The Bloor Perspective: CNET money troubles, IT board strategies and CA's productivity

Plan B for content providers
It seems that advertisers have finally cottoned on to the idea that web traffic is not as high as the predictions they were sold and they are, understandably, reducing their activities within the new media.

Two excellent examples of the impact of reduced advertising revenues have surfaced this week. The first is The Money Channel - a TV service for small investors, part-owned by Adam Faith. Although it is TV-related, a part of The Money Channel's revenue model is based upon interactive advertising that viewers can 'click through' using their remote controls. With low viewer figures, advertisers have turned away from the company and now it is looking likely to run out of cash before the summer.

The other example is that of news-provider, CNET. It has just announced its financial figures for the last quarter. Although possibly skewed by the acquisition of ZDNet, revenues appear to have dropped by $17m compared with the same period last year. In addition to this, CNET has written down the value of its investments by more than $110m. Much of the downturn in revenues was caused by weaker input from online advertisers - despite CNET claims that it had nearly 40 million page views each day and a 35 per cent increase in the number of leads generated.

With falling advertising revenues, what does the future hold for content providers? There needs to be an alternative source of revenue to support these loss-making activities. Somewhere along the line, these businesses need to be able to add value to the information that they have gathered - to offer a service that is not available elsewhere.

Inevitably, this leads to a bricks and mortar operation that sells products and services based upon the added value. It brings us back to the familiar message of having a proper business plan with contingencies built in for alternative revenue sources.

Board makes headway
A new report this week highlights just how far away we are from achieving a position whereby technology and business work hand in hand, with one supporting the other and both working towards a common strategy. The study comes from Synstar, and it provides quite a valuable insight.

As it currently stands there are too few IT managers and directors providing strategic input into the business directly - 56 per cent of them across the UK, Germany and Benelux are still very much focussed on operational issues.

However, it would appear that some headway is being made because 60 per cent of the study respondents claimed that they were moving towards a more strategic role.

While IT managers and directors believe their role is becoming more strategic this could just be a case of personal perspective. However, it is backed up by other findings - 62 per cent of those surveyed said they strongly disagreed with the idea that 'the board frequently makes decisions about the business without considering the IT implications'. So some progress must be being made.

The problem that remains however is that the IT function as a whole is still not being represented on the board. Out of all of the study panel, 64 per cent said IT was not represented on the board.

Further to that, the perceived IT knowledge on most boards was said to be just average by the majority of survey respondents.

Quite why this would be is perhaps the most fundamental question that everyone should be asking. According to the study of IT managers and directors, 22 per cent thought IT wasn't well represented at board level because IT is not valued or understood.

A further 22 per cent said it was because IT is viewed as peripheral to the organisation and 18 per cent said it was because IT managers and directors lack the education, background and interpersonal skills to progress to board level. The truth is of course that the real problem is more likely to be an ugly combination of all three perceptions. The trick now is to go and alter that!

CA bites back
Last weekend an article appeared in the New York Times that questioned CA's financial and technical performance. It also accused the company of introducing new accounting methods in an attempt to cover up its weaknesses. Now CA has come back with a long and detailed response.

The disagreement seems to stem from CA's new business model, introduced back in October 2000. The changes made at that time included a move towards subscription-based licenses, which brings on a separate issue of when revenue can be recognised. It is this revenue recognition that seems to have upset the New York Times. The rateable revenue model is designed to enable CA to be more competitive by offering reduced up-front costs and by removing the 'end of quarter' sales rush that is nearly always accompanied by a range of discounts.

The article in the New York Times sees things slightly differently and also makes a number of generalised statements about CA's products and activities. In particular it suggested that CA's revenues had fallen by two-thirds on a six-month period and that this fact has been hidden by the new revenue recognition rules. It doesn't quite seem to have understood that a subscription-based model will always result in reduced short-term revenues - unless sales rocket at the same time - but that the situation will stabilise over the longer term. CA's new model dictates that actual revenue and pro forma revenue will be quite different during that time.

The issue of pro forma revenue recognition is always a tricky one that leaves CA open to suggestions of creative accounting but it should all even out as long as CA doesn't keep changing the rules. CA believes that such revenue recognition provides a better view of operational performance.

Beyond this point, the New York Times seems to have decided to dig out some old chestnuts to chew on. For example, it discusses CA's apparent failure to diversify beyond its mainframe business and says Unicenter is difficult to install and often ends up as 'shelfware'. None of these claims help its arguments very much and, even if they have an element of truth about them, they are not relevant to the central thrust of the item - that CA is, somehow, pulling the wool over the eyes of financial analysts. Good try New York Times - but not this time.