CIOs Have Authorised Only 5% Of IT Investments

CFO influence in IT is growing as CFOs alone have authorised 26 percent of all IT investments, while CIOs alone have authorised only 5 percent of IT investments, according to a recent joint study by Gartner, Inc., Financial Executives Research Foundation (FERF) and the Committee of Finance & IT (CFIT) of Financial Executives International (FEI). The survey also showed that 42 percent of IT organisations report directly to the CFO, and 33 percent of IT organisations are reporting to the CEO.

The survey of CFOs, which is in its third year, is designed to gather perceptions from financial executives about technology, key trends and planned improvements to operations. The Gartner/FERF technology study, conducted from October 2010 through January 2011, included 344 respondents who were qualified in providing a perspective on technology deployment within the enterprise. Sixty-six percent of the respondents were CFOs, 9 percent were business unit CFOs, and 95 percent could be considered senior financial executives.

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The survey results varied by the size of the company. For example, in companies with less than $50 million in revenue, 47 percent of IT departments report to the CFO. Fifty-eight percent of companies with revenue of more than $50 million and less than $250 million have IT departments that report to the CFO, while 46 percent of companies with $1 billion or more in revenue have IT reporting to the CFO.

“This high level of reporting to the CFO, as well as their influence in technology investments, demonstrates the need for companies to ensure that their CFO is educated on technology, and underscores just how critical it is that the CIO and CFO have a common understanding on how to leverage enterprise technology,” said John Van Decker, research vice president at Gartner.

“This year’s results show an increasing enterprise requirement for greater financial control of technology initiatives in the firm, as well as better alignment between the technology and the strategic direction of the enterprise, with the CFO primarily leading this coordination,” said Bill Sinnett, director of research at FERF.

Senior financial executives were asked how to ensure that the relationship between the business and IT is successful and effective. The responses pointed to a clear ownership of the project (38 percent), the business case for the project (37 percent) and the project management (36 percent). Business partnering and sound project management continue to have more of an impact on IT investment success than technology prowess.

The survey also showed that senior financial executives expect IT spending to recover conservatively in 2011, with 38 percent of respondents saying that they do not expect this growth to reach the level experienced before the recession in 2008. Forty percent see the level of growth consistent with 2010; just 6 percent expect the economy to rebound this year beyond 2008 levels.

When it comes to how CFOs are making IT investments, and which guidelines they used to guide investments, 72 percent of firms said that they will invest where they see a competitive advantage driven by IT. Business intelligence (BI) is the top technology initiative from the perspective of the senior financial executive. For a combined 65 percent of choices, BI ranked as the technology with the highest demand, while 46 percent ranked enterprise business applications, such as enterprise resource planning (ERP) and integrated financial management solutions, as investment priorities. When viewed within the larger scope of operations’ infrastructure, however, business applications (30 percent) were seen as more important than BI (23 percent) in 2011.

Of all organisations in the study, 41 percent believed that IT is appropriately funded for 2011, and 31 percent said that IT has the technological capability to move the firm forward. However, only 30 percent said that IT truly fulfills its mission, meaning that 70 percent do not believe that IT is providing business benefits. Furthermore, only 32 percent of CFOs said they see the CIO as a strategic partner.
Only 47 percent of survey respondents viewed IT as being strategic, while 28 percent said IT fulfills what is asked of it. Thirty-five percent of organisations see IT as being a strategic driver of business performance; 8 percent view IT as a key contributor to the enterprise’s competitive position; and 4 percent see it as transformational.

“In terms of enterprise technology, organisations need to focus on better enabling business processes, led by technology initiatives,” said Sinnett. “Given some of this dissatisfaction, CFOs are taking a more active role in controlling a greater share of the organisation’s IT investments. Due to the increased involvement of CFOs and senior financial executives, organisations must make it a priority to better educate decision makers.”

“IT organisations must understand the CFO’s views of technology investment decisions and must work toward developing a relationship with the CFO that resembles a business partnership,” said Van Decker. “This will enable the business to become more agile. This flexibility will help firms select best practices that could make business processes work better, thereby providing better business insight.”