What Sets The CFO-CIO Bonding Right?

by CXOtoday News Desk    May 25, 2015

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CFOs’ insufficient understanding of IT issues is the number one barrier in their relationship with CIOs, says an EY survey. It notes that despite 61 percent of CFOs reporting increased collaboration in the last three years and 71 percent increasing involvement in the IT agenda during the same period, there are two threats to this critical union. Cost discipline, rather than strategic value, still defines the IT investment mindset, and lack of mutual understanding between CFOs and CIOs is still an all too common problem according to our global survey.

In today’s digital economy, the financial well-being of the enterprise is dependent on the health of the CFO-CIO relationship. Technology innovations, from the cloud to mobility, to big data offer the potential to transform organizations’ operations, customer experience and business model, said EY researchers. To succeed, organizations must make bold technology investment decisions that are driven by corporate strategy, while managing a range of severe risks, such as cyber risk and data privacy concerns.

This mission-critical convergence of technology, investment strategy and risk has elevated the CFO-CIO relationship to new levels of importance. Any disconnect between the CFO and CIO will have profound consequences for the organization, and jeopardize advancement.

According to the survey, CFOs and CIOs are becoming increasingly connected. Sixty-one percent of CFOs say that their collaboration with the CIO has increased over the past three years. Similarly, 71 percent of CFOs say that there has been an increase in their involvement in IT over the past three years.

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The study highlights the two key concerns:

First, CFOs continue to struggle with balancing their responsibility to maintain cost discipline with more strategic ambitions, such as setting the agenda for change.

Second, lack of understanding between these two C-suite peers is an all-too-common problem. CFOs point to insufficient understanding of IT issues among finance executives as the main relationship barrier

Read more: SMAC Is Changing CFO-CIO Dynamic

Researchers however believe that the relationship between the CFO and the CIO has always had a strong cost dynamic. Investments have typically involved large-scale purchases of data storage, enterprise applications and PCs.

IT spending as a percentage of revenue, as high as 6 percent in some industries, used to be a crucial metric. The goal was to bring this figure down, and CFOs played a critical role in managing IT project overruns and keeping a watchful eye on hidden costs. This is why many CIOs reported to the CFO.

Today, however, technologies are crucial to both operational excellence and profitable growth. Tony Klimas, Global Finance Performance Improvement Advisory Leader at EY, believes that CFOs are recognizing the growing strategic importance of IT. “CFOs are becoming much more aware of the strategic value of IT and what it has to offer,” says Klimas. “There is a growing focus not only on what IT costs, but also on the value it brings to the organization.”

Helen Arnold, CIO of SAP, agrees that IT should not be seen primarily as a cost, but rather as a tool for broader efficiency goals. “To achieve greater efficiency and bring down cost, a validation and redesign of business processes is often paramount,” Arnold says. “Typically, it’s a new technology that will enable these benefits to materialize so that the organization achieves higher business value.”

As organizations look to drive innovation through technology, this critical CFO-CIO relationship requires a different mindset and better mutual understanding. It is then that the strategic value of IT will be  recognized, and a closer CFO-CIO relationship will develop.