There is a very telling side story in the May 2008 issue of CFO magazine on what can happen when Finance and I.T. work together to add value to the business.
Later this year, AT&T Mobility will roll-out a 30-line P&L statement for every iPhone customer (internal-only, of course). When it does, the business questions that can be answered are quite significant, for example:
1. Exactly how profitable is our iPhone business? Is it worth the license fees we pay to Apple (5-year exclusive US distribution rights), the investment in infrastructure (technology, support staff, sales training, etc), and the cannibalization to other phone vendor and channel relationships?
2. Are there more profitable customer types than others (business, government, family plans, students, prepaid, etc)? Or geographies for that matter? And if so, should we invest more heavily in marketing to one group or geo over another?
3. Do we have the pricing right? What’s the threshold for pricing various calling plans by customer type? Do we notice a correlation between price selling and value selling (online, store-front, channels, etc)?
And I’m sure you can think of dozens of other business questions this rollout will help answer.
The article says that AT&T owes the potential success of this initiative to a “strong partnership between finance and IT.” Jerry Boerner, AT&T mobility’s executive director of management reporting, says that after the 2004 Cingular Wireless acquisition, they had to look at customer data differently: the G/L couldn’t deliver on decision-support demand so he built a Teradata data warehouse with BI and portal technology on-top.
Jerry, if you’re reading this, I’m very interested in how you are handling indirect cost allocation in the customer P&L – for example, the apple license fees, SG&A, support, etc. Usually this is the hardest nut to crack on customer/product profitability.
Another nugget in the article about Finance/IT partnerships is how AT&T Mobility gets the business to trust it’s numbers. For this iPhone profitability effort (and others, I’m sure), they include an “AT&T Mobility Finance – Certified” logo on the portal. If I were an AT&T Mobility brand manager or regional sales VP, instead of spending time validating the numbers, I could spend more time answering those business questions and taking action to improve revenue growth & margin.
Here’s a related link (also quoting Jerry Boerner) on Financial Performance Management advice from Teradata and Ventana Research
What they don’t say is that to get started in improving Finance and IT collaboration, and to get agreement on the most material Financial Performance Management initiatives to invest in, (plug alert!) engage the Business Foundation to conduct our patent-pending rapid Business/IT alignment methodology that let’s you visualize it all on one sheet of paper.