For any IT manager wrestling with the conundrum of how to deliver value to the business, AMR Research analyst Nigel Montgomery suggests that the question to ask is, ‘What is keeping the CFO awake at night, and how can IT help them to sleep?’
In most medium-sized businesses, IT staff answer to the finance director. IT is therefore seen as a cost that needs to be managed. But by directing its efforts towards solving the problems that dog the finance chief the most, the IT department can come to be seen as a profit centre, points out Montgomery.
So what are those problems? According to research by AMR, chief among them are cost control, compliance, risk management, reporting accuracy and profitability – all areas in which IT has the power to make a significant difference.
To illustrate the ability of IT to improve cost control, Montgomery provides the example of a plastics company that he has worked with. To gain a better understanding of how the company consumed energy, the IT director decided to build – in Visual Basic – a tool that counted the units of energy consumed by every billable operation.
The finer detail of the information this application provided allowed the company to plan its energy requirements with much greater accuracy; so much so that the hand-built software has saved the company £2 million a year in reduced energy costs.
Benefiting the bottom line
Montgomery observes that breaking down cost allocation as far as possible – a task that will usually only be made possible by IT – will always help a company to control cost.
Compliance and risk management are, according to Montgomery, really the same problem. Organisations can keep risk exposure to a minimum by going above and beyond the requirements of regulatory compliance.
IT departments’ contribution to compliance has traditionally been confined to data management, and that will continue to be a pressing concern. “It is a big growth area of spending,” says Montgomery, “because the amount of data these companies are struggling to deal with is still growing.”
But by taking a risk management approach, an IT department can move its focus from containing immediate risk to defence against risk. By providing executives with up-to-the-minute information on, for example, the environmental impact of a business decision, IT staff can help a business to pre-empt both compliance obligations and other risks to the business.
Accuracy of reporting and profitability are connected problems. While all businesses, and especially their finance directors, claim to focus on profit, most cannot accurately know how profitable they are at any given point. If IT can improve the accuracy, relevance and timeliness of reports – perhaps by deploying performance management techniques or through data quality drives – it will help finance departments to focus on profitability.
Allowing finance directors to concentrate on profitability will be rewarded in kind, says Montgomery, and IT departments will be able to secure funding for profit-growing, not just cost-limiting, projects. “If you focus your time on satisfying that need, you are going to get a hell of a lot more support from the CFO,” says Montgomery.
And that could be useful for the future. After all, like prime minister Gordon Brown, every CFO sees themselves as the next CEO, says Montgomery.