IT and Finance: Coming Together

The heat is on for finance departments.

After years of bloated budgets, businesses are looking more closely than ever at cost centers and return on investment. If they don't, they face the consequences.

"If you get slammed, the business gets tucked in on Friday evening, and you wake up on Monday morning and find you've been put out of business," says Robert Anderson, a research director at Stamford, Conn.-based Gartner Inc. "So there's very little react time."

Wise finance executives know that the best place to turn is toward their counterparts in IT. In fact, finance and technology executives have, in many ways, become interdependent, with the fate of the company in their hands.

"They have to be in lock step, finishing each other's sentences," Anderson says.

The two departments are so closely linked at Bethesda, Md.-based Marriott International Inc. that IT has its own chief financial officer. It's common sense, says Executive Vice President and CIO Carl Wilson. In fact, he sees the collaboration between finance and IT as a sign that businesses have come full circle.

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The CFO Embraces IT

A recent survey of 1,400 CFOs by Robert Half International Inc. shows how closely aligned IT and finance have become and how critical their cooperation is to companies' future success. The following are among the findings from the survey:

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Asked which skills, aside from financial expertise, will be most important for financial professionals in the future, CFOs ranked technology expertise (44%) first.

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More than half (52%) of CFOs say IT training will be their first professional development priority (above traditional finance skills development) for their accounting staffs in the next two years.

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A large majority (82%) of CFOs said their accounting departments have become more involved with their companies' technology initiatives in the past five years.

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Almost half (49%) of CFOs said their accounting departments have become more involved with e-commerce in the past three years.

Source: Robert Half International Inc., Menlo Park, Calif.

Back in the '60s, when companies were first getting into commercial data processing, most of the applications being developed were financial tools -- accounts payable, accounts receivable, payroll. And since colleges didn't offer programming degrees back then, many IT workers came from finance backgrounds, says Wilson. After all, he says, both finance and technology rely heavily on mathematics and technical specifications and equations.

"The skills of finance and systems analysts are very similar," he says. "They just use a different syntax to do their work."

But Scott Modist, CFO at Boca Raton, Fla.-based Moredirect.com, disagrees. In fact, he says, IT and finance people speak such different languages that they have trouble understanding each other. That's why the relationship between the CIO and CFO is so critical, he says. It's up to them to come up with shared strategies, then explain those strategies to their people in the languages they understand.

Back Where We Started

In the past decade, IT has come into its own. But, says Wilson, that doesn't mean it can cut ties with finance. In fact, because of the advancements due to technology, it's more important than ever for them to be in sync.

Take globalization, for instance. As businesses grow in size and complexity, it becomes more difficult to gauge costs and profits. The CFO's insight is increasingly critical because there's more at stake, but he needs tools from the CIO to gather and analyze figures across the organization and to react to those figures in time.

Technology even helps the CFO weigh investments in IT infrastructure, Wilson adds. In the early days of IT, you didn't have discussions about whether or not something was a good investment because it was fairly straightforward, he says. It was assumed that if you automated your accounts payable system, you could expect to process x more transactions per minute and save x amount of dollars per year. But the picture is more complex these days, he says.

"Marriott, like most other successful companies, is investing more money in IT than it ever has," says Wilson. So as the costs go up, the company needs to make sure that the value is worth the investment.

At Marriott, the CFO and CIO, along with other business leaders, measure value by looking at benchmarks and revenue per available hotel room over that of competitors, says Wilson. They compare the return on investment of Marriott.com, the company's Internet distribution channel, with those of other sales channels. They look at the cost of running the Marriott Rewards program, which offers discounts to members, vs. the sales it produces, he says.

"Finance and accounting: that's the language of business," says Wilson. CIOs must understand that language. And as more economic analysts weigh companies' IT infrastructures before making investment recommendations, "the CFO has to be able to conceptually understand and communicate the value that Marriott is receiving from its É information technology and how that affects its growth in the future," he says.

The pace of business has also given rise to finance/IT collaboration, says Gartner's Anderson. The turbulent economy means finance departments need to be able to analyze data, spot gaps and redirect the company -- all in record time, he says. Enterprise resource planning systems have given them more data about their operations, and now they need analytical tools to get their arms around that data.

"We're taking in reams of information all the time, but it's trying to find that needle in the haystack," says Anderson. "The real powerhouse capabilities are between those two sides -- the CFO and the CTO [or CIO]. If the left side and the right side aren't operating together," the company won't be able to reach its maximum potential.

Dynamic Steering

South San Francisco-based See's Candies Inc. outsourced its IT operations until 1994. When it pulled them back in-house, IT's relationship with finance grew exponentially, says MIS director Greg Gibbons, who reports to the CFO, Ken Scott.

"It's developed and deepened," Gibbons says. "I think we have a good working relationship."

See's has an active cost-control team consisting of various executives, including the CFO and CEO. "They're always looking to us: 'Can you do this? Can you do that?'"

So the finance and technology executives must understand each other's work. "I'm a big explainer. That's just part of my own style. And [Scott] listens and understands," says Gibbons. "I need to understand them at least at a high and general level."

Moredirect.com CFO Modist says of his relationship with his counterpart in IT, CTO Michael Diament, "It's absolutely critical that we work together. If senior management in IT and the finance group are not communicating often and closely, that's where a lot of problems come up such as accounting misstatements, incorrect customer charges."

Chandran Sankaran, CEO of Closedloop Solutions and a former consultant at New York-based McKinsey & Co., says many firms make wide use of financial planning and budgeting tools, but the results aren't impressive because they're looking at static information.

To dynamically steer a company, the CFO must get real-time information about revenue realities from the CIO so he can make changes on the fly. Waiting five days to get that information, Sankaran says, could mean the difference between a projected shortfall and an actual shortfall.

"Strategy is, Where do you want to go and how do you get there?" explains Stanford University Business School professor Kathy Eisenhardt, co-author of Competing on the Edge (Harvard Business School Press, 1998). "The real emphasis now is putting the where and the how together. [You] have to be ahead of the game."

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Copyright © 2001 IDG Communications, Inc.

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