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Strength through unity

IT and finance mangers do not always make easy bedfellows and, historically,
the relationship between chief information officers (CIOs) and chief financial
officers (CFOs) has been widely characterised by tension or, in some cases,
outright hostility.

Such fundamental conflict has long been considered inevitable given the fact
that finance directors (FDs) are responsible for managing expenditure and IT is
invariably expensive. Budgeting and cost control is of paramount importance to
CFOs, while procurement and maintenance of expensive IT systems are core
functions of CIOs, so conflict has often resulted. The relationship has been
further strained because CFOs do not welcome surprises that upset carefully
prepared financial plans and IT can be full of surprises, many of which are
nasty ­ such as projects going over budget or systems crashing.

There has long been a chorus calling for rapprochement between these
seemingly implacable foes. However, in today’s challenging economic climate,
experts warn that the need to end this internecine squabbling has never been
more pressing as failure to grasp the nettle could tip many struggling firms
over the edge into commercial oblivion.

Sheila Upton, a director at Ernst & Young, acknowledges that “categorical
challenges” remain in the majority of FD/CIO relationships.

“The need to get the relationships between IT and finance right is more of

a burning issue than it was a couple of years ago,” she says.

“The economic conditions of the past year and a half have acted as a
catalyst, forcing IT to talk to the business more effectively. But there are
still a lot of firms where the IT professionals may now be wearing suits to fit
in when they attend board meetings, but still think they are in beards and
sandals.”

Savvy CIOs should be taking the initiative and trying to engage with their
CFO colleagues.

“The CIO has the responsibility to actually go to finance and present options
as to what solutions are available and what their respective strengths,
weaknesses and costs are. And the CFO has a responsibly to listen. Even
companies in the same industry have been affected in very different ways by the
downturn: there is not a one-size-fits-all solution,” says Upton.

Vuk Trifkovic, senior analyst at Datamonitor, agreed that, as the impact of
the downturn has made itself increasingly felt, formulating the alignment
between IT and the business has quickly become a pressing priority.

“Now everyone realises this is an issue, but it remains tough to implement.
We are in the middle of a generation handover. The next generation of managers
is not going to transform things radically, but we are now seeing both IT
leaders and business leaders who grew up with IT. Many of the traditional
divisions between IT and the business will be reordered because of the
pervasiveness of technology. We are starting to turn out technical people who
have greater business knowledge,” says Trifkovic.

Peter Williams, practice leader in IT infrastructure management at Bloor
Research, says that in the past, IT and business managers have looked at
technology totally differently.

“Quite often systems do not have the flexibility that business managers
wanted. These business managers often could not understand why something that
appears conceptually simple cannot be done by IT,” he says.

“Now every business is run on IT. In today’s world the business managers
cannot do their job if the IT infrastructure is not in place. We must all be
going in the same direction ­ lack of co-operation is no longer an option.”

Charles Cotton, a reward specialist at the Chartered Institute for Personnel
and Development, suggests that corporate human resources (HR) departments have a
role to play in improving the relationship between finance and IT professionals
by allowing suitably qualified technical managers to take on non-technical roles
and so gain a more holistic understanding of the business.

“You might get people from an IT background to go and zig-zag around the
organisation. HR has a role to talent-spot the right skills,” says Cotton.

Other commentators are more upbeat about the quality of relationships between
IT and finance in the economic downturn. Research from the Economist
Intelligence Unit (EIU) describes “strong indications from many firms of
continued improvement of CIO-CFO relationships”. Despite the fact that many
would expect the IT/finance relationship to have suffered with budgets coming
under severe pressure over recent months, almost 50 per cent of respondents to
an EIU survey reported that co-ordination between the two key executives has
actually improved at their firms in the past year.

The majority of CIOs and CFOs in the poll rate levels of trust, communication
and understanding between them as strong. CFOs offer a rosier picture than do
CIOs, but few in either group report any deterioration in their relationships.

These improvements are attributed by the research, entitled Staying the
Course? Technology Decision-making in Turbulent Times, at least in part, to the
fact that CIOs appear to be retaining their places at board level and are
increasingly involved in core business discussions, rather than being locked in
the technology silo. Few survey respondents believe that the CIO’s influence in
technology investment decisions will decline in their firm, while a large
minority expect CIO involvement in business strategy discussions to expand.

“Most firms will remain cautious about new technology investment until
economic recovery looks more certain,” says Denis McCauley, director, global
technology research at the EIU.

“But some firms will take risks with projects that help position them for
growth when conditions improve. This raises the stakes for CIOs and the IT
function, and they will need to deliver.”

Clive Longbottom, service director at analyst Quocirca, says that when
meeting these challenges CIOs need to keep focused on core business issues and
not become sidetracked by technology for its own sake.

“I cannot say it enough: it is not about technology ­ it is about the
business,” says Longbottom.

“We have come through such a long period of good times when revenue was
coming in fast and furious that many problems and business issues were subsumed.
Now these are being laid bare and firms need to get to grips with them.
Technology to automate and make processes and systems more efficient and
flexible can certainly help,” he says.

“Firms should be looking at what highly targeted IT investment can do to
streamline their value chains. Only the firms that do this and take appropriate
action will be able to weather this economic storm. It is time that we had the
CIO and FD dancing nicely together rather than having their swords drawn as has
so often happened in the past.”

An Ernst & Young report, Successful IT in High-performing Organisations,
the Impact on Business Growth, urged firms to “set the bar high” when attempting
to improve CIO/CFO relationships: “Many organisations have made real progress in
improving IT management and delivery, and integrating IT with business
objectives to deliver tangible results. These activities are not easy and many
organisations, by their own admission, are not successful across the board.
Successful ones, however, share some common characteristics,” the study says.

“Above all, our research showed that in assessing current performance levels
and setting targets for improvement, organisations that expect IT to make a
strategic contribution will get more value, so it pays to set the bar high when
agreeing targets.”

Aligning IT with the business
• Successful organisations exhibit a sophisticated understanding of IT and a
flexible view of the function and its reporting lines;

• A variety of leadership structures exist to support integrated business and
IT decision-making – it is not just about whether the CIO is on the board;

• While no single governance model stands out as working better than others,
there is overwhelming agreement on the board’s responsibility to ensure the
right governance structures and processes are in place;

• Quality and frequency of discussion matter more than structure and
hierarchy but organisations need to ensure integration where separate
committees exist for specific purposes; risk being a typical example of this.

Source: Ernst & Young report, Successful IT in high-performing
organisations, The impact on business growth

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