The damage caused by the global crisis of 2008 still has an impact in companies today. CFOs continue to juggle tight budgets and must carefully choose what investments to make.
The dependency that companies have grown to have on technology over the last several years has not facilitated the task of the CFO. We’ve noticed that in the day-to-day, the CIO and CFO often struggle to understand each other.
On one hand, CFOs must achieve their financial goals with these major constraints:
• The obligation to do more with less, and in all areas of the company
• Reduce investments to a minimum for all non-vital areas of the company
On the other hand, IT is a reality that must be addressed now and cannot wait for a stronger economy:
• 80% of Canadian CEOs believe IT as an essential tool for growing their business [i]
• CIOs also have an obligation to do more with less
• The speed at which technology changes requires ongoing investments
The disparity of these goals can cause significant problems within companies. Financial constraints on IT decisions can have negative long-term impact on business productivity. Simultaneously, an IT project that does not take into account the financial objectives of the company can have just as negative effects on growth.
Understanding a problem is always the first step to solving it. In this context, here is a list of 5 main reasons why CFOs and IT may have difficulty understanding each other.
1. They do not always have the same perception about the budget allocated to IT
70% of the IT budget is allocated to maintenance. [ii] Therefore, IT can count on only 30% of the overall budget allocated to them to develop new projects and improve the overall performance of the company, the rest having the function of "keeping the lights on."
Therefore, in a certain way, the 70% of the IT budget allocated to maintenance should not be directly associated to this department’s expenses, but rather general expenses of running the business.
2. The expectations for ROI are different
IT executives usually see ROI within the lifetime of the equipment, while from a financial point of view, depreciation would be much faster.
This is especially true in large companies and public companies that must also take into consideration the expectations of shareholders and the market.
3. They do not speak the same language
Whether the CFO or CIO, neither should expect that the other adapts their language.
Therefore, it can be difficult for CIOs to sell a project that is necessary for the company if the technical aspect takes precedence over the financial considerations.
4. They may be resistant to change
Overall, people are hesistant to change. As technology is evolving at a faster pace than ever, and companies’ digital transformation are at the forefront of strategic initiatives, an openness from both the CIO as well as the CFO is required.
This is forcing IT leaders to update their vision of infrastructure and of its financing. And for CFOs to consider and take advantage of the "as-a-service" dimension in their financial models.
5. Each remains stuck to his guns
Having different goals can lead to situations where leaders stay firm on their positions.
The goal of the CFO is not to suffocate the IT department by cutting funding and that of the CIO is not to buy the most expensive technologies for pleasure. Yet the two sides are often on the defensive.
Conclusion
The gap between IT executives and finance is an important situation to manage as it can delay the achievement of corporate objectives in many companies. With the growing role of technology in enterprises, CIOs and CFOs need to find common ground.
[i] Source: Données issues du 18th Annual Global CEO Survey de PwC, 2015.
[ii] Source: IBM Global Data Center Study, 2012.
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