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IT and finance need to work in lockstep now more than ever
The lines between “IT” and “enterprise IT” are blurring as businesses lean more heavily on digital investments to stay competitive and drive growth. For better or worse, every technology investment decision is also a business decision — and the CIO-CFO relationship is the key to effectively managing technology spend, risk and value across the enterprise.
In this CIO-CFO partnership, the CIO evolves from technology provider to strategic advisor, and the CFO works with their CIO counterpart to make sure the entire enterprise gets the most out of technology spend.
Proactive stewardship and communication strengthen the CIO-CFO relationship
Follow these four steps to optimize IT spend, solidify the IT-finance connection and maximize technology’s business value.
Step 1: Optimize the supply side of the IT budget
Effective IT financial management (ITFM) requires:
Building a strong foundation for the IT budget. Using the finance general-ledger view — operating expenditure (opex) and capital expenditure (capex) — as a baseline, build in IT expense planning and forecasting to cut down on budget variances and time-consuming tactical discussions.
Providing 360-degree financial transparency. Map IT spend from four different stakeholder perspectives. Executives will focus on ROI; technologists on technology spend; business leaders on function-specific applications or services; and finance on consumption.
Looking at both the “run” and “change” sides of IT’s business value. “Run” shows how IT supports and maintains ongoing operations. “Change” highlights how IT enables innovation and growth.
Tackling supply-side issues like wastage, vendors and efficiency.
CFOs and CIOs can also partner to increase the IT leadership team’s financial acumen. Hold monthly financial reviews and “lunch and learn” sessions to share the burden of fiscal accountability.
Step 2: Show the value of IT spend
Understanding IT unit costs, volumes and cost drivers helps stakeholders make informed investment decisions.
Plan and prioritize investments around a business case. Include nonfinancial elements like strategic fit, risk, qualitative value and alternatives.
Consider the impact of IT cost-cutting. Highlight trade-offs by connecting the dots between IT service levels and business outcomes.
Create a business-facing service portfolio. Most IT spend goes toward running the business. Calling out key IT cost drivers helps stakeholders use IT more mindfully.
Benchmark IT spending and staffing. Build a data story around how IT contributes to the enterprise overall and identify opportunities to improve.
Step 3: Partner on enterprisewide technology spend
Build an enterprise IT financial plan aligned to corporate strategy. Include not only the IT budget, but also business unit IT spend and all other technology investments.
Take a strategic view of cost optimization. Jointly decide when to cut costs in the near term versus when technology can improve performance and enable growth.
Look at how cost reductions impact business outcomes. Avoid cutting costs piecemeal. Instead, when you identify a cost-saving idea, assess the risk and bottom-line impact before moving forward.
Step 4: Use technology to optimize costs across the enterprise
Solidify the CIO-CFO partnership by focusing on whole-enterprise value.
IT should not fund unplanned business cost optimization initiatives. Paying for other business units’ cost-reducing technologies adds to IT’s already heavy cost optimization burden.
Focus on digital investments. Automation technologies breed efficiency.
Work together to implement financial planning software and IT financial management as needed. Integrate data from across the organization to give IT and finance a single source of truth for forecasting, budgeting and spend analysis.
Benchmark functional costs. Compare spending and staffing against peers’, justify functional IT investments, and support cost optimization and resource planning.
CIO-CFO partnership FAQs
Why should CIOs and CFOs work together on IT costs?
CFOs view digital investments as crucial for profitable growth and efficiency — and they’re budgeting accordingly. Investing in technology is no longer a choice, but a necessity for companies looking to maintain a competitive edge. To maximize the value of technology investments, CFOs and CIOs must collaborate effectively.
What tools or frameworks can help optimize IT and enterprise costs?
Efficient growth companies adopt a cost optimization framework that prioritizes reducing spending, optimizing performance through improved efficiency and productivity, and creating value by investing against business outcomes.
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