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Technologists are very good at spending money, but less good at accounting for it – right? Maybe not. This perception of IT as a cost center may linger, but changes in the role of the CFO and new C-suite dynamics are starting to throw out received wisdom.
Five years ago, CIOs were more likely to report to the CFO than the CEO. Fast forward to 2019, and reporting lines and relationships have changed beyond recognition. Improved access to real-time data throughout the organization and technology’s increasing significance to business model transformation are changing the way the CFO measures the value of technology investments.
According to new FT Focus research, 81% of finance leaders say that digital transformation has led to greater trust between the IT function and the rest of the business. And a Deloitte study finds that CIOs are now more likely to report to the CEO (46% of global CIOs say this) than to the CFO (28%).
In this context, the role of the finance leader is changing. CFOs are now more involved in technology investment discussions, with 81% saying that one of their main responsibilities is to identify areas of new value across the business.
The investment conundrum
Technology investment costs are an area where finance and IT leaders need to find common ground. Fredrik Lannerberth, CFO group IT for Danske Bank, says that despite increasing alignment between the two C-suite roles, there are still frustrations. “Digital transformation is at the center of the agenda in financial services, so there’s more alignment in terms of focus, in terms of prioritization,” he says. “But there is also more tension because it’s such a high priority. Any cost or delivery issues are magnified in the eyes of leadership.”
The spectrum of IT investments is now much wider than it was five years ago, which further complicates decision-making, and makes it harder to measure return on investment. Some investments’ outcomes are easier to track – automation, for example: speeding up repetitive tasks by automating them has clear financial benefits. But this is not the case for most technology investments. “Many digital investments have such profound underlying or inherent uncertainties that trying to make detailed calculations of the ROI of individual cases would basically be futile,” says Lannerberth.
It is unsurprising, then, that more than a quarter (28%) of finance respondents to our survey say that the biggest differences of opinion between the finance and IT functions arise from the allocation of IT investment in new digital technologies and accountability for technology investment decisions.
But “we all need to make choices and trade-offs,” says John Beaumont, chief digital officer at Thames Water. “Do I invest here, or do I invest over there? Do I build a new website? Or do I invest in sewer depth monitors? In our context, very quickly, we’re making investment decisions across different functions, and that can create tension and also discussion, as it should.”
More than a fifth (22%) of finance leaders also say that providing a clear roadmap for investment in new/emerging technologies is one of the actions the IT function should prioritize over the next three years in order to support growth. Close to six in 10 (58%) finance leaders say that IT leaders have a proven track record of successfully piloting frontier technologies such as robotics and augmented reality.
However, technology investment is a fluid process. It is not always immediately clear whether the investment is in the right place – let alone if it will generate the expected ROI.
This is where the CIO and CFO partner well together, according to Atticus Tysen, CIO of Intuit. “The total tech spend in a company, even if it's not a technology company, is often not only in the CIO's budget anymore. The CFO can hold leaders accountable for making smart technology decisions and often the CIO can partner with him or her to identify the right solutions that benefit the business the most.”
Who sets strategy?
One of the key differences of opinion between the finance and IT functions, according to finance leaders, is IT’s role in setting broader business strategy.
But whose responsibility is it? Is it the CFO’s or the CIO’s? Digital transformation and business change and strategy are so intertwined that there is no one person responsible. So the answer is both. Setting the agenda is no longer a case of finance versus IT, but finance working alongside IT.
If the CIO presents a compelling case, the CFO will be on board. But to realize this potential, the CIO and the technology function need to be able to communicate their views better. A lack of communication and influencing skills can stop IT leaders from creating that compelling case and delivering business change, but they are less aware of this shortfall than their finance counterparts. Nearly three-quarters (71%) of finance respondents say that the IT function needs greater influencing skills to deliver the change their business requires.
Technology professionals will have to play the role of evangelist, explaining the advantages of certain technologies and advocating for them. “Today, [having] mission and purpose is as important to engineers as it is to journalists,” says Cait O’Riordan, chief product and information officer at the Financial Times. “Technologists need to be able to communicate that passion.”