5 reasons why CFOs and CIOs should talk more
It’s good to talk – especially about IT investment decisions. Here are five reasons why CFOs and CIOs should share more quality time together.
1. Better collaboration between CFOs and CIOs leads to better IT decisions
IT purchases account for one of the most significant capital investments most companies will make – adding up to one-third of all capital expenditures for many organisations.
A common problem in many organisations is that finance and IT departments often look at IT assets in different ways, which can lead to different expectations when it comes to renewing equipment. For example, IT departments fund some laptops on a three-year lease expecting to replace them after 36 months – whereas finance are more likely to try and get more out of the IT by ‘sweating’ the assets.
While this can reduce capital expenditure, IT departments know that operational expenditure will likely increase, as older equipment needs greater maintenance. Furthermore, poor equipment can result in low staff morale, which can impact productivity.
This disparity in perspective and expectations between departments is very common, and can result in IT decisions being made by finance teams without consulting IT teams – which can sometimes mean companies don’t get the IT provision they really need.
If you are not involved in the decision making process from the outset – through good collaboration with your IT colleagues – there’s a real danger that decisions will be made based on disjointed information, which could lead to the wrong IT solutions being implemented with potentially costly consequences.
2. IT asset registers
In 2013 we undertook some independent research, which involved a survey of 100 IT and finance directors. One of our key findings was that many companies still use manual processes to manage their assets. One organisation could only account for 20% of its IT assets because it depended on staff to update spread sheets when it purchased new equipment.
Manual processes leave significant room for error, either through duplicating information, or missing assets entirely. What’s more, we found that finance and IT teams had different ways of recording assets, so asset registers often differ between departments. Again, when the finance view of IT assets doesn’t agree with the IT view of assets there is scope for some serious accounting issues to arise.
Make sure you discuss asset management with your IT colleagues. Agree how you will record your IT assets, and look into the benefits of using automated asset tracking tools to save time and improve accuracy.
3. Pay-as-you-go models: leasing and managed services
Increasingly, organisations are looking for ways to spread their investment costs over the lifetime of the assets. Both IT leasing arrangements and the trend towards managed services enable this approach.
Our research showed that IT teams have a more thorough understanding of the ins and outs of IT leasing than their financial colleagues. However, in the majority of cases, it’s the finance team that have final say on how the purchase is funded. In other words, a finance community where 64% state they have limited or no awareness of IT leasing makes the vast majority (71%) of purchase decisions. In contrast, 58% of their IT counterparts stated that they were ‘very familiar’ with the concept of IT Leasing. The discrepancy in knowledge between finance and IT implies that better collaboration could lead to more informed decisions when it comes to funding IT investment.
Many organisations are taking advantage of the benefits that managed services bring. This approach also has the potential to change purchasing models from capital to opex, enabling you to pay for IT equipment over its lifecycle rather than as one single up-front payment. This frees up capital for other strategic investment, which can facilitate growth. The move towards managed services is a technical decision that can only be made alongside the business case, so to take advantage of this solution you will need to understand the needs of your IT colleagues and other stakeholders and agree a strategy, as it changes not only how your IT services are paid for, but also how they are consumed.
4. Understand your IT counterparts’ priorities – so you can plan budgets
According to The Harvey Nash CIO Survey, as confidence returns to the UK economy, and after five years of cost cutting, two-thirds of IT leaders are talking about prioritising projects that make money for their business. This indicates that more companies are focusing on investment in IT for growth rather than to save money. What’s more, according to the survey, CIOs are more optimistic that their IT budgets will continue to grow, than at any time since 2005, when the survey began, with some 44% expecting more budget increases next year. Will you be able to manage budgets to make this happen?
5. Learn who your IT counterparts are talking to – understand the bigger picture
The survey also found that CIOs participation on the board of directors has increased significantly since the start of the recession with many more IT leaders in a position to better influence other business leaders.
There is another twist – increased attention on the importance of digital marketing has seen marketing directors begin to influence IT decisions. According to the survey 40% of CIOs said the marketing department is now responsible for digital technology, up 7% from 2013, whilst at the same time only 10% of CIOs said IT is responsible for digital, down 2% from last year. Changing times indeed.
Joining your IT and marketing counterparts will ensure that better-informed decisions are made regarding your IT investment, because all of the major stakeholders are involved in the discussion from the outset.