CIOs take aim at FDs

The past couple of years have seen the IT function in business largely taken over by the finance department. After the widely reported excesses of EUR2K investment and the drive to implement technology for its own sake, finance directors have got their revenge in the form of tighter IT budgets, a slowdown in spend, and a drive toward accountability and return on investment.

All this has rather left IT directors and chief information officers feeling left out in the cold, without a voice on the company board in many cases. At a recent conference hosted by IT analysts IDC in Paris, CIOs of the largest European companies were bemoaning their lot. “Very often the CIO is not the leader in (IT) sourcing strategy,” said Jean-Pierre Corniou, CIO of Renault. “IT is not viewed as core to the business.” Thomas Endres, head of group IT at Deutsche Lufthansa, was similarly downbeat about business appreciation of the IT function: “Doing what you have always done, while telling people that you are doing a brilliant job, is not enough to raise the profile of IT.”

At the conference, analysts urged CIOs to take control in the coming months and convince their businesses that they are crucial leaders in the future direction of their companies. “IT is fundamentally a political tool and the continuation of company politics. If you are just a technologist, and you don’t understand that you have to get the power line-up right, you will fail,” said Paul Strassman, head of consultants Strassman.

Closer to home, Maggie Miller, business transformation director for Sainsbury’s, says that the trick for CIOs is to promote themselves as being in tune with the business, even if their agenda is longer term than many company strategies. “We should be in step with where the business is going,” she says. “The trouble is, IT projects take time to come to fruition; if you are not careful, you can be seen to be out of step. If you talk about blue-sky stuff all the time, then the business will see that as indulgent. But if you make a strategic mistake with IT, the resultant problems will not appear for some time. We have to be careful about how we communicate that long-term view.”

Miller says that, even though she has a good relationship with her group level FD, many of her colleagues in other companies feel forced out by tighter controls from the executive board. But all that is about to change, she says. “The IT function’s voice has definitely been weakened. Business is going through tough times and people have heard enough about IT. But a lot of investment is needed to refresh the systems implemented before 2000 and Sarbanes-Oxley is starting to drive focus on systems in their wider sense again, rather than just technology.”

Taking a harder line, Dorien James, CIO of Capital One, says that the finance department has to let go of control over IT completely. “The role of the CIO is to work with the whole of the business to establish what systems and functionality we need. It is also to work out what kind of operating and procurement strategy we need to enable those aspirations.

I wouldn’t expect the FD to have any involvement in the latter, and his involvement in the former is the same as any other stakeholder in the business,” he says.

James’ comments will have most FDs flabbergasted, but he says the aim is for Capital One to become more sophisticated about the way it accounts for IT expenditure, so all stakeholders are involved in making the most informed decisions about IT spend. “Historically, there was a line in the accounts where a big round number labelled ‘IT costs’ would sit. The aim was always to make that number as small as possible,” he says. “But we have split that into two numbers: the cost of ongoing service and maintenance of existing systems, and money allocated for investment in future technology. We can now focus together on getting the ‘run the engine’ costs as small as possible, while continuing to invest in development.”

While James says FDs “should not be especially privileged” when making decisions about IT – an argument that will find few supporters among Financial Director’s readers – Miller says that the issue is not the over-dominance of finance but the lack of identity IT departments have. “Burying IT under finance does a disservice to both functions,” she says. “They are the only two departments that understand that business from end to end – but they come from different angles.”

So will 2004 be the year of the CIO? “Yeah!” says Miller. “It’s about time!”