CFO-CIO: a growing collaboration

Partnering for performance

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The CFO-CIO relationship is becoming closer and more collaborative. But there are two threats to this critical union. Cost discipline, rather than strategic value, still defines the IT investment mindset, and lack of mutual understanding between CFOs and CIOs is still an all too common problem according to our global survey of 652 CFO and financial leaders.

Key findings about the CFO-CIO relationship:

  • 61% of CFOs report increased collaboration in the last three years.
  • 71% of CFOs have increased involvement in the IT agenda in the last three years.
  • CFOs say they add most value by managing costs and profitability.
  • CFOs’ insufficient understanding of IT issues is the number one barrier in their relationship with CIOs.

In today’s digital economy, the financial well-being of the enterprise is dependent on the health of the CFO-CIO relationship – and this will be amplified as the importance of digital grows. Technology innovations, from the cloud to mobility, offer the potential to transform organizations’ operations, customer experience and business model.

Organizations are driving performance improvement and creating new competitive advantage through a range of digital initiatives, from harnessing the power of big data and analytics to transforming decision-making, to meeting the demands of the ultra-connected customer.

To succeed, organizations must make bold technology investment decisions that are driven by corporate strategy, while managing a range of severe risks, such as cyber risk and data privacy concerns.

This mission-critical convergence of technology, investment strategy and risk has elevated the CFO-CIO relationship to new levels of importance. Any disconnect between the CFO and CIO will have profound consequences for the organization, and jeopardize advancement.

  • Key findings about the CFO-CIO relationship

    According to our survey, CFOs and CIOs are becoming increasingly connected. Sixty-one percent of CFOs say that their collaboration with the CIO has increased over the past three years (see Chart 1).

    Chart 1: Over the past three years, what change has there been in the extent to which you collaborate with the CIO?
    EY - Over the past three years, what change has there been in the extent to which you collaborate with the CIO?

    Similarly, 71% of CFOs say that there has been an increase in their involvement in IT over the past three years (see Chart 2).

    Chart 2: Over the past three years, how has your involvement in the IT function changed?
    EY - Over the past three years, how has your involvement in the IT function changed?
    Partnering for performance: the CFO and CIO - A crucial collaboration

    Although the relationship has grown closer, there are two concerns for the future of this union.

    First, CFOs continue to struggle with balancing their responsibility to maintain cost discipline with more strategic ambitions, such as setting the agenda for change (see Chart 3).

    Chart 3: In which of the following areas do you consider your contribution to IT to be most valuable? (Please select up to three)
    EY - In which of the following areas do you consider your contribution to IT to be most valuable?

    Second, lack of understanding between these two C-suite peers is an all-too-common problem. CFOs point to insufficient understanding of IT issues among finance executives as the main relationship barrier (see Chart 4).

    Chart 4: What do you consider to be the main barriers preventing a closer relationship with the CIO? (Please select up to three)
    EY - What do you consider to be the main barriers preventing a closer relationship with the CIO?
    Partnering for performance: the CFO and CIO - A crucial collaboration
  • From cost management to strategic IT investment

    The relationship between the CFO and the CIO has always had a strong cost dynamic. Investments have typically involved large-scale purchases of data storage, enterprise applications and PCs.

    IT spending as a percentage of revenue, as high as 6% in some industries, used to be a crucial metric. The goal was to bring this figure down, and CFOs played a critical role in managing IT project overruns and keeping a watchful eye on hidden costs. This is why many CIOs reported to the CFO.

    Today, however, technologies are crucial to both operational excellence and profitable growth. Tony Klimas, Global Finance Performance Improvement Advisory Leader at EY, believes that CFOs are recognizing the growing strategic importance of IT.

    “CFOs are becoming much more aware of the strategic value of IT and what it has to offer,” says Klimas. “There is a growing focus not only on what IT costs, but also on the value it brings to the organization.”

    Helen Arnold, CIO of SAP, agrees that IT should not be seen primarily as a cost, but rather as a tool for broader efficiency goals.

    “To achieve greater efficiency and bring down cost, a validation and redesign of business processes is often paramount,” Arnold says. “Typically, it’s a new technology that will enable these benefits to materialize so that the organization achieves higher business value.”

    Venkat Padmanabhan, President and Global Head of Finance – Products, Olam International, believes greater CFO involvement is key to driving value.

    “IT is very powerful, and finance should have more ownership,” Padmanabhan says. “What I often see in the outside world is that IT operates in isolation and has its own priorities. When finance is the core owner of IT, it makes a huge difference when it comes to extracting the full value of IT investments.”

    As organizations look to drive innovation through technology, this critical CFO-CIO relationship requires a different mindset and better mutual understanding.

  • Key activities for CFO-CIO collaboration

    The strategic value of IT is now being recognized, and a closer CFO-CIO relationship is developing as a result. In the rest of this series, we explore how CFOs and CIOs are collaborating across four key activities:

    • Managing cybersecurity
    • Creating an analytics-driven organization
    • Establishing information strategy, architecture and processes
    • Transitioning to a digital IT function

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