUTES

ATTENDEES

 

Members
Arthur Alderson	Wal-Mart Stores, Inc.
Margaret Boissoneau	United Technologies Corporation
William Burns	Gartner
Michael Cangemi	Cangemi Company LLC
Ann Flatz	Intel Corp.
Greg Grocholski	Dow Chemical
Taylor Hawes	Microsoft Corporation
Garry Lowenthal	Salt Creative
William Overell	Overell Solutions
Gary Petrangelo	Japs-Olson Company
Leslie Porter	University of Southern California
Robert Shultz	Hewlett Packard
Carol Zoellner	Hallmark Cards Inc.
Guests
Steven Ford	TradeCard
Robert Norton	Vertex Inc.
Technical Advisor
Sri Ramamoorti	Kennesaw State University
Mike Willis	PricewaterhouseCoopers
Guest Presenters
Kurt Cavano	TradeCard
Glen Dong	Deloitte
Tim Griffin	Hallmark Cards Inc.
Thayer Stewart	OB 10
FEI Staff
William Sinnett
Maria Zadravac

 

I.          Welcome

Carol Zoellner, Corporate Controller for Hallmark Cards, Inc., welcomed the committee members to the Hallmark Cards headquarters.  She said that Hallmark Cards is a privately-held company with 4,000 employees in Kansas City and 15,000 worldwide.

 

Carol said that Hallmark was founded in 1910, so 2010 is its 100^th anniversary.  She said that the attendees would receive a special book commemorating Hallmark’s 100 years.

 

II.         Call to Order

Chairman Bob Shultz called the meeting to order at 8:50 a.m. CT on Thursday, December 9, 2010.  Bob thanked Carol Zoellner and Hallmark for hosting the meeting.  He welcomed the CFIT members and guests present.  He said that this meeting would include presentations from TradeCard and OB 10, two companies that operate “business exchange” in the Cloud.

 

III.        Committee Business – December CFIT Meeting Minutes

Bob Shultz asked for comments on the minutes from the September 16, 2010, CFIT meeting.  There were no suggested changes. Upon a motion duly made and seconded, the CFIT Committee accepted the minutes of the September 16, 2010, CFIT meeting.

 

IV.        Emerging Technologies Subcommittee Report

Bob Shultz asked Bill Overell to present the report of the CFIT Emerging Technologies Subcommittee, which Bill chairs.

 

Bill referred the members to his “CFIT Initiatives” matrix.  He said that this matrix included “Top 10” lists from:

·        The 2010 FERF/Gartner/CFIT survey of financial executives;

·        Gartner (Orlando, October 2010);

·        IDC Predictions (December 2009);

·        McKinsey (August 2010);

·        AICPA (June 2010); and

·        Longview (FEI Summit, April 2010).

 

Bill said that the purpose of this matrix was to identify topics on which CFIT’s subcommittees should focus, and how these topics align with FEI’s strategy.  The matrix also provides suggestions for possible deliverables for each topic.

 

Bill said that the Top 10 list from the 2011 FERF Technology Issues survey would be updated by the March 2011 meeting in Costa Rica.  However, Bill added that the number of responses to this year’s survey was behind last year’s by 50%, and he did not know why.

 

Bill Sinnett noted that several CFIT members had arranged to have personalized e-mail solicitations sent to their respective chapter members, asking them to take the on-line survey, including:

·        Ann Flatz – Portland

·        Greg Grocholski - Detroit

·        Taylor Hawes – Washington State

·        Bill Overell – Los Angeles

·        Gary Petrangelo – Twin Cities

·        Mahesh Shetty – Dallas, Houston, and San Antonio

·        Carol Zoellner – Kansas City

 

Bill added that Mike Willis posted a link on the XBRL International Website.

 

Peggy Boissoneau said that FEI Canada would promote the survey to its members.  Bill Sinnett will send survey information to FEI Canada staff.

 

Bill Overell suggested sending a special edition of “Finance & IT News” with a summary of last year’s findings and a link to this year’s survey.

