Is There A Common Ground Where The CIO-CFO Can Meet?

It is interesting to note how the relationship between the CIO and CFO is so often cited to highlight how CIOs have or haven’t come very far, becoming a benchmark of sorts of the CIO’s evolution. A CFO holding a significant sway over the CIO and a tight hand on the purse strings is indicative of a CIO who is viewed as a mere technology manager, and the opposite indicating a CIO who has truly breached all clichés to be accepted as a business leader. But, between these extremes is the state wherein lies the real power of the CIO-CFO relationship, a potent combination that is often ignored in the supposed battle for power. The answer lies in meeting each other half way.

The Real Deal

A joint study by Gartner and Financial Executives Research Foundation (FERF) established that 44 percent of C-suite executives believed that the CFO’s hold over IT investments has increased . Even as CIOs are increasingly getting to report directly to the CEO, the CIO is not always autonomous in IT investment decisions. The CFO stands and watches guard over the money the CIO is doling to the vendor and calls foul when IT procurement goes overboard. The job of the CFO is to ensure ROI and bring financial acumen to the table while the CIO stays aggressive for business-driven technology. It all begins with their respective educational background. The CFO is taught to think in numbers and the CIO perceives business through technology advancement.

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Coming from the opposite ends of the spectrum, how do the two establish a common middle ground? Ajay Kumar Dhir, former Group CIO, Lanco Infratech suggests that while the CIO is moving from being a pure technologist to becoming a business leader, the CFO also should traverse the path from pure business and financial outlook to having some IT knowledge. At the end of the day they both possess tools to empower technology within the organisation.

Tips To Establish Common Middle Ground

With the exception of a few, a key stumbling block for most CIOs is selling the IT project internally to the CFO. According to Ajay Seth, CFO at Maruti Suzuki, when investments are made with CapEx models, the CFO’s involvement is higher while it is lower in case of OpEx models. “There will be a budget under which CIOs can make their own spending decisions. Above that limit, they would need consent from the CFO,” he adds further, giving a CFO’s perspective. Pilots are key aspects of any IT business case. Many projects start with a pilot and end at the pilot. Here are some tips for CIOs on how they can convincingly justify the investment:

• The CIO needs to be honest and explain the possible hurdles as well as the benefits of taking that risk. “Generally, CIOs over-sell their IT projects. CIOs get carried away with technology developments and consider business requirements as secondary,” says Ajay Kapoor, CFO of Tata Power Delhi Distribution Ltd. CIOs cannot paint rosy pictures just to get approvals and not deliver on the promise later - this will hurt their credibility in the long run.

• Impact in totality – the domino effect of benefits - needs to be demonstrated. The CIO should be able to showcase these benefits as well as the fact that IT has indirect and pervasive effects on the workings of the enterprise, to the CFO.

• The key to the CFO’s heart is a well-researched business case that not only looks at a set of business users and focuses on a problem at hand but also considers the business philosophy of the company. Delivery metrics need to be well defined. With these in place, half the battle is won.

• There needs to be transparency and understanding of financials. “For instance, the CFO will give the thumbs up if the ROI is realised within 9 months. The CFO will put up with IT investments and projects that run under two years, and anything above that will be viewed as inflated investments,” opines Tamal Chakravorty, Global IT Director at Bata Shoe Organization.

• In cases where CapEx is high, the OpEx should be low. This is very important. However, a lot of CIOs pitch for one time investment projects but fail to foresee the maintenance costs. Consultants come into the picture and vendor maintenance packages that were mentioned in fine print and which were overlooked, now surface.

• CIOs need to build up credentials with past IT project successes to become an ally to the CFO and gain his/her confidence. CIOs need to present their projects depicting the calculated risks that are involved.

• Relationship management is also important. Clarity of vision, openness to problem solving and responsibility for things when they go wrong are vital. The CFO will always have more respect for a CIO demonstrating these qualities.

• If the CIO has operational credibility then the CFO will be more willing to hear out his/her IT woes.

• The CFO will regard the CIO as an ally if the CIO has business experience, understands the economic condition the business is working in and considers the budget constraints.

“In short, a CIO making the CFO’s job easier will always win favour,” sums up Sarwant Singh, Partner, Frost & Sullivan.

While there is undoubtedly a strong case for CIO reporting directly into the CEO and be an integral part of the CEO’s inner circle, it is also advisable to keep the CFO in the loop even though he/she will not call all the shots when it comes to IT investments. After all, the CEO has limited bandwidth and the CFO shares in the business vision while holding the kitty for the enterprise. ‘Don’t make CEO the referee,’ advises Singh. “It should be just like all the different parts of a well-oiled machine working in-sync. “

One must realise that the learning curve is not for CIOs alone. CFOs too have a thing or two to learn. Here are some tips that will come in handy for the CFO to enlist more active support from the CIO:

• The CFO needs to realise that he/she cannot close the door on the CIO when it comes to business strategy deliberations with the CEO, and chip away into the CIO’s domain.

• CFOs sometimes make the blunder of undermining the CIO’s role, thinking that IT can be outsourced. This thinking needs to stand corrected. A CFO needs to respect the CIO for his/her contribution across the entire value chain.

• Even in cases where the CIO may report to the CFO, the process heads need to be in some awe of the CIO, and how his/her technology endeavours affect their job. Not only does this mean the CIO will be in control, but the CFO will acknowledge this control and give the CIO a better listening ear.

Ultimately, the CIO and CFO are fighting the battle for the same side – working toward the success of the same organisation. All it takes is some effort from both the parties to understand and respect each others’ role. Summing it up on the basis of the Gartner-FERF study, Bill Sinnett, Director of Research, FERF says, “There is an opportunity for them to form a powerful alliance that generates more value for the enterprise. The CFO and CIO are well-positioned to work together at generating superior performance from enterprise IT investments. However, this performance is often not achieved because of poor perceptions of IT, a parochial CFO or CIO perspective, or simply a failure to invest in the CFO-CIO relationship."