Does the Sarbanes-Oxley Act play a role here? Is there more urgency because of the regulatory issues?
Beauchamp: No question about it. If you don't understand the relationship between the infrastructure and the business services, then you can't guarantee that you have your arms around the process. You know, the ankle bone is connected to the foot bone and so on.
You were CEO when the company had to implement Sarbanes-Oxley requirements. There has been a lot criticism from corporate leaders who say the legislation is an encumbrance to doing business. How much of an issue is it?
Beauchamp: I would say that we're a better company because we had to do it.
How so?
Beauchamp: We discovered some deficiencies that, while they never did burn us, could have caused us to make a mistake.
Can you remember an example?
Beauchamp: Well, one was with our sales commission processes. We found out that (with the processes we had in place, we could have) misestimated the sales commissions and therefore had a problem. We might never have tripped over it.
Because we found it during the SOX review, we were able to tighten up the process, and so our shareholders were never subjected to an error that potentially could have happened. This was several years ago, and that deficiency has been resolved; it's gone.
So Sarbanes-Oxley, on balance, has been a plus?
Beauchamp: Well, I'll say yes. I think that SOX made us a better company. I think the amount of money spent and the amount of time spent on it is really extraordinary, though.
I don't think there's any question that foreign corporations are rethinking their listings in the U.S. exchanges. But now you're seeing some of the problems turning up that companies have hidden in Europe. So, as I said, I think it's made our system better. It's made our company better. I think we just have to watch that we don't get carried away.
I'd like to talk about mainframes, since that part of your business continues to chug along.
Beauchamp: It actually grew. Up four percent.
Interesting. But the general perception, of course, is that mainframes are dinosaurs living on borrowed time.
Beauchamp: No, they're not. In general, if you are going to get off the mainframe, you probably did already. There are still a few companies I talk to every now and then that have an end-of-life strategy. But you're not going to find a bank or any of the money centres in the world that don't still run on mainframes. And they are quite happy.
Do you think this is going to be able to sustain itself over the course of the next decade?
Beauchamp: I do.
How do pricing pressures compare with five years ago?
Beauchamp: Five years back, we were under extraordinary pricing pressure when the bubble popped. All of the venture capital-funded companies were melting, and many of our customers had layoffs. Then outsourcing resulted in a huge shift.
The pressure was so extraordinary that customers would say, "I don't care what it does or how much I need it. You've got to lower the cost." Since then, we've seen the pendulum swing the other way.
Is that because they've realised that the end of the world was not about to occur?
Beauchamp: I just think it was a natural part of the business cycle. I think now we've gotten back to a healthy place. Customers are still quite focused on real cost savings, but if you can show them real cost reduction, they'll spend the money with you.
How has that affected the sales cycle?
Beauchamp: What happened in the 1990s was that IT was this black box, and the CFO would believe IT workers when they said, "I've got to have this new Tornado 2000 tomorrow." What's happened since is that the chief financial officer basically doesn't believe a word they say anymore.
What's also happened is that CIOs who survived have learned how to embed a really good financial person as part of their staff. So, when a deal goes forward, the i's are dotted and the t's are crossed on real savings, and they're presented to the CFO.
The revenge of the CFO has gone from one of almost just revenge to now, I think, just a much more disciplined process, and IT is managed like all other departments of the company.
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