 

ACTION: CFIT Subcommittee Chairs should forward information about the topics that they are working on to Bill Overell.

 

ACTION: CFIT Subcommittee Chairs should look for ways to link their activities to the FEI Strategic Plan Goals.

 

ACTION: Bill Sinnett will continue to promote the Technology Issues survey.

 

V.         Technology and Reporting Subcommittee Report

Bob Shultz asked Taylor Hawes to present the report of the CFIT Technology and Reporting Subcommittee, which Taylor chairs.

 

Taylor said that the Technology and Reporting Subcommittee has a number of current initiatives:

·        IFRS and Convergence

·        XBRL

·        Cloud

·        The Last Mile of Financial Reporting

·        Transparency

·        CFO Roundtables

 

IFRS and Convergence

Taylor said that Bill Burns of Gartner is working with Denise Cutrone and Lyn Fifer of PricewaterhouseCoopers (PwC) to develop a series of Issue Alerts on how accounting standards convergence could impact IT systems.

 

 

Taylor said that the first Issue Alert, “Are You Ready for the Proposed Changes to Accounting for Leases,” had been published and distributed on November 16.  He said that the next Issue Alert in this series will address revenue recognition.

 

Taylor said that he had heard that when SAP migrated to IFRS, there was minimal impact on its systems.

 

ACTION: Bill Burns will work with PwC to develop additional Issue Alerts on the impact of convergence on IT.

 

XBRL

Taylor said that Mike Willis and John Rowden of PwC (UK) had drafted an Issue Alert on the HMRC (the United Kingdom’s customs and tax service) XBRL Mandate that will take effect this year.

 

ACTION: Bill Sinnett will work with Mike Willis of PwC to finalize the UK HMRC XBRL Issue Alert.

 

Cloud

Taylor said that the Technology & Reporting Subcommittee will partner with the SMB and BTO Subcommittees to examine the use of Cloud.  He suggested that Carol Zoellner could manage this initiative, with Mahesh Shetty looking at how Cloud could be used by SMBs and Carlos Passi looking at infrastructure issues.

 

Art Alderson began a discussion of how the Cloud initiative could be addressed by the various Subcommittees, and how their efforts could be mapped in a grid.  Here is a first draft of this grid:

 

		Solutions
Issues	Infrastructure	Application	Software
Policy/Advocacy
Financial
Legal
Privacy

 

Art suggested that CFIT members identify possible external partners, such as ISACA and TradeCard, which could help with this Cloud initiative.

 

Taylor said there could be legal issues involved with the purchase and sale of Cloud services.  He said that there would be legal questions regarding venue and which country’s laws would prevail.

 

ACTION: Carol Zoellner will develop an action grid for Cloud.

 

The Last Mile of Financial Reporting

Taylor said that Bill Sinnett had interviewed vendors of financial reporting tools for a research report.  Bill will describe what tools are available, and summarize how companies manage and control the financial reporting process.

 

Bob Norton suggested that tax provisioning and preparation are pain points, and should be included in this report.  Ann Flatz agreed that technology can enable the tax preparation process, and corporate taxes can be significan.

 

ACTION: Bill Sinnett will draft the Last Mile research report.

 

Transparency

Taylor said that CFIT had a successful DC “Fly In” last December, which was used to promote transparency in government.  He said that, based on the results of the national mid-term elections, Representative Darrell Issa (R-CA) will become chairman of the House Committee on Oversight and Government Reform.  He said that Rep. Issa was pushing the use of XBRL for government reporting.  He suggested that CFIT address the role of financial executives in promoting transparency and accountability in government.

 

Bob Shultz suggested that CFIT schedule another DC Fly In.  Taylor said that “transparency” was a topic with rich potential, and liked the idea of an annual Fly In.  Art Alderson asked if FEI had a position on transparency, so that CFIT could develop a related position.

