How CFOs and CIOs are Collaborating to Drive IT ROI

1. Introduction

In the digital age, the intersection of technology and finance is reshaping the financial landscape, driving innovation, efficiency, and accessibility. This transformative era is evident in financial markets, where algorithmic trading, robo-advisors, blockchain technology, and digital banking are revolutionizing service delivery and consumption. The collaboration between IT and finance departments has become critical as companies pursue digital transformation in their financial operations.

A Workday survey highlights the importance of this partnership, revealing that only 28% of companies with disconnected CFOs and CIOs have successfully launched a digital finance strategy. This underscores the need for cohesive collaboration to harness the full potential of technological advancements in finance.

2. CFO-CIO Partnership

As organizations strive to align financial strategies with technological advancements, the synergy between CIO and CFO can drive significant business outcomes. Recent findings from a Censuswide survey sponsored by Rimini Street highlight the dynamics of this partnership and reveal essential insights into how CFOs and CIOs work together to navigate the complexities of IT investments and deliver substantial ROI. Below are the key findings from the survey, highlighting the impact of a strengthened CFO-CIO collaboration.

#1: Strengthening CFO/CIO Partnership

The survey reveals a significant strengthening of the relationship between CFOs and CIOs, with 86% of respondents noting improvements. This collaboration is crucial for aligning financial strategies with technological advancements.

The bond has grown stronger due to several factors: a focus on security, compliance, and risk; the urgent need for collaboration to make agile technology decisions; engagement from other leaders; and the necessity to cut IT costs smartly.

Takeaway: A robust partnership enables CFOs and CIOs to make informed decisions on critical areas such as emerging technologies, security, agility, ROI, and hybrid environments. Working closely together, they can ensure technology investments align with business objectives and drive tangible outcomes like revenue growth.

#2: Differing Perspectives on IT Investments

CFOs are increasingly involved in technology investments, prioritizing those that deliver tangible business outcomes and de-prioritizing low-value projects. Only 20% of CFOs are satisfied with the impact of tech investments, highlighting the need for improvement. CFOs are more involved in the details of technology investments, including timing, spending, and selection.

CIOs, on the other hand, focus on addressing business and technology pressures by leveraging emerging technologies, with about 50% of respondents investing heavily in this area. However, 31% of CIOs adopt a cautious approach, finding fit-for-purpose solutions preferable to upgrading to the newest platforms or completely replacing current systems.

Takeaway: CIOs should emphasize the ROI of each technology project, ensuring every tech dollar contributes to strategic goals. This results-driven focus is vital for securing executive buy-in and demonstrating the value of technology initiatives. CFOs should collaborate with CIOs to understand how technology investments address challenges and accelerate business opportunities, fostering better collaboration for successful investments.

#3: Need for Mutual Understanding and Communication

The survey indicates that 85% of CFOs believe their CIO counterparts need to be more business-savvy for better communication. Conversely, 86% of CIOs think their CFO counterparts need to be more technology-savvy.

CFOs rely on CIOs for expertise in managing technology-driven priorities like security and emerging technologies, while CIOs look to CFOs for budgeting support and executive advocacy.

Takeaway: CIOs and CFOs should familiarize themselves with each other’s business goals, terminologies, and industry trends. Communicating in terms and metrics that matter to the other ensures mutual understanding and better outcomes.

3. CIO Strategies for Managing Rising IT Costs

Leverage shared services

CIOs can indeed save money through IT shared services across different business lines in an organization. Economies of scale are developed as a result of this kind of strategy, offer potentials for the reduction of fixed cost by 15 percent to 20 percent within 18 to 36 months; some attain above 25 percent in savings.

Adopt a Cloud-First Policy

A cloud-first strategy delivers an extended range of infrastructure and software services, opening up greater agility, flexibility, scalability, and cost efficiency. Nevertheless, establishing robust governance of cloud spend management will be critical in ensuring cost savings are realized; otherwise, the costs of running infrastructure and applications could escalate and spiral out of control.

Consolidate Enterprise Data Centers

With the growth of business, traditional data center maintenance costs also increase. The IT department’s upgrading and consolidating data center environments with advanced switching architectures will definitely help to overcome it. It will help the customers to save 10% to 20% of the data center budget.

Optimize and Standardize Enterprise Applications

One of the biggest IT costs is managing an eclectic application portfolio. It is the capacity for standardization and rationalization of their application portfolios that helps CIOs reduce and then finally manage their costs better. Ultimately, this could result in a cost reduction of 15% to 25% against the application budget.

Bring about IT Financial Transparency

IT financial practices achieve transparency through a clear understanding of the costs of IT service delivery. Collaboration with chief financial officers and finance teams in mapping general ledger entries to technical and business service costs makes enterprise IT spend transparent. Thereby, such transparency creates opportunities for better cost optimization and value delivery with IT services.

Optimize Business Costs by Controlling IT Spending

This means that ninety-six percent of business spend occurs outside the IT function, creating opportunities for IT expense reduction. CIOs can work with peers in other functions to scrutinize, at a detailed level, processes, resources, and capacities in search of areas where IT can make a productive or efficient contribution.

