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RealTime IT News

In Case You Were Wondering, the E-Economy IS Different

E-commerce is so different from doing business in more traditional ways that companies need to redesign their corporate finance functions to enable e-business transformation, says a new industry study.

Many CFOs view their companies as lacking the necessary structure and culture to effectively account for today's changing e-business conditions, says the report from Andersen Consulting in cooperation with the Economist Intelligence Unit (EIU).

The report is entitled E-Commerce and the CFO: A framework for finance in the new economy.

"Our survey, focusing on the impact of e-commerce on corporate finance, indicates that many CFOs doubt the ability of traditional metrics to evaluate key elements of operating in the new economy," said Daniel T. London, a partner in Andersen Consulting's Finance and Performance Management group.

"The majority of corporations is still applying traditional business evaluation techniques to e-business," he said.

Only 17 percent of survey respondents said new revenue/cost streams could be accounted for "very effectively" by established processes. And despite these concerns, 56 percent of respondents said they still apply traditional techniques when considering capital investments.

The survey confirms that most companies are aligning their e-business strategies with those of their traditional-economy businesses.

"E-commerce is changing the rules of the game and broadening the role of financial officers," said London. "New business models and innovative technologies are requiring greater levels of finance leadership to ensure long-term viability and success.

"Transforming brick and mortar companies to e-commerce players requires CFOs to reassess their approach to capital investment and rates of return. They are being asked to evolve at e-speed and, in several instances, reorder their priorities."

Illustrating just how dramatic the transition has been, 64 percent of respondents said their company has had an e-business strategy in place for two years or less.

In addition, 58 percent of respondents said that e-business strategy is reviewed on an ongoing basis, rather than annually. The survey also shows that by 2005, more than half of e-business initiatives will have a planning cycle of less than one year.

The survey also found that e-commerce is driving the finance organization to enhance transaction processing, with an emphasis on "virtual" accounting, where transactions are processed without human intervention.

There is an early sign of this trend in the move by companies to close their books faster, and perhaps, one day, virtually. Among the largest companies surveyed (with revenues in excess of $10 billion), 43 percent hoped to implement a virtual close by 2005.

The report is based on a global survey conducted by the Economist Intelligence Unit (EIU) in cooperation with Andersen Consulting. The survey covered 276 major corporations with a growing array of e-business initiatives.

In addition, personal interviews were conducted with CFOs and other senior finance executives at 35 companies in North America, Europe and the Asia-Pacific region.