CFO, CIO together should decide IT budgets

by Sohini Bagchi    Sep 04, 2012

cfocio debateAll C-level executives have one common concern: how to maintain steady and sustained top-line and bottom line growth. Even then the question that comes up time and again is who has the real power behind the IT budget – CIO or CFO?

According to a Gartner research, the CFO’s role in technology decision making has increased in the past few years and this is becoming a cause of concern for the CIO. Some have even argued that with the CFO taking a more active role in controlling a greater share of IT investments in an enterprise, will the CIO’s role will take a backseat or even become redundant?

“Certainly not,” believes Kumar R Parakala, Head of Management Consulting - IT Advisory, KPMG in EMA. “CIO’s role today is much more than being just a technology person. Like other CXOs, the CIO is expected to play a leadership role who can steer the organisation and drive value to the business,” he says. At the same time he points out that CFOs will also continue to remain powerful influencers and strict enforcers of policies and decisions in an enterprise.

The business-savvy CIO

It is important for CIOs to get out of the operations mindset and become business savvy so that he can have a strategic role to play in IT budgeting.

“The CIO should determine the nature of the assignment for which the company needs to invest and the desired business value it brings. And the most important part is to articulate the value in business language to the board members,” said Parakala. Those CIOs who can logically explain and communicate their technology needs and value are more successful in achieving their goals, he believes.

Ashwani Tikko, CIO, CSC India believes that unlike in the past, where the IT head had a more technical role to play, today as the business landscape transformed majorly, CIOs are expected to be more assertive. “IT managers should be aware of the company’s goals and strategies as they explain to the management why a particular technology investment can bring the desired results,” he said.

According to John Van Decker, VP-Research at Gartner, CFOs are increasingly showing an inclination in investing in emerging technologies such as business intelligence (BI), analytics and cloud as they are recognising the need for improved technology support to facilitate collaboration and knowledge management. This gives ample opportunities for the CIO to communicate to the CFO in clear business terms how these and more effective technologies can be leveraged for better delivery of business applications.

The tech-savvy CFO

Most enterprises expect that the CFO needs to ensure that they are qualified to oversee IT functioning as well. “Just the way we expect more business savvy CIOs, I would say, the need of the hour is also to have tech savvy CFOs,” said Angsuman Chakravarty, technology analyst and CEO of Relaso Group.

It has been observed that most CFOs have strong knowledge in terms of understanding IT budgets. But Chakravarty believes that there are areas such as IT security, IT metrics, and some others where CIOs have better insights. So in order to have a greater control on IT finance, CFOs should keep learning about newer technologies and have a deeper understanding of technology practices.

A tech-savvy CFO should measure the contribution of IT beyond managing budget and resources and then incorporate long term changes in productivity, capacity and business performance.

A collaborative approach

According to Decker, “The CFO and CIO should work together in enterprise IT investments to increase business value. However, this is often not achieved because of poor perceptions of IT or a failure to invest in the CFO-CIO relationship.”

He believes that the CFO and CIO in many companies are working together to invest in IT and provide information that supports the entire business processes. Decker considers that CFOs should also explain to CIOs the IT requirements needed by the finance function and take adequate feedback from the IT team.

Biren Ghose, Country Head (India), Technicolor believes that the objective of technology investment is to get the maximum business value while saving on the operational cost. “

He believes It is important for the CFO and the CIO to form a strong alliance that can generate greater business value. Once that happens, determining IT budget would not a difficult task.