TECHNOLOGY COSTS UNDER THE CFO MICROSCOPE
Numbers can be daunting, especially when the numbers are in a budget and you are trying to justify costs. And CIOs know this only too well.
|Technology Costs: Falling Under the CFO’s Watch?
With technology changing the way we run businesses and manage our work, a substantial amount of money today is spent on IT infrastructure management and upgrades in an organization. Forrester Research has forecast the US tech market’s growth at 7.5% for the year ahead, revised upward from the 6.6% growth projected a few months back. For 2013, IT spending is expected to grow by 8.3%. It is therefore no surprise that given its level of influence on the future of an organization and its “high” costs, IT departments are now increasingly being managed by CFOs, with many CIOs reporting directly to the CFO
This trend has been echoed across surveys (including by Gartner and the Financial Executives Research Foundation), and is consistent not only at small and medium enterprises (SMEs) where a C-level executive (like the CFO) could lead more than one function, but at larger entities as well.
Having an influence over the IT department allows a CFO to manage costs better. Given the challenging global financial situation today, CFOs tend to keep a tight grip on the purse strings, closely monitoring ROI on large capital expenses made by IT. This is important particularly when a deeper analysis is needed to evaluate a large implementation (e.g., an ERP system). For example, do we prefer a SaaS model to a more traditional approach? Should we build an application in-house; buy it off the shelf or source it from a third party?
THE EXPANDED ROLE OF THE CFO
Another factor that influences this trend is the changing role of the CFO in organizations. CFOs today have stepped out from their traditional role of managing the core financial functions
. They are increasingly taking on the role of a “business manager”, even taking on the functions of a COO.
The influence of technology on the way we manage the finance and accounting (F&A) functions today have also made it necessary for the CFO to work closely with IT. Recently evolved automation tools, paperless environments and access to ERP systems via the cloud, have all significantly influenced the focus of a CFO.
SO WHAT DOES THE CIO THINK OF THIS?
As may be expected, there are arguments for and against a CFO managing the IT department. It is a situation that many expect will evolve to some extent. However, it is also true that CEOs in many organizations just have too many direct reports and tend to group departments under a few key executives for better control.
Regardless of the pace at which this trend is moving, one thing is certain: there is an increasing need for greater financial control of IT initiatives in any organization.
The success of an organization is being increasingly determined by alignment between its technology drive and its strategic direction. With CFOs increasingly handling business roles, this can be better aligned with the CFO primarily leading the initiative. It is also important for the CFO to leverage the expertise brought in by the CIO and his team to better understand the intricacies of technology.
Do you agree that CFOs are better positioned to lead technology initiatives? Is this new trend a cost-effective solution or do businesses risk sabotaging the future of their technology infrastructure? Share your thoughts in the comments.