 

Sri Ramamoorti said that the Securities and Exchange Commission (SEC) was developing rules to implement the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (HR 4173) (“Dodd-Frank”).  Bob Norton said that the Dodd-Frank legislation could mandate up to 500 new rules, and that many of these rules could impact companies’ IT systems.

 

[Here is FEI’s summary of Dodd-Frank.]

 

ACTION: Bill Sinnett will work with FEI’s DC office to plan a DC Fly In.  Bill will identify the members of the House Committee on Oversight and Government Reform.

 

ACTION: Bill Sinnett will ask Matt Miller, FEI’s VP, Government Affairs, to make a presentation at a future CFIT meeting.

 

CFO Roundtables

Taylor suggested developing a roundtable of CFOs who have adopted Cloud.

 

VI.        Business Technology Optimization Subcommittee Report

Bob Shultz asked Art Alderson to present the report of the CFIT Business Technology Optimization (BTO) Subcommittee, which Art chairs.

 

Art reviewed the BTO Subcommittee’s Vision:

“The Business & Technology Optimization subcommittee will help FEI members understand the possibilities to optimize business processes and performance with technology.”

 

He then reviewed the BTO Subcommittee’s Mission:

“The subcommittee will act as a sounding board for members and technology providers, share best practices and provide communications to members through papers, presentations, articles and group sessions.”

 

Art said that the BTO Subcommittee holds a monthly conference call to discuss progress on its initiatives:

 

Change Management

Art said that Ann Flatz and David Taylor let a panel presentation on “The CPM Dashboard: Planning Budgeting and Forecasting” at the April 2010 FEI Summit.

 

Ann Flatz said that her finance team won the Intel Quality Award in September, and it was part of Intel’s financial transformation.  She said that Intel’s Human Resources department got in-depth training as part of this transformation, and the finance department would get mandatory training over the next five years.

 

Bill Sinnett offered to draft an article on “Financial Transformation” for Financial Executive magazine, focusing on how you get employees to change.  Art Alderson said that he would like to include Wal-Mart in the article.  Greg Grocholski said that Dow Chemical is implementing a new strategy, and would like to be included in the article also.  Les Porter and Bob Norton also expressed interest in participation.

 

ACTION: Ann Flatz will send information on Intel’s financial transformation, and Les Porter will send material on Change Management.  Bill Sinnett will interview executives at Wal-Mart and Dow, and draft an article for Financial Executive magazine.

 

Cloud

Art said that CFIT had discussed a new approach to Cloud, in which the BTO Subcommittee would participate.

 

Enterprise Performance Management

Art said that Steve Hosley of The Hackett Group has drafted an article on Enterprise Performance Management (EPM) for Financial Executive magazine.

 

VII.       Governance, Risk and Compliance Subcommittee

Bob Shultz asked Margaret (Peggy) Boissoneau to present the report of the CFIT Governance, Risk and Compliance (GRC) Subcommittee, which Peggy chairs.

 

Peggy said that she is helping Sri Ramamoorti and Bill Sinnett with a new research project on Continuous Monitoring (CM).  She said that CM is important in any organization.  Peggy then reviewed United Technologies’ (UTC’s) CM program.  She said that UTC’s major objective is to reduce and eliminate duplicate payments.  She said that the “procure to pay” integrity checks were reduced from 17 down to 4:

·        Vendor bank account duplicate

·        Vendor duplicate (two vendors are the same)

·        Vendor duplicate invoice (two vouchers are the same)

·        Payment duplicate (two payments are the same)

 

Peggy discussed lessons learned from UTC’s CM program:

·        There were too many integrity checks;

·        You need to validate business case assumptions;

·        You need the commitment of the business units; and

·        Ongoing communication to key stakeholders is critical.

 

Sri Ramamoorti updated the committee on the FERF research project on Continuous Monitoring.  He said that the focus of the project would be on companies’ operational controls, compliance initiatives and strategy, and it would go beyond the COSO report on Monitoring.

 

ACTION: Sri Ramamoorti and Bill Sinnett will proceed with the research project on Continuous Monitoring.

