Friday, May 16, 2014

CIO-CFO Collaboration for IT Governance

Through CIO-CFO collaboration, the right mindset can be better shaped in IT transformation.

There should be very few IT projects but rather business projects with IT involvement. IT has only one mission, and that is to drive business success. Business therefore needs to share responsibility for IT investments and projects as well. And it is crucial to build strong CIO-CFO relationship for IT governance effectiveness and efficiency.

The right mindset: Should the CFO care about their IT projects and performance, the majority opinion is a resounding “YES”!  Through CIO-CFO collaboration, the right mindset can be better shaped in IT transformation project; such as: ROI-focused, vigilant on scope, knowing the business objects and how this transformation project links to the overall business goals. The strong senior leadership can enforce IT governance principles and practices, to ensure ROI is really going to achieve; control project scope and exploit business objectives accordingly.

The logic steps: CIO and CFO should both require some very specific information for each major IT project prior to initiation, and follow the following logic steps in IT governance:
1) An approved business case that clearly states the purpose and objectives, high level scope, proposed timeline, planned return on investment or value proposition, and how the project aligns with the organization or department strategic objectives.
2) Identify the executive sponsor who has accepted accountability for successful delivery.
3) Identify the project manager who is responsible for successful delivery.
4) A preliminary risk assessment identifying organizational, technological, and external risks at a minimum.
5) A detailed project schedule with clear milestones, named deliverables, and assigned resources that have the necessary availability to complete the work. 
6) A review process needs to be in place on a regular basis to evaluate whether based on any external or internal events, the view of the organization towards the project has changed and items 1 through 5 need any adjustments (minor or major)
7) It is very beneficial to have an independent governance process in place, to ensure the project team is neither too conservative nor too risky, as this could cause significant delivery issues once the project starts. 

The better communication: CFO is frustrated with IT for the very reason. The main problem is that IT is unable to express how they create value (IT for business), and often focus on wrong things (IT for IT). It often talks of new platforms, outsourcing deals, process maturity, but very little how these activities transform into business value. Though the important thing to understand is that this is often a role IT is given by CFO or business. Secondly, cost levels are monitored but not managed. There is a need to create full transparency and business accountability in order to manage cost. This is usually not done smoothly. IT is related to general IT performance and effectiveness (value creation / cost levels).

The mutual understanding: The great frustration IT has with CFO and other financial controllers is mainly lack of understanding of how IT works and its purpose. IT becomes a pure support function and cost center, not a strategic partner in producing value - which demanded a different role and governance. Also, IT is often asked to reduce cost to a bare minimum with devastating effects in terms of risk levels, value creation and innovation power. IT is often viewed as a black box that outputs services vs. a core part of any company's strategy. In fact, IT is an enabler, which means it should be enabling other groups to be more successful. If treated strictly as a cost center, the primary goal is for IT to be cheaper, which greatly restricts its ability to grow your business. The question CFO would probably ask: "What do I need to know about IT and how can I help IT to deliver as much value as possible.". Step away from the absolute control and focus on creating the right environment for IT to blossom.

CIO and CFO need to work more collaboratively to enforce IT governance, and well establish document and resource management, take the best practices and next practices, to ensure the project investments have to be conceptualized and executed as business projects not IT projects with clear-defined business case and risk management strategy. IT governance is converging with business governance, and IT is business.


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