A CFO's Guide For Managing IT

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A CFO's Guide For Managing IT
Featured Author - Bill Friend - December 25, 2003

IT Has Changed Forever

Often, it is difficult to determine precisely when sea change starts. For the Information Technology sector, it is clear that if the signs were not apparent before, sometime shortly after 12:01 on Saturday, January 1, 2000, things changed forever. Ironically, IT changed, not because something happened, but because of a non-event. Y2K didn't really happen, at least in sense of the disaster that was predicted. IT did its job.

For corporate boards and executives not really comfortable with technology in the first place, the Y2K non-event has had the practical consequence of moving IT activities from a headline to a footnote on the corporate report. As a result IT, which had gained a seat at the Executive Committee during the Internet/Y2K bubble, started to be relegated back to a staff function. Often, in all but the largest organizations, the management of IT is returning to the CFO.

Can IT Be Managed Like Accounting?

The adage, "you better be careful what you wish for", might be in the back of the mind of a CFO the day IT responsibility becomes part of the finance and accounting domain. On the surface, the IT organization does look a bit like accounting. There are technicians and data base administrators who keep the operations going on a daily basis, much like the payroll or accounts payable and receivable clerks. There may be systems analysts and programmers who handle the more complex assignments, not unlike accountants. And, there is usual cadre of supervisors and managers. In larger organizations, both accounting and IT may have staff dispersed into operating units.

The differences start to emerge when the CFO looks at the IT budget and the organizational scope of IT initiatives. The budget for IT is often significantly greater than that of accounting, finance, treasury, fixed assets, and payroll combined. And the IT budget has both an operating and a capital component. Both budgets can run deep into the operations of the company. In the heyday, many companies made IT responsible for all voice and data communications and centralized technology purchases in the IT budget.

While the IT organization and even its budgetary scope may be somewhat familiar territory to the CFO, major differences between IT and accounting emerge in organizational mission. The accounting part of the CFO's job is a tactical activity, which simply (or perhaps creatively) measures organizational results. The finance part is slightly more strategic in that it ensures that adequate cash is available for operations in the future. IT also has a tactical and strategic component. From a tactical perspective, IT has to ensure that "the system is up", but from a strategic point of view, IT is charged with ensuring that not only will the system have the capacity to "be up" in the future but also the capability to provide the company with cost effective business solutions. The issues that surround IT capacity and capability will challenge most IT managers and will drive most CFO's outside of their accounting/finance based comfort zone.

Taming the Beast

The first thing CFOs realize when the IT function becomes their responsibility is that there is more organization passion around IT than there has ever been around accounting. Not only does every employee have a better computer at home than they have in the office but many of the non-IT employees will seem to know a lot about computing, at least at a certain level.

Early on, CFOs will think that the IT project prioritization system is obviously broken. Peers, who couldn't seem to read the financial reports, will be lobbying to have their IT projects that promise to provide "the information we need to manage the business" moved up in the priority list.

These initial responses to the CFO's new responsibilities may be overwhelming, but there are several things that should be done before making any changes in the IT organization or in IT strategy.

  • Become aware of the current IT strategies, project priorities and IT service levels that involve the finance and accounting department. Find out what kind of a job your subordinates think IT is doing and evaluate your IT projects against the organizational goals you have set for your own department. In other words, find out what kind of user of IT resources you have been. Your credibility with the IT organization and the rest of the company will be influenced by the way you have used IT in the past.

  • Find out what the big issues are from the IT staff. Determine what they consider to be "deal breakers" down the road. Get their perspective on the top priority IT projects and their timetables for completion. If you get the IT organizational perspective before you go talk to your peers about their projects and priorities, you will have one point of view to balance their input.

  • Talk with your peers about their IT projects and priorities. Here are a few things to remember when talking to IT users:

    • Personal productivity projects (those that reduce the time to perform a task) are not nearly as important as those that eliminate tasks altogether.

    • Good IT projects usually have cross-functional sponsorship. In other words, a departmental project is fine, but a project that involves two or more departments is much better because cross-functional projects tend to involve business processes.

    • IT projects that have been in progress for more than 6 months may have been improperly designed. Large projects should be designed in phases so results can be evaluated periodically instead of at the end a long timetable.

    • ROI is difficult to measure in the white-collar environment. Look for ROI surrogates (see Is ROI King In Evaluating IT Investments?) that measure process improvements.

    • When you are looking for organizational comfort and support, look to your R & D department. R & D and IT have similar methodologies and share the same project prioritization issues, often with the same internal customers.

Moving On

This assessment will help determine the nature of the journey that a CFO will take after assuming IT responsibility. There are many other questions that will come up. They could include any of the following:

  • Is IT properly organized and staffed?

  • Is there a need for more IT centralization?

  • Should more of IT be outsourced?

  • Should software maintenance contracts be renewed?

  • Is there a need for a development methodology?

  • Is the IT architecture strategy appropriate for the company's business model?

  • Is there enough business involvement in setting IT priorities?

  • Are the appropriate management skills available in the IT department?

Unfortunately, IT strategy isn't easy to determine. Billions and billions of dollars were wasted in the 1990's by companies who didn't develop an appropriate role for IT in their company or in their industry. CFOs should keep in mind that IT is one of the tools available to deliver the business plan and bring in the bottom line. Each company has a unique set of opportunities where, properly applied, IT can make a difference.

About the Author

Bill Friend was a consultant, writer and speaker who specialized in the application of IT to business problems in the process industries. He was a principal of WR Friend & Associates (www.wrfriend.com) and had over 25 years executive experience in food and chemical manufacturing. Bill co-wrote a monthly column "Managing Software" for Food Engineering (www.foodengineeringmag.com) and was a co-founder of the Food, Chemical and Life Science CIO Forums found at www.foodcioforum.com, www.chemcioforum.com, and www.lifesciencecioforum.com.

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