IT need be seen as a key contributor to corporate strategy.
A joint survey by Gartner and the Financial Executives
Research Foundation found that 42% of IT organizations report directly to the
CFO. The same survey pointed out that finance chiefs alone authorize 26% of all
IT investments, while chief information officers approve only 5%. This makes
sense: in tough economic times, finance inevitably asserts itself and casts a
gimlet eye on spending.
The CFO and CIO are well-positioned to work together at
generating business value from enterprise IT investments. However, this
performance is often not achieved because of poor perceptions of IT, a
parochial CFO or CIO perspective, or simply a failure to invest in the CFO-CIO
relationship," said John Van Decker, research vice president at Gartner.
According to the other study "A New Role for New
Times," which includes survey responses from hundreds of CFOs around the
world, financial executives really do see value in technology. And they're firm
believers that the future will rely heavily upon technology. At the same time,
they're frustrated with "outdated" IT solutions that don't live up to
their expectations. The paradox is: they're the same folks who are probably
telling you to curtail spending.
How many CFOs view IT as a necessary evil and how many
view it as a strategic enabler? Most of business executives including CFO view
CIO as tool guy/gal, from an earlier consulting and media firm’s survey, Only
33% of CIOs believe they’re seen as a “trusted partner or business peer,” and
even fewer (31%) see themselves viewed as a “valued service provider.” Only 11%
think IT is providing competitive differentiation
IT is being treated as a cost-to-be-controlled for years -
and not just the CFO-view, but the business' perception as well (after all, the CFOs view of IT is very likely
an extension or reflection of the business' view of IT). It may be reasonable
because many IT organizations simply cannot give a fair accounting of where the
money is going in terms of business capability or, more importantly, directly
identifying the business value -- which leads to an inability for IT to its
value to the lines-of-business. Therefore, CIOs have been treated as
CITO-Chief In Title Only, without authority in decision making.
To make it fair, there’s also “bias” to view CFO role, they
are viewed as “bean counter”, opposite to innovation agent, CFOs may view IT as
an unpredictable cost and there is very little visibility into, or
accountability for, IT costs. In other words, there is essentially no
accounting, charging or budgeting for most IT expenditures. As CFOs want
control over costs, and they want IT to be in one bucket so they can measure it
easily. But IT is embedded in every organization and every department and every
budget, not just one. CFOs need to learn to measure IT differently than other
business budget lines. Industry analysts even declare: Every budget is an IT
budget, Technology is embedded in every product.
When CFO and CIO can exchange or expand their lens to see
the business world holistically, they may understand each other more: IT is
oriented toward change and finance is all about consistency. Once something is
locked down, finance is loath to change it. That may make for sound cost
management, but it can be a barrier to innovation.
Information is more pervasive than ever these days,
businesses cross-sectors declare themselves at information businesses, thus, there’s
a plethora of opportunities on the IT horizon. In order not to miss
opportunities, CFO and CIO need transparency, and they need to talk.
IT actually does well in improving efficiency; the recent industry study showed that its record of doing more with less (a response found frequently in IT study) makes IT a business segment leader in productivity. While measuring IT largely on the Lean “do more with less” criterion may warm the CFO’s heart, it can run counter to the concept of implementing new technology to drive innovation.
IT actually does well in improving efficiency; the recent industry study showed that its record of doing more with less (a response found frequently in IT study) makes IT a business segment leader in productivity. While measuring IT largely on the Lean “do more with less” criterion may warm the CFO’s heart, it can run counter to the concept of implementing new technology to drive innovation.
As CFO, you may need shift your finance’s “mean” mindset, or
take off your IT customer hat, and act as visionary business leaders to
perceive IT as silver lining for business growth and leverage IT to drive value
across the business.
The most mature organizations see IT as a business partner,
from a financial management perspective. IT need be seen as a key contributor
to corporate strategy. Therefore, CFO and CIO are well-positioned to communicate
in-depth and work together at generating business value from enterprise IT
investments. As a lack of transparency on a financial basis which only fans the
flames between the groups as IT has always been seen as a cost center and a
rather expenses one at that. Ultimately, More transparency in the IT's value
proposition to the business plus more engagement an partnership is need with
the Business.
CFO may help CIO strengthen the relationship between IT
investments and IT finance returns by holding business sponsors accountable for
realizing the benefits outlined in strong business case, to ensure that project
justifications outline the strategic value and operational metrics that serve
as leading indicators to projected financial benefits (improvements in cycle
time, quality, value, accuracy, customer service, etc.) and that project plans
incorporate baseline measurement and post-implementation monitoring.
CFO & CIO can also work closely with board to determine
which key performance indicators and IT metrics may help senior leadership
oversee IT effectively. Examples of key IT performance indicators are: reliability
of all key operational systems (number and duration of unplanned outages), number
of active significant IT projects, return on investment for significant IT
projects, IT spend versus budget--by major category,
Modern CIO & CFO both need wear multiple hats to face rapidly
changing business dynamic, and look at business from strategic long term and
operational quick win, besides “I”-infrastructure CIO’s 5”I” missions may
include: Innovation, Influence, Integration, Information and Improvement, and surely,
“F” doesn’t mean failure, CFO’s 5 “F” faces are Flexibility, Fluid,
Fertilization, Frugality, and Finance.
Effective cost management is one phase of the process of
effective financial management. It allows for a baseline to communicate that
consumption equates to real costs that must be met somewhere in the
organization. Running IT more like business: Charge back or show back systems
can also be used to measure IT value, in addition to their normal role in
demand management. When executed across business hierarchies, in enough detail,
they are a great way of aligning costs with revenue and performing other types
of performance measurement
The best governed organizations in which CFO & CIO works
more collaboratively & carefully measure in great detail and manage the
costs of IT, comparing those costs to the economic value they receive from
them. They actively measure what the value of IT services is, by comparing the
total cost of ownership to the return on investment.
Potentially a larger cost management opportunity is the
transparency in sourcing decisions to allow for cost-effective sourcing strategy. CIO
& CFO may also need work closely on studying the trends, such as Cloud,
which provides opportunity to transform IT capital investment into operational
expense, for many budge-tight businesses, it improves finance fluid &
flexibility, also help IT focus on innovation & improvement. However, business may also bypass IT to order
SAAS based services on their own, As CFO, you need to understand the risks that
arise when business leaders take IT into their own hands and help your CIO rein
in the rogues. This is a spending issue (those credit-card swipes can mount up)
as well as security, risk and performance issues, and all that falls within the
CFO's natural purview.
The good IT investment may just like the rubber meets the
ground, all about where and when. Actually CFO and CIO can also be like-minded
about IT investment: When it comes to areas that CFOs would like to invest in,
the study showed that business intelligence, analytics and performance
management are at the top of the list. CFOs clearly recognize the need for
improved technology support for these key business processes and identified the
top business process area that needs technology investment as the ability to
facilitate analysis and decision making (57 percent) closely followed by
collaboration and knowledge management (52 percent). Those projects are usually
also strategic CIO’s top choices.
Therefore, CFOs crunch number, not for number’s sake, and
CIO hunts for data, also not for data’s sake; they need use finance data and
enterprise information to weave a brighter business picture of future, they
need work together via communication and collaboration and deliver the
consistent message: Doing more with Innovation and deliver business value via
long-term planning.
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