If IT fails the firm will too

Put your IT systems under the shareholder spotlight.

Put your IT systems under the shareholder spotlight

Corporate IT systems are no longer just the processing function of a business; nor are they just the accounting number-cruncher.

Nowadays they are a pivotal part of a company and can be just as much a part of the marketing and sales department as that slick salesperson. Many businesses are now designed around their systems capabilities, and their very business plan could not be implemented without them.

So when listening to firms reviewing their figures, it is interesting to note how rarely they refer to their IT, if at all. A quick review of the annual reports of many leading public companies usually shows a mere reference to technology development, and little of strategic systems and IT comment.

When you look at City analysts' reviews of companies, there is little awareness of businesses' IT situation. The IT of a business is often the area that bears the risk of the company's very existence - for example, systems failure or security breaches could be disastrous. But equally, in this world of cut-throat competition, the systems applications can often be the key differentiating factor for a business.

In this post-Enron environment, when we now look with cynicism at all accounts and commentaries, perhaps we should be doing the same with any company that does not properly reflect the importance of its systems in its reports and accounts.

As a shareholder, I want companies to reflect truthfully the IT issues they are handling, and to allow me to understand properly the implications for that company's current and future prospects, I will be looking for far more searching enquiries from analysts. If the IT fails, it is very likely that the company will, too.

Justin Urquhart Stewart is a director at Seven Investment Management, a division of stockbroking firm Killik & Co
This was last published in April 2003

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