 

VIII.      Small and Medium Business Subcommittee Report

In the absence of Mahesh Shetty, Bob Shultz asked Gary Petrangelo to present the report of the CFIT Small and Medium Business Subcommittee (SMB).  Gary explained that Mahesh could not come to this meeting because he was meeting with investors.

 

Gary reviewed some of the SMB’s achievements during the past year:

·        Mahesh enlisted Ross Tisnovsky of Everest Research Institute to author “Risks Versus Value in Outsourced Cloud Computing” for the November issue of Financial Executive magazine.

·        Mahesh moderated “Under the Hood: The Mechanics of Software as a Service,” a panel presentation at the April 2010 FEI Summit.

·        Gary hosted the first ever SMB-focused CFIT meeting in September 2010.

·        SMB has collaborated with the BTO Subcommittee on Voice over Internet Protocol (VoIP).

·        SMB has collaborated with the Technology and Reporting Subcommittee on Financial Reporting and Business Intelligence for the SMB market.

·        SMB collaborated with FERF for the “Software as a Service” research report, and reached out to members with the NetSuite Webinar.

·        SMB has reached out to almost 1,000 FEI members (in the Dallas, Houston and San Antonio chapters) to solicit their participation in the 2011 Technology Issues survey.

·        SMB identified Melissa Krasnow to present at the April 2011 FEI Summit.

·        Mahesh will moderate the NetSuite panel at the April 2011 Summit.

 

Gary said that SMB’s primary initiative will be Cloud and the Virtual Back Office.

 

IX.        The Shift Index: Measuring the Forces of Long-Term Change

Bill Sinnett introduced Glen Dong, Chief of Staff for Deloitte’s Center for the Edge.

 

Glen said that Deloitte’s Center for the Edge published a book titled The Power of Pull, which describes how to draw out the best in people by connecting them in ways that increase understanding and effectiveness.

 

Glen discussed six “provocative” propositions:

·        Our management practices are fundamentally broken;

·        The basis of competition is fundamentally changing in terms of the source and means of value creation;

·        The global center of innovation is shifting from the U.S. to China and India;

·        Trajectories for performance improvement may be fundamentally changing;

·        Resolving the Dilbert Paradox may be the key to unleashing increasing return performance improvement;

·        Reintegrating passion and profession will be key to success in driving extreme performance improvement.

 

Glen described “Pull” as the ability to draw out people and resources as needed to address opportunities and challenges.  He said that Pull is about:

·        Expanding our awareness of what is possible;

·        Evolving new dispositions;

·        Mastering new practices;

·        Taking new actions to realize those possibilities; and

·        Developing new institutional frameworks.

 

Glen then described three levels of Pull:

·        Access involves the ability to find, learn about, and connect with people, products, and knowledge to address unanticipated needs.

·        Attract involves techniques for drawing people and resources to us that we were not even aware that existed, but prove to be relevant and valuable.

·        Achieve helps us to connect with our passions and accelerate talent development.

 

Glen said that there is a passion problem in this country.  He added that the larger the company, the less the passion.  As an example of reinvigorating passion, Glen said that Toyota redefined job responsibilities of line workers, telling them that their responsibility was to find problems on the line.

 

X.         Committee Planning Session

Bob Shultz announced that CFIT would have a new Chair as of July 1.  He suggested a new sub-committee structure for CFIT to be more effective:

 

CFIT Today	CFIT on July 1
21 Members	30 Members
Emerging Tech Subcommittee	“Club”
BTO Subcommittee	BTO Subcommittee
Governance Subcommittee	Governance Subcommittee
Tech & Reporting Subcommittee	Tech & Reporting Subcommittee
SMB Subcommittee	“Club”
Tasks/Deliverables	Tasks/Deliverables
Fly In	Roundtables
Summit IT Track	Evangelize to FEI Membership (Bill S)
Survey (Bill Overell)	Membership Communications

 

There were a number of suggestions about how to increase CFIT membership:

·        Ann Flatz suggested that each CFIT member bring one guest over the next year;

·        Bob Shultz suggested that invitations be sent to CCR member companies and FEI chapters;

·        Bob Norton suggested that each CFIT member identify what they get from CFIT membership;

·        Art Alderson suggested that CFIT add an international dimension and schedule one meeting per year outside the U.S.

