CIOs and CFOs: creating a value-driven partnership

Emmanuelle Hose, GVP and general manager EMEA at Rimini Street, discusses how CIOs and CFOs are creating a value-driven partnership.

The CFO/CIO relationship is evolving in the UK and elsewhere in the world. The digitisation of everything is forcing both functions to recognise that technology is not just integral to running the business efficiently, but also permeates every aspect of business strategy and how companies define competitive advantage. Consequently, technology is exerting much greater influence on the way CFOs and CIOs think about their roles and how they define value for their organisations. As a recent Rimini Street report of UK CFOs, conducted by Dimensional Research, stated: “Technology is expanding the roles that CFOs and CIOs play in an organisation…”. It implies the need for closer collaboration between IT and finance in this country. If both roles collaborate and ask meaningful questions of each other, their shared expertise will enable them to better understand their contribution to delivering value for the business and how their combined skillsets can leverage the benefits of digitisation to become more productive.

Yet, not all is sweetness and success, because traditionally both functions have come from very different standpoints when it comes to what value means to their organisations: “While the CFO-CIO relationship is interconnected, sometimes it can become divided, as both (CIO and CFO) often speak different ‘languages’ about the same topic”. For example, in the UK:

  • CIOs can struggle to communicate IT project ROI, business priorities and costs. This is often because they focus more on the technological “know how to get the job done” aspect.
  • CFOs expect CIOs to present a clear business case. However, they don’t always understand the technology sufficiently to make sound financial decisions; some 92% of CFOs say that CIOs need to learn more about the business now than two years ago, and 15% of CFOs reported a worse relationship with their CIO. Three top reasons cited were CIO plans with no demonstrated ROI (31%), a lack of urgency (28%), and too little proactive engagement (28%).

As such, both must take ownership of their parts in the relationship and work harder to understand how technology is disrupting their traditional responsibilities. The goal should be a partnership which drives value for the organisation. So how do we get to that point? The best place to start is understanding what both roles are trying to achieve.

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What do CFOs want?

CFOs expect technology investments to have clear evidence of business value and a sophisticated ROI analysis. While CFOs have long been the creators of cost structures and act as financial guardians, controlling costs has become increasingly complicated. Furthermore, funding IT priorities is made even more difficult in businesses where rising costs are outpacing revenue growth (think COVID-19 if nothing else). It makes it challenging to sustain growth and profitability.

In addition, CFOs view legacy cost items once seen as necessities – managing data centres, maintaining unnecessary software licences and undertaking expensive, low value vendor-directed upgrades and migrations – as needing increased scrutiny. Indeed, a CFO-critical consideration when assessing IT spending lies in prioritising between projects that yield positive business outcomes and those “less fortunate”. Some 67% of CFOs agreed their businesses cannot afford to waste money on IT projects that don’t “move the needle”.

When asked about what types of IT projects CFOs want to see more of from CIOs, the following were at the top of the investment/action list:

  • revenue-generating technology initiatives (40%);
  • optimising existing technology investments (44%);
  • process improvements and employee efficiency (39%).

According to the Rimini Street report, CFOs want the ROI on technology spending to be swift, with 46% of CFOs expecting paybacks within two years. While this may seem unduly rapid, CFOs recognise that the pace of technology innovation is in itself a factor. It means they need to partner with their CIOs to ensure funding requests are backed by a clear business case and ROI timeline for CIO initiated projects.

What do CIOs want?

The CFO responses perceive CIOs as often struggling to communicate ‘real’ IT project ROI, business priorities, and costs. This is because their (CIO) focus is on the technological know-how and implementation/operations. At the same time, CIOs seem not wholly to comprehend the pressures on CFOs to judge business cases. CFOs need explanations of proposed technological initiatives expressed in financial as well as practical terms.

Yet, while CFOs want more “business-oriented” IT plans, CIOs wish CFOs took the time to understand their technological issues. A common failure is the lack of technological comprehension by CFOs. Just the words, the shorthand that IT uses to compress its conversations, becomes a barrier. That is before CIOs raise the more complex architectural, infrastructure, communication, compliance and security issues.

CIOs do know that the ever-growing sophistication of technology is challenging for CFOs. For CIOs, broadening into a mutually intelligible conversation – beyond budgets, costs and ROI – would establish a platform for longer-term CIO/CFO collaboration. It would move, some would say ‘at last’, beyond the ‘periodic budget-time confrontations’ that many CIOs have come to expect in their interactions with CFOs.

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Building a strong bond between finance and IT

With digital transformation high on the priority list of most businesses today, a strong CFO/CIO partnership is important. This means:

  • financial decision-makers must take the time to learn the language of technology;
  • CIOs must understand better the CFO and investment/return mindset.

In a broader context, whether the ‘discussion’ is about digital transformation or infrastructure, CIOs must take a critical look at their operational expenses — so that they assess the IT budget in terms of value. Equally, CFOs should participate more in discussions about infrastructure, relevant technologies and their evolution so that they can reasonably assess the impact of IT investment and expenditure proposals.

What is absolutely clear is that the demand for close collaboration will only increase, as finance and IT work together to define value in organisations in the digital era.

Written by Emmanuelle Hose, group vice-president and general manager EMEA at Rimini Street

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