What CFOs want from IT
By Mary K. Pratt
January 24, 2011 06:00 AM ET
Specifically, Carey explains, "we needed to leverage our systems, automating or integrating or getting the right information to the right people at the right time to make decisions" -- but without making any more big investments in infrastructure.
That meant working with the CIO and the IT staff to get more value from the ERP system. Carey had the IT staff add business process management software and other programs to the ERP front end to make the company's order fulfillment system run more efficiently.
Although the software additions did require some in-house development, they represented a quicker and cheaper investment than buying and rolling out an entirely new system. Yet the results were significant: Carey says the department that handles orders has been able to increase accuracy and double the number of transactions handled each quarter without adding staff.
Know What the Business Needs Now
Being aware of the company's business strategy is always a priority for IT managers, but in tough times, it's imperative for IT to be up to date and ready to help with corporate changes on an almost daily basis, CFOs say.
For example, Teknor Apex Co., a custom compounder of advanced polymers in Pawtucket, R.I., recently completed a major acquisition, and CFO Jim Morrison says he had to make sure IT understood the challenges the merger presented.
His message to IT: Bringing the new acquisition into the fold is your No. 1 priority for the foreseeable future. For six to nine months, IT will be "pretty much consumed" with the acquisition -- indeed, "the whole company will be," says Morrison. The acquisition illustrates the need for the IT department to help drive forward the company's strategy and be able to rapidly adjust priorities as the strategy evolves. To be sure, Morrison supports his CIO's road map of long-term strategic initiatives intended to increase efficiencies and save money, but he also needs IT to be able to shift resources as corporate events warrant.
Tatum's Martins agrees. He says a CIO needs to understand his company's short-term financial situation, its near-term tech requirements, and its current risk-tolerance level -- as well as its future vision. Understanding all that, he says, will help a CIO better identify and prioritize the projects that mesh with the company's immediate needs.
Show Me an ROI That I Can Trust
Martins advises CIOs to look beyond price tags and projected savings when they're making a case for a tech investment. He says those figures aren't really enough to calculate the true return an IT investment will generate. "I see ROIs all the time that can have a wide range of values depending on how you work your assumptions," he says.
How to Sell IT Projects to the CFO
Most CFOs still see IT as a black box -- they have limited visibility into the value that IT creates for their organizations, says Gregg Rosenberg, managing director of the IT practice at The Corporate Executive Board, a research and advisory services company.
So it's no wonder that IT managers have a tough time persuading their CFOs to spend money on new technology today, Rosenberg says.
By making changes in their pitches, IT managers can overcome that roadblock and get the CFO's stamp of approval for more projects, Rosenberg and other consultants say. Those changes should include reframing proposals and spending requests to highlight the business value that technology creates.
In a white paper, Rosenberg suggests that CIOs should take the following steps to get their economic houses in order and make it easier for CFOs to see the value of the services that IT provides to the business:
- Find out the business objectives of the stakeholders.
- Allocate all IT costs to a set of services that the business wants.
- Hold IT service managers accountable for controlling the costs of the services they provide.
- Define units of service in terms that the business understands, and show how changes in IT service consumption affect costs.
- Reward IT staffers for lowering the total cost of service.
- Set the prices for IT services to support overall business objectives, such as cost predictability.
- Invest in IT asset management for making resource allocation decisions (not for reacting to audits).
Most of all, CIOs should communicate using the business metrics -- like "decrease unit costs" -- that really matter to the company's leaders, says Saby Mitra, an associate professor in the College of Management at the Georgia Institute of Technology.
—Mary K. Pratt