 

There were several suggestions for new topics that CFIT should address:

·        Bob Shultz suggested Social Media and Mobility;

·        Art Alderson suggested Cyber Security, Cloud and CM;

·        Gary Petrangelo said that the top issues for SMBs were Software as a Service and Business Intelligence.

 

Bob Shultz asked for facilitators for committee tasks:

·        Garry Lowenthal will facilitate CFIT membership;

·        Sri Ramamoorti will facilitate relations with external organizations;

·        Taylor Hawes will facilitate a DC Fly In;

·        Bill Overell will facilitate the Technology Issues survey;

·        Greg Grocholski will facilitate conference presentations.

 

Bob Shultz recommended that each CFIT member serve on a subcommittee.

 

ACTION: Maria Zadravac will send an e-mail to all CFIT members asking them to choose membership in one CFIT subcommittee.

 

XI.        Welcome to Hallmark

Carol Zoellner introduced Tim Griffin, Hallmark’s CFO.  She said that Tim has worked for Hallmark for 33 years, and has worked in every area of finance except tax.

 

Tim said that Don Hall, Jr., CEO of Hallmark, and Dave Hall, President, were the third generation of Hall family leaders in its 100 year history.

 

Tim said that he does not say much about Hallmark’s finances because it is a privately-held company.  He did say that Hallmark does not need to go to the external credit markets, and avoids debt because covenants will dictate how you run your business.

 

Tim said that Hallmark now has distributorships in 52 countries.  Sri Ramamoorti asked Tim to describe Hallmark’s strategy for China and India.  Tim said that greeting cards are cultural.  He said that Hallmark might be able to sell Crayola in China, but not greeting cards.

 

XII.       The Role of Supplier Networks in Financial Transformation

Bob Shultz introduced Thayer Stewart, VP of Marketing for OB 10.

 

Thayer said that with technology, timing is everything, and we are on the cusp of something big.  He said that the Internet now provides linkages that can integrate financials with the supply chain.

 

Thayer said that OB 10 is the largest e-invoicing network in the world.  It is 10 years old, does business with 100,000 suppliers, and produces 12 million invoices a year.  He said that OB 10 has grown at a rate of 40% annually.

 

Thayer said that, from the CFOs perspective, Accounts Payable has become more strategic, because it can help optimize working capital and improve purchasing compliance.  He described some of the benefits of A/P workflow:

·        Automates routing and approval of invoices;

·        Standardizes the process;

·        Ensures greater visibility and compliance;

·        Enables off-shoring of non-value added activities; and

·        Compresses invoice approval cycle time.

 

Even so, Thayer said that paper invoices persist because:

·        From the customer’s standpoint:

o   ERP input formats are proprietary and

o   Cost and complexity of working with hundreds of suppliers

·        From the supplier’s standpoint:

o   Billing systems output invoices proprietary formats and

o   Cost and complexity of customizing for clients

 

Thayer summarized this discussion be stating that paper invoices will not go away because there are no standards, and it is cheaper to pay low cost clerks to invoice rather than pay high-cost programmers.

 

Thayer described four invoice submission methods:

·        Imaging

·        Optical character recognition

·        Outsourcing

·        E-Invoicing supplier network

 

Thayer said that there are only two countries in the world that do not permit e-invoicing at this time:

·        China and

·        Brazil, though Brazil may require e-invoicing in the future to address tax evasion.

 

XIII.      Supply Chain in the Cloud

Bob Shultz introduced Kurt Cavano, CEO of TradeCard.

