In CFO’s best interests to know their tech

With technology increasingly a boardroom issue, it’s essential for the CFO to build a strong relationship with the company’s IT leaders.

Today’s chief information officers are thrown ideas from every corner of the organisation: from sales, which may want new graphics, to marketing, which may want new dashboards.

It’s the CIO’s responsibility to separate the valuable ideas from the shiny objects and to come to meetings prepared for the inevitable question: “What’s the return on investment on this?”

But while the chief executive and chief financial officer tend to share ideals on financial and strategic goals, CIOs often speak a different language.

That results in a different answer to the question of ROI, leading to something of an innovation malaise in Australia and New Zealand.

When digital transformation is seemingly on everyone’s agenda, a recent survey from Gartner involving more than 3000 CIOs, including 161 in Australia and New Zealand, found information technology budgets in Australia and New Zealand are mostly flat, growing by only 1.5 per cent a year on average.

While the CIO-CFO relationship is critical to align IT investments with strategic growth plans, few partnerships are actually characterised by mutual understanding.

With technology increasingly a boardroom issue, it’s essential for the CFO to build a stronger relationship with the company’s IT leaders to learn how CIOs think about spend, risk and outcomes, and to co-define IT objectives from that foundation. Then they can align business strategy with tech possibilities and constraints to increase the odds of their mutual success.

For that to happen, the first step as a CFO is to understand the operating environments the CIO faces when it comes to technology offerings, especially those that act as the platform for the business’s operations.

At least since the advent of the modern enterprise resource planning system — think Oracle, SAP and the like — CIOs have tended to build their strategies around these systems governing back office functions such as software for finance and supply chain management.

These ERP systems tied everything together and, once installed, became the platform for how an organisation operated — but there is a downside to ERP adoption. The product road maps of the big ERP vendors effectively became the organisation’s own technology planning road map.

Contracts signed with vendors often meant that businesses had to upgrade their systems in lock-step with the vendor’s lead or risk being denied access to technical support for business-critical systems and applications.

This acceptance of the vendor-dictated road map restricted choices for the IT team. With so many resources committed to implementing the software upgrades required under the software maintenance contract, plus the cost of that contract, often nothing was left to fund even a proof-of-concept trial of something new.

Then companies such as Netflix, Uber and Airbnb emerged that built their user experience first, then filled in a road map to deliver on it. These companies didn’t go all in with a single vendor; they weren’t willing to swallow technologies they didn’t need at a pace dictated by someone else.

Instead, they made business-driven decisions, investing in technology to accelerate business growth. They turned IT from a cost centre to a profit centre, using technology not only as a foundation but also as a tool for growth.

In other words, they tried something novel: they followed their own business-driven road map, built around their own priorities. This may not seem like a radical notion but this is a huge departure from the technology planning norm.

For some CIOs, it may be hard to adapt the long-held thinking on ERP systems to suit this new paradigm. Options now exist outside of the big vendors when it comes to maintenance, support and expertise on ERP, options that don’t require onerous lock-in or exorbitant costs. It’s imperative that the CIO identifies these, and that comes with teaching them to think more like a CFO.

Sebastian Grady is president of Rimini Street.