What CFOs want from IT
Here's what finance officers would like you to know before you come knocking.
By Mary K. Pratt
January 24, 2011 06:00 AM ET
Computerworld - You can't run a company without technology, but you can't invest in technology without the blessings of the finance department. And thanks to the stagnant economy, the pendulum of power between Finance and IT is swinging decidedly toward the chief financial officer's door these days.
"The power dynamic in the C-suite really does change when the economic times are difficult," says Bob Martins, a CFO partner at Tatum LLC, an executive services firm headquartered in Atlanta. "And right now, any kind of spending decision requires much more scrutiny."
All of this means that now is an excellent time for you, as an IT manager, to hear what Finance has to say. Computerworld asked several CFOs what message they'd most like to get through to their top technologists.
Say Goodbye to Bells and Whistles
During better economic times, Don MacKenzie, CFO and chief operating officer at Accounting Management Solutions Inc., could be persuaded to buy a more expensive system if it offered nice-to-have usability options or extra functionality.
But these days, the age-old battle between cost and functionality is being won by cost. So when the Waltham, Mass.-based professional services firm needed new customer relationship management software, MacKenzie told his CIO at the outset, "Maybe we don't need the Cadillac. Our problem might be better solved using a Chevy solution."
MacKenzie expected the CIO to deliver an analysis that looked at several systems -- something he has always done, in good times and bad -- detailing how much each one cost, the features offered and what type of ROI each one could be expected to deliver. But MacKenzie admits that given the financial pressure, the weight was almost all on the cost side of the equation.
"I'm not suggesting that there wouldn't have been a financial analysis [in the past]," MacKenzie continues, "but the focus then would have been more on functionality and on [the software's] tie-in to other applications. That might have overridden the financial considerations."
These days, that's not the case. One of the options the CIO presented was "a 300-pound gorilla with all the bells," MacKenzie says, "but we went with one that was a lot cheaper."
Play With the Toys You Already Have
Tibco Software Inc. in Palo Alto, Calif., has made significant investments in IT in the past, including the acquisition of an ERP system. So before Executive Vice President and CFO Sydney Carey opens the coffers to buy more hardware or software, she wants to make sure that the company is making full use of its current resources.
"The recession has focused us more on the fact that we've made investments," she says, "so we need to ask, 'Are we really getting all we can from them?'"
Hint: CFOs Like Cloud Computing
Perhaps you've already discovered this, but cloud computing (including software as a service) is a CFO-friendly topic.
CFOs like the pay-as-you-go economics of cloud computing because it keeps cash in the bank longer, notes a Forrester Research report.
"To a CFO, IT capacity or an application purchased from a cloud service provider is an operating expense that can be scaled up to meet a rising business need -- or turned off when the need evaporates. The same system hosted in the corporate data center is a sunk cost that includes a capital expenditure that must be carried on the balance sheet as an asset that loses value as it depreciates," the report explains.
Forrester says that because of the difference between capital expenditures and operating expenditures, cloud computing yields the kind of financial benefits that CFOs value:
- Better cash flow. The company avoids taking on debt and writing a big check upfront. Instead, checks are written monthly or quarterly.
- Lower financial risk. With a cloud-based system, you pay only for what you use, and you can terminate the contract. An on-premises system means spending money upfront for benefits that may or may not materialize.
- Greater financial visibility. A cloud services provider can tell you how much it will cost to add a user or process an additional transaction. Many IT shops would be hard-pressed to do the same for an on-premises system.
- Healthier return on assets. Cloud costs are incurred in the same time period that the value is delivered, so the balance sheet doesn't carry an ever-depreciating capital asset of hardware and software, which lowers the increasingly important financial metric of return on assets.
In a recent survey of 481 CFOs in the U.S., about half said they already have some IT activities occurring in the cloud. The survey by Duke University and CFO magazine found that 83% of the CFOs expect their companies to rely on cloud-based services in the next three to five years.