Building constructive relationships between CIOs and CFOs
- 10 October, 2012 13:27
Fifteen years ago, IT was regarded as a necessary evil by many non-IT executives, who were often heard saying they were “not sure what it does, but it sure costs a lot”.
CFOs, in particular, were characterised as being IT-spend averse, with little meaningful (or cordial) communication between finance and IT on the issue of how much was the right amount to invest. In fact, some would suggest that finance’s response to “how much” would almost inevitably be “as little as possible”.
But as technology’s business benefits have become better understood by non-IT people, there has been a fundamental shift in the way things are done. In fact, the pendulum may be swinging back the other way as CFOs begin to drive technology investment – in some organisations, anyway.
Indeed, a recent Gartner and Financial Executives Research Foundation (FERF) survey showed that the CFO is increasingly becoming a top technology investment decision-maker, if not the leading decision-maker in many organisations.
The study, conducted between October 2011 and February 2012, showed that the CFO’s role in technology decision-making increased in the past year with 44 per cent of CFOs stating that their influence over IT investment has grown since 2010. Forty-seven per cent say that it has remained the same, while only 9 per cent of those surveyed believe that their influence has decreased.
“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.
“This year’s results show that, in most organisations, the CFO and CIO work together to finance IT and provide information that supports enterprise processes. But there is also an opportunity for them to form a powerful alliance that generates more value for the enterprise.” The survey results showed that there are many ways that CFOs are involved in making IT investment decisions.
Forty one per cent said that they were the actual leader of a group responsible for IT investment, whereas another 41 per cent were part of a group responsible for IT decision-making, 16 per cent provide advice and 1 per cent said they were the sole decision-maker. Since the large majority was involved in group decision making about IT, engaging the CFO is clearly a critical issue.
They are usually powerful influencers and strict enforcers of policies and decisions because of their access to, and involvement with, senior business governance groups, and their strong influence and credibility with the CEO and board.
While the survey was conducted in the US, Peter Acheson, CEO of Peoplebank, Australia’s largest IT&T recruitment company, believes the Gartner findings accurately depict what’s happening in many large businesses.
“Traditional tensions are to do with the fact that IT is a large area of capital investment spending,” he says. “At the start of the decade the IT manager or CIO role reported to the CFO, who then reported to the CEO.
This meant the CFO had responsibility for IT, but if they weren’t IT savvy and didn’t understand it, or were cost conscious, then they may not have supported a project.
“Now the IT manager position has evolved to the CIO role. The CIO has become a peer to the CFO, especially in utilities and telecoms, which has helped to improve relations.”
Acheson says CFOs today understand IT is an important part of the business and a core enabler. However, he cautions that CIOs still need to gain the CFO’s support when it comes to investment decisions.
“Just because they’re peers, it doesn’t mean the CIO can go to the board and ask for a major investment without the support of the CFO,” he says, explaining that it is a function of the fact that the CFO has ultimate responsibility for collating the overall capital plan. He points out that collaboration with the CFO is vital in gaining support for new IT investments. Bill Sinnett, director of research at the US-based FERF, agrees.
“While CFOs certainly appreciate reduced cost through the more efficient delivery of IT, organisations need to understand that CFOs want technology investment that they can see business value from in the form of improved business processes. Therefore, their priorities are largely focused on analytics and business applications,” Sinnett said in response to the Gartner/ FERF survey results.
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