CFO Resigns Over IT Issue: How Weird Is This?

Ann All

IT Business Edge colleague Loraine Lawson is a Facebook friend of mine, and I always enjoy checking out her feed as she often unearths weird news items. Occasionally her talent for ferreting out this stuff extends to her blogging at ITBE. And so it was yesterday when she wrote about a data integration glitch that led the CFO at British travel company TUI Travel to resign.

 

As Loraine wrote, citing stories from The Wall Street Journal and the UK Telegraph, the company overstated its revenues last year by 117 million, approximately US$185 million. The apparent cause was faulty integration between IT systems owned by TUI and First Choice, a rival travel firm TUI acquired in 2007. TUI's tour operating system did not take into account the discounts and free items offered by agents using First Choice's retail system. So, essentially, the TUI accounts were not registering sales discounts offered by First Choice's sales team. Some of these "irrecoverable balances" were written off and disclosed earlier in August, but an additional 88 million (US$139 million) has been discovered since then.

 

Maybe I'm trying to make it weirder than it really is, but does it strike anyone as odd that the CFO is resigning, given that the problem resulted from a botched integration? In a statement, CEO Peter Long said:

It is now clear that at the time of merger there were weaknesses in the legacy systems we chose to use in the TUI UK business.

I wonder if the exiting CFO, Paul Bowtell, had any say in selecting those systems or signed off on them? Was he informed of those weaknesses? Does the company's CIO report to the CFO, ultimately making the CFO responsible for IT?

 

So many questions, and ones a spokesperson answered by referring me back to the CEO's remarks in TUI's statement announcing the restatement of earnings. She also didn't answer when I asked if there were any repercussions for CIO Jim Mann, who joined TUI in 2000.

 


According to a bio on IT Experts Exchange, before Mann joined TUI Group, he was group director of operations and IT at financial services company NatWest, "reporting at Board level." Given that reporting structure, it seems unlikely Mann would have reported to Bowtell at TUI Travel. A list of the UK's largest 100 users of IT at CIO.com UK puts TUI at No. 24.

 

Mann "has held a number of high profile senior management and IT roles in a career spanning multiple business sectors," according to the bio. A key role for Mann "has been evaluating and selecting offshore resources to support IT development, infrastructure management and back office processing." Outsourcing is apparently a pretty common practice at TUI, as I found multiple online references to agreements with vendors including T-Systems and Wipro Technologies. I also found a Shared Services & Outsourcing Network interview with Sharon Finch, former head of Finance, Shared Services for TUI, in which she discusses moving finance and accounting procedures to India as well as the First Choice merger.

 

Am I trying too hard to find a smoking gun? I hope not. It's just that this story seems so full of unanswered questions.

 

Computerworld UK reports TUI has completed a "full and detailed" review of its systems and processes as part of the year-end closing process, and claims to be "satisfied" that problems in its systems have been rectified. TUI is also undertaking another integration project. After entering into a strategic venture with Canadian travel company Sunwing, TUI said it had identified back-office functions between the two operations that can be consolidated at head and regional offices. It expects to generate a profit "of at least 6 million (US$8.2 million)" as a result.



Add Comment      Leave a comment on this blog post
Oct 28, 2010 3:58 AM another anonymous another anonymous  says:

You are certainly not making it weirder than it is. Take a look at the majority shareholder of TUI Travel PLC the German listed TUI AG. This is a boardroom power struggle with an offer, and exit, Bowtell could not refuse.

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