Apply Robotic Process Automation

RPA and AI can be adopted for data analysis with the discovery of patterns. These technologies thus support intelligent business decisions and automation or improvement of inefficient processes.

Assess IT Asset Management Practices

Neglecting IT asset management practices leads to increased operational costs. When CIOs have already begun to pass on the ITAM responsibilities down to corporate governance, the main work provided by this shift is the change from tracking individual assets to something big that gives cost savings of 10% to 20%.

4. Challenges and Solutions in Technology Investments

1. Rapid Obsolescence: With rapid technological evolution, businesses must constantly invest in new systems and software to stay competitive. According to McKinsey, this cycle of rapid obsolescence requires companies to be agile, constantly evaluating and adapting their technology stacks to ensure they remain relevant and efficient. To overcome this challenge, companies must:
   • Continuously Learn and Adapt: Organizations should invest in continuous training and development programs to keep their workforce up-to-date with the latest technologies. This will create a culture of continuous learning that encourages innovation and adaptation.
   • Implement Flexible Technology Frameworks: Implementing flexible and scalable technology that can easily integrate new components or updates can help mitigate the risk of obsolescence. This could involve adopting cloud services that allow for modular updates and scalability.
2. High Initial Costs: Technology investment can be highly expensive, especially for startups and small businesses. Deloitte reports that the upfront cost of implementing advanced digital solutions, such as AI or blockchain, can deter businesses from adopting these technologies despite their potential long-term benefits. Solutions to high initial costs include:
   • Phased Implementation: To manage the high upfront costs, companies can phase the implementation of new technologies, starting with the most critical areas. This approach allows for breaking down the expenses over time and validating ROI step-by-step.
   • Seeking Financing and Grants: Businesses can look for external funding options such as l****, investor capital, and government grants designed to support technological innovation.
3. Integration Challenges: Integrating new technology with existing systems can be complex and resource-intensive. Poor integration can lead to inefficiencies, increased costs, and failure to achieve the desired ROI from technology investments.
   • Robust Planning and Expertise: Before implementation, thorough planning and consultation with IT experts can identify potential integration issues. Gartner emphasizes the importance of investing in in-house or outsourced expertise to ensure smooth integration.
   • Standardized Processes and Tools: Adopting standardized software and technologies across the organization can reduce compatibility issues and simplify the integration process.
4. Security Risks: As investments in technology grow, so do the associated security risks. Data breaches and cyber-attacks can have devastating financial and reputational consequences. The 2020 Cost of a Data Breach Report by IBM found that the average cost of a data breach is $3.86 million, underscoring the critical need for robust security measures. How security risks can be mitigated:
   • • Investment in Security Infrastructure: Regularly updating cybersecurity measures and investing in advanced security infrastructure is crucial. The IBM report suggests implementing automated security solutions that can predict and mitigate potential breaches.
     • Regular Audits and Compliance Checks: Conducting regular security audits and maintaining strict compliance with data protection regulations can help prevent security lapses.
5. Skill Gaps: The rapid development of technology creates a gap between the skills available in the workforce and the skills needed to effectively utilize new technologies. The World Economic Forum has emphasized the importance of ongoing training and education to prepare employees for the digital economy.
   • Partnerships with Educational Institutions: Forming partnerships with universities and educational platforms can help access training resources and keep the workforce skilled in the latest technologies. The World Economic Forum supports such collaborations as a way to bridge the skill gap.
   • Hiring and Retaining Specialist Talent: Actively recruiting and retaining employees who specialize in emerging technologies can alleviate skill shortages.

Also Read: Three Strategies to Help You Solve Your IT Skills Gap

1. Regulatory Compliance: With the increasing amount of data collected and used by businesses, regulatory compliance has become a significant challenge. Compliance with regulations such as GDPR in Europe or CCPA in California requires substantial investment in technology and processes to ensure data protection and privacy. What solutions can be taken to overcome regulatory compliance challenges:
   • Dedicated Compliance Teams: Establishing a team specifically focused on compliance can ensure that all technology practices adhere to the latest regulations. These teams should stay informed about regulatory changes and adjust practices accordingly.
   • Technology-Assisted Compliance Tools: Utilizing compliance software that helps in maintaining records, managing data privacy, and generating compliance reports automatically can reduce the burden and risk of non-compliance.

“Organizations have a lot more tools and digital capabilities at their disposal than they did during the financial crisis of 2008-2009. A recession offers organizations the opportunity to experiment with disruptive innovations and to redefine the next decade. The CFO-CIO relationship is key in ensuring these innovations are given appropriate funding and the appropriate risk appetite is set in order to leverage digital against today’s economic headwinds and set up for a healthier future.” – says Sanil Solanki, Managing Vice President at Gartner.

5. Conclusion

Collaboration between CIOs and CFOs is essential for making sound financial and technological decisions that drive company growth. This partnership helps companies enhance their capabilities, reduce costs, and make data-driven decisions.

CFOs and CIOs share equal responsibility in forming a mutually beneficial relationship. CFOs must fully support digital transformation efforts, while CIOs should create IT roadmaps aligned with strategic organizational objectives rather than just perceived technology needs. When both parties consider how technology initiatives can streamline processes, improve workflows, and provide competitive advantages, IT investments will become less adversarial.

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