 

Kurt said that TradeCard is focused on the direct cost of goods in procurement.  He said that he raised $100 million in 1999 and started TradeCard at that time, before widespread use of the Internet.  It was intended to be a platform to avoid letters of credit.  From there, he built a financial supply chain in the Cloud using Software as a Service.  Today, TradeCard has 31,000 individual users, over 6,000 clients, and handles 30,000 transactions per month, worth $1 billion.  It operates in 60 countries, using 32 languages.  Kurt said that his biggest competitor is the old way of doing business.

 

Kurt reviewed the definition of “Cloud Computing” provided by Wikipedia:

“A style of computing in which dynamically scalable and often virtualized resources are provided as a service over the Internet.  Users need not have knowledge of, expertise in, or control over the technology infrastructure in the cloud that supports them.”

 

Kurt said that, with traditional software, adding trading partners and service providers requires:

·        On-site installation and service visits from vendor service teams;

·        Dedicated server hardware;

·        Support staff to manage it;

 

Therefore, he said that larger trading partners and service providers that can afford to pay get this level of attention.

 

However, for every large enterprise that purchases a line-of-business solution, there are dozens of smaller and medium-sized businesses that could benefit from such a solution, but that cannot afford the expense.  So a Cloud platform with a built-in trading partner and service provider network can be a competitive edge, because it is uniquely positioned to service the long tail of the extended supply chain.  In other words, small customers get the benefit of the investments that TradeCard makes for everyone.

 

Kurt said that a supply chain in the cloud is the future, because it can connect all parties without overseas presence, IT headaches and costs, and it has the ability to upgrade modules and technology painlessly to meet new challenges.

 

Kurt said that TradeCard is a strategic global business network for supply chain collaboration, providing:

·        Visibility into ALL parties;

·        Rapid communication of changes;

·        Financial services to eliminate credit and liquidity risk;

·        Ability to rapidly respond to shifts in demand;

·        Speed to market support; and

·        Vendor and regulatory compliance.

 

Kurt said that all customers have two basic questions:

·        Where is my money?

·        Where is my stuff?

 

He said that TradeCard can answer these two questions.

 

XIV.      Social Networking Platforms

Bill Sinnett said that FEI wanted to develop a Social Networking Platform that could be used by all FEI members, without being dominated by marketing pitches.  He said that the CFIT LinkedIn group was one of three FEI committee LinkedIn groups being used to test what works and what doesn’t work.

 

Bill Overell referenced his notes from the June 2009 CFIT meeting, based on the suggestions of the FEI IT Task Force, which he chaired.  From the minutes of the June 2009 CFIT meeting, these suggestions included the following:

·        For social networking, use an existing platform:

o   Leverage the dollars already spent by vendors;

o   Leverage FEI members’ investment in their profiles and links on existing sites;

o   LinkedIn was by far the choice of the members present.

 

Art Alderson asked whether Microsoft SharePoint was being considered as a platform.  Bill Overell said that CFIT had used an earlier version of SharePoint several years ago, but it was too difficult to use.

 

Mike Willis said that XBRL International uses SharePoint for confidential committee discussions, and LinkedIn for general discussions.

 

Bob Shultz suggested that FEI speak with a LinkedIn sales representative to better understand all of LinkedIn’s current capabilities.

 

Art Alderson suggested that CFIT recommend criteria for Networking, including a closed environment in which CFIT members can share documents.

 

XV.       Future Meetings

 

March 23 and 25, 2011

Carlos Passi of IBM will host the March 2011 meeting at IBM facilities in Costa Rica.

 

June 2011

Greg Grocholski of Dow Chemical has offered to host the June 2011 meeting in Midland, Michigan.  Dates are to be determined.

 

September 8 and 9, 2011

Bill Burns of Gartner will host the September 2011 meeting at the Gartner headquarters in Stamford, Connecticut.

 

December 2011

Les Porter has offered to host the December 2011 meeting at the University of Southern California (USC) in Los Angeles.  Dates are to be determined.

 

XVI.      Adjournment

The CFIT meeting was adjourned at 11:30 a.m. ET on Friday, December 10, 2010.

 

 

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