Strong CFO-CIO partnerships are key to digital investment success.
Only 30 per cent of CFO-CIO relationships are characterized by strong collegiality and business centricity, according to a recent survey by Gartner, Inc. These two key attributes define a strong digital partnership without which organizations struggle to find funding for digital initiatives, keep digital spending in line with the budget plan, and achieve intended digital business outcomes.
In the December 2021 survey of 183 executives (CFOs and CIOs) a strong CFO-CIO partnership that lead to the best digital investment outcomes was defined as being business centric (as opposed to function centric) and collegial (as opposed to adversarial).
“Inflationary headwinds are raising the stakes for CFOs to ensure that digital investments deliver productivity improvements and business outcomes that can offset margin erosion,” said Randeep Rathindran, vice president, research in the Gartner Finance Practice. “Having the right kind of relationship with the CIO is a critical part of delivering that value.”
Strong CFO-CIO relationships are 51 per cent more likely to easily find funding for digital initiatives, 39 per cent more likely to keep digital spending in line with the budget plan and 18 per cent more likely to achieve the intended business outcomes.
“CFOs should be thinking of their CIO as a business strategist, rather than just a budget owner,” said Rathindran. “Better partnership here will help to ensure that executive leadership is aligned on the role of discretionary technology spend across the enterprise and what it can deliver.”
Organizations with strong CFO-CIO partnership outperform their peers in several financial management practices that are unique to digital and are enabled by collegial and business-centric relationships between finance and IT.
Five Key CFO-CIO Actions That Enable Digital Success
Gartner experts have identified five CFO-CIO actions that enable digital success. These practices are unique to digital and enabled by collegial and business-centric relationships between finance and IT. The five actions include:
Adopt product-line-funding models to increase comfort with digital opex spending.
Progressive CFOs shift the “digital capex versus opex” discussion from short-term profitability to long-term value creation, collaborating with their CIOs to highlight the operational and strategic benefits of digital investments funded from opex. For instance, instead of focusing on EBITDA alone, they track how digital investments impact metrics related to workforce productivity, operational margins, and revenue-generating activists, etc.
Use an expanded set of metrics to reframe expectations for digital investment success.
CFOs should expand how they measure digital success to include the technology and operational metrics that CIOs emphasize. Metrics such as those related to user engagement and participation (e.g., the number of users or percentage of interactions that are digital) are often a better fit for digital investments than traditional financial metrics.
Use a common performance management framework to understand how digital investments impact business KPIs.
CFOs should lead their teams to work with IT to build an updated metrics cascade that includes more appropriate, granular KPIs as a shared framework for evaluating digital investment performance. Finance and IT can use this framework to better understand how digital initiatives impact key KPIs by linking technology KPIs (e.g., user engagement), intermediate outcomes (e.g., higher sales volume) and financial outcomes (e.g., increased revenue).
Prioritize involvement in IT’s technology-road mapping process.
CFOs should use early road mapping discussions with IT as an opportunity to share expectations for how technology should be used to advance the enterprise’s big-picture strategy, and how digital investments impact corporate financials. Finance can do this by conducting financial analysis and providing early input on the financial feasibility of technology plans.
Equip IT with tools that promote digital-cost-structure transparency.
Finance should collaborate with IT to communicate the value of digital costs in the context of measuring performance improvement in, and IT’s contribution to, the business objective of maximizing organizational value. For this reason, service-based costing models that are less detailed but emphasize the “output” created by a cost are most likely to create the kind of transparency CFOs need.
Tags: data centreGartner
