Dollars & Sense of IT
Despite years of trying to gain corporate respectability by engineering a direct reporting line to the CEO, most top IT managers don’t report to the top executive at the vast majority of companies. The rule in big companies is pretty much the same as it is in midsize companies: The CIO or senior IT executive -- and, by association, the IT function in general -- reports to the CBC, or chief bean counter. In most companies, this is called the CFO.
I’m not sure exactly why that is, but I am left with the conclusion that when it comes right down to brass tacks, IT is still looked-upon at most companies as a cost center to be managed or otherwise restrained. That is a vastly different view from IT as a source of strategic initiative or competitive advantage. But it’s the only way to explain this reporting line.
So with the CFO as watchdog, the results of a recent survey of several hundred of their kind should hold particular interest to all of you who are a part of the IT function. The survey mirrors the opinions and feelings of more than 400 CFOs and was conducted by the Financial Executives Institute of Morristown, N.J., and Computer Sciences Corp. of El Segundo, Calif.
Before I share the survey results and some analysis of same with you, let me state my bewilderment that the majority of companies today still don’t view IT as a strategic asset to be exploited for any number of business benefits. I chalk up this corporate intransigence for CFOs and their kind to boil the value of IT down into nice round numbers. That is, the return on investment (ROI) of information technology has always evaded and continues to evade financial analysis.
Further, I believe there is a profound lack of imagination on the part of many senior executives as to how readily IT can be exploited for business value. Lacking such imagination and creativity, senior executives defer to the bean counters to keep a tight rein on IT, mainly because they just plain don’t understand how to best use it.
Want proof? Check out these top-line results of the survey.
The CFOs were asked for the criteria they use most often to evaluate return on IT investments. The top criteria? "Helped us to cut operating expenses," listed by three-quarters of the CFOs. Taking up the rear in this category of criteria was "Provided opportunity to enter new businesses." It doesn’t take a genius to see how the Internet and the skillful application of intranet/extranet technology has revolutionized major business segments. Unfortunately, most CFOs apparently are not troubled by deep thoughts about IT and new business development.
Asked how they would classify the ROI of their IT investments, one-third of the CFOs replied, "Don’t know." They perhaps should have replied, "We just don’t understand IT in any terms except dollars and cents, and seeing how IT doesn’t bring money in directly, it is an expense item. So let’s control it."
The list of the CFOs’ top IT management issues included this in the top four: "Prioritizing technology investments, ensuring year 2000 compliance, and identifying the appropriate level of technology investment." This makes sense, you say, because they are, after all, CFOs. But the survey also revealed that in 55 percent of the companies polled, IT reports to the CFO. So it’s almost all about money, and very little about results, as I read these tea leaves.
On balance, I found the results of this major survey disheartening, and I imagine to you IT practitioners, it is even more so. The fact is that the interests and goals of the corporate finance ministers are probably very different from those of the IT department and its leadership. How does the IT department, for example, quantify adequately enough to satisfy the CFO the value of heavy investments being made in the network infrastructure to support electronic commerce applications that might do no more than just enable the company to keep up with the competition?
Fail to make such network investments, and the new applications cause major performance problems. User productivity slides across the board. And if the network includes an extranet, you also have unhappy external customers.
I’m not sure what the solution is, but I wish the next major survey would contrast overall corporate results (such as growth in revenues, profits, market share, and so forth) in companies where IT reports to the CFO vs. companies where IT reports to a nonfinancial type. I’d be surprised if superior business results, measured in terms very familiar to the CFO, actually favored those companies where finance controls IT. -- Bill Laberis is president of Bill Laberis Associates Inc. (Holliston, Mass.) and former editor-in-chief of Computerworld. Contact him at email@example.com.