Is the CIO reporting to the CFO?

9 Nov

At the start of the decade the IT manager reported to the CFO, who then reported to the CEO. This meant the CFO had responsibility for IT, but generally they weren’t IT savvy and didn’t understand it, or were cost conscious. Now the IT manager position has evolved to the CIO role, who has become a peer to the CFO. However, since the recession hit ICT investment and innovation, is it the CFO who call the shots once again and is the CIO once more reporting to the CFO?

The survey of 203 key financial decision-makers by IT specialist Getronics and consultancy Loudhouse, undertaken between October 2011 and February 2012, showed that the CFO’s role in technology decision-making increased in the past year with 44 per cent of CFOs stating that their influence over IT investment has grown since 2010. It also suggested that 43 per cent of CFOs believe the IT leadership role will inevitably merge with the top finance position. The research suggests 38 per cent of CFOs believe CIOs do not possess a good level of financial understanding.

So who’s really in charge of the IT department?  The close alignment of IT and finance means that CIOs and CFOs are finding themselves in a significantly more interdependent relationship. This is a challenging position for both executives. The tension between the two roles more than likely results from a lack of communication around the two roles’ desired outcomes for the business. By taking advantage of the new alliances between IT and finance, the CIO and CFO can develop a shared vision and roadmap for the goals, funding and usage of cloud technologies needed to move the business forward.

One of the first things that CIOs need to realize is that with the arrival of cloud computing their need for ever increasing IT budgets may be at an end. Now they are going to be able to focus less on building out a network of more boxes, and more on providing value to the rest of the company. In order to make the most of this opportunity, the CIO and the CFO need to have a truly transparent relationship. CIOs are going to need to understand how the CFO sees the world. The CFO by necessity exists in a lean world where every expenditure needs to be associated with an ROI. The CIO needs to adapt to this world and clearly spell out the need and benefit of every IT project that the company is going to undertake.

When it is working well, the relationship between the CIO and the CFO is potentially one of the most strategically valuable in any organisation. It is also, of course, equally important in optimising the efficiency of current processes and business activities.

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2 Responses to “Is the CIO reporting to the CFO?”

  1. ronnoc90 November 9, 2012 at 6:03 pm #

    Interesting post ncooney. It is fascinating to note the substanial increase in the role the CFO has in decision-making vis-a-vis investment in IT. Companies are indeed suffering due to economic downturn and as a result are tightening the purse strings.

    I think that increased communication between both departments is a good idea and I know that many companies are strategically aligning the goals of both finance and IT. However, in the long-run is it feasible to expect a symbiotic relationship between the two? Surely it is a common reoccurance that finance and IT have differing opinions and there is difficulties in reaching consensus about the path of which to follow. I do think that in the future we could see the advent of a CIFO, as a knowledge of both IT and finance would be an asset to any company.

    • ncooney1 November 13, 2012 at 7:27 pm #

      Thanks for your response! I agree that it is difficult for the two officers to reach a consensus on many topics, but I think that by being able to try understand what the others point of view is, and understand the reasoning behind them, it would make it easier for the two to reach an agreement. As CFO’s are becoming more ‘tech savy’, they will have a better idea of which projects are needed for the company, and will have a better understanding of the reasoning behind the CIO’s requests. CIOs are going to need to understand the CFO’s world based on ROI. Therefore they need to speak the CFO’s language and spell out the need and benefit of every IT project that the company is going to undertake in terms of ROI’s.

      The two roles may never fully agree on many decisions, but the focus is on making each side understand the others, so that the best decisions for the company can be reached. By ensuring that the reasoning behind every decision must be obviously shown, means that CIO’s and CFO’s will be able to clearly see the others point of view, and perhaps be able to approach the subject with a more unbiased view.

      Although it is easy to state what changes I believe need to occur, I appreciate that things are not always that straight forward, so I take your point about being unsure whether or not they will ever work in harmony, and perhaps they won’t, but I believe that they have been working more in sync now than they were a decade ago, and so perhaps they can continue down that path and work even more in agreement as their jobs become ever more interconnected. I think your idea about a joint CIFO is a very interesting one which could indeed come about in the future, but perhaps it may be too much work for one person? I do not know but I appreciate your feedback! 🙂

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