CIO vs. CFO: Making the Case for Tech Spending
CREDIT: © Ruslan Grigolava | Dreamstime.com
While CIOs may know their way around a database, CFOs are the masters of the spreadsheet and control the purse strings at many companies when it comes to IT investments.
CFO influence over IT is growing as CFOs alone have authorized 26 percent of all IT investments, while CIOs have authorized only 5 percent of IT investments, according to a recent joint study by Gartner Inc., Financial Executives Research Foundation and the Committee of Finance & IT of Financial Executives International. The survey also showed that 42 percent of IT organizations report directly to the CFO, and 33 percent of IT organizations are reporting to the CEO.
So how hard is it for IT managers to make their case to the people who control the cash?
"It is still the same story that CFOs and CEOs feel that that when they see the IT guy walking through the door, they are about to ask them for money," said Scott Kinka, chief technology officer for Wayne, Pa.-based Evolve IP, a cloud service provider. Kinka also spent a decade as an IP manager for a telecommunications carrier. "One of the biggest problems for IT managers when it comes to budgeting is that they don’t take into account how the person on other side of the table is viewing their request. They have to think about it in the context of the other person’s job, responsibilities and concerns."
As an IT manager, the first step is to determine the nature of the project for which you are seeking funding. "Is the project is truly an operational cost of being in business, or is the project delivering some value?" he said. While it may seem obvious, some IT investments that seem as if they are a cost of doing business can actually add value. For example, if you’re making a pitch for a new tape backup system that is faster and more reliable than the one you are replacing, it important to point out the benefits.
"And if it is an operational cost of doing business, then make sure that you have looked at every place where you can save money," Kinka said. "If it is a project that is supposed to deliver value, come armed with specifics. If you can do that as an IT manager, you’ll be much more successful in getting the money you need for your department."
Another issue that is making the funding process more strained than it has been in the past is that CFOs and CEOs are more knowledgeable about technology. "What cloud computing in particular has done is create a lot of exposure in terms of the cost of technology per seat," said Chris Pick, chief marketing officer for Apptio, a vendor of technology business management software based in Bellevue, Wash. "CEOs and CFOs want to know that the technology, whomever is providing it, is going to be delivered at competitive market rates."
Since the IT budget is typically a percentage of overall revenue, projects that fall outside the established budget are more difficult to fund. "Those can be a tough sell," he said.
Pick suggested that if there is a project that falls outside of the annual budget, IT managers might take a look at ways to trim costs in some areas to gain the necessary funding. "Look at opportunities to run the business more efficiently, such as decreasing the number of vendors and retiring older technologies or applications that don’t bring any value to the company as a way to fund new projects."
Another factor that can increase the chances of getting the funding for a particular project is understanding the company’s budgeting cycle.
"A bit of a rookie mistake many IT managers make the first time out is that they miss the funding cycle," said Hsiu Mei Wong, managing consultant for New York-based PA Consulting, an IT consulting firm.
For companies that are on a January-to-December budgeting cycle, the planning typically starts in August and by September funding is locked in. "You don’t want to miss the boat, as it only gets tougher to get funding once budgets are set,"she said.
It is also important for IT managers to be aware of the company's goals and strategic direction as they fight for a slice of the budget.
"What we've found with our clients [is that] projects have a direct line of sight to the company’s goals – such as lead generation or gaining market share – are more likely to capture the attention of the CFO or CEO," Wong said.
Personal relationships are an important, yet overlooked aspect of the financing dance. "At the end of the day, it is about winning the hearts and minds of the people making the financing decisions," she said.