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Leadership / Finance and procurement

CFOs are all for digital transformation – but only if it delivers guaranteed results

IT projects must come with a strong return on investment to get the green light from finance chiefs.

CIO-CFO relationships have improved during the pandemic but the finance department still wants to see greater business value from IT investments, and will only loosen the purse strings if digital transformation projects promise significant return on investment (ROI), according to a new survey.

The report, released this week by Rimini Street, shows that CFOs expect any technology investments to have distinct business value and a strong ROI. Sixty-seven per cent of CFOs questioned “refuse to waste precious dollars on IT investments that don’t move the needle,” the report says, and would rather prioritise projects that can bring tangible business outcomes.

CIO-CFO relationship
CFOs have high expectations of IT projects they fund. (Photo by Lovelyday12/Shutterstock)

“It’s not surprising that CFOs want to cancel IT projects that lack a strong ROI, like many software vendor-forced ERP re-implementations and migrations, given that resources can be liberated for new technology investments that accelerate achieving the business’s digital goals,” says Rimini Street CEO Seth Ravin.

Want funding for digital transformation? You’d better deliver fast

CFO expectations when it comes to ROI are high, and on top of providing a strong business case for new digital transformation projects, 46% want to see ROI on their technology investment within two years, and 82% of them within three to five years. However, the vast majority of CFOs (88%) prefer involvement in the projects only when CIOs have a clear and finalised business plan.

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The top three priorities that global CFOs want to see from their CIOs are optimising existing technology investments, revenue-generating technology initiatives, and process improvements and employee efficiency. In addition to this, 80% of CFOs consider digital transformation as a top-five corporate priority, with 71% declaring that digital transformation is essential to their organisation’s success.

Those CIOs able to continually optimise their IT operations have better odds to secure budgets and funding for strategic IT investments aligned with business priorities.

Among the IT projects that CFOs see as non-essential and prefer to cancel if they cannot see ROI are next-generation disruptive technology initiatives and major ERP reimplementation and migration projects. Other costs under CFO scrutiny are those associated with legacy systems, including managing data centres, maintaining software licences and undertaking expensive upgrades suggested by vendors.

CFO-CIO relationship: the CIO viewpoint

Christine Ashton, CIO and director at software company Cogventive, disagrees with the view that CFOs want to cut spend on core maintenance. She does agree though that CFOs are increasingly aware of technology making up a big percentage of the asset base that creates company value, therefore it is unsurprising that CFOs want to get more from it.

One of the recent trends I have seen is for CIOs and CFOs to look to make fewer but higher quality technology investments.
Christine Ashton, CIO, Cogventive

“One of the recent trends I have seen is for CIOs and CFOs to look to make fewer but higher quality technology investments,” Ashton told Tech Monitor. “They want vendors to have a bigger stake in their success. For many, it’s now more important than ever that a core vendor’s products are robust and resilient and that they are going to be around in six to ten years’ time.”

 

A good CFO-CIO relationship is essential to business success

Strong CFO-CIO partnerships and understanding between the two roles are quoted as critical not just for transformational projects but to the overall organisation’s success. But this is not a new theme. A 2017 report by Forbes Insights found that 96% of executives consider a close working relationship between CFOs and CIOs as important or critical for business success. This collaboration is usually jeopardised when CFOs sees the IT function as just a cost centre.

Similarly to the Forbes findings from 2017, 92% of Rimini Street’s survey respondents said that a successful CFO has a “great” relationship with their CIO. Most CFOs saw this relationship improve during 2020, with 77% of CFOs saying that the disruption brought by Covid-19 and other uncertainties has significantly or slightly strengthened their relationship with their CIO counterpart. Reasons for this improvement include an increased focus on security and compliance, as well as the urgent need to collaborate and make nimble technology decisions in the wake of the Covid-19 pandemic.

However, some CFOs reported a worsening relationship with CIOs in 2020 due to CIOs’ lack of expertise to engage on security, compliance, and risk issues, complete lack of flexibility in identifying ways to cut costs, a lack of demonstrated ROI in plans, rejection of attempts to engage proactively, and a lack of urgency. CIOs’ struggle to communicate IT projects’ ROI and business priorities is a common obstacle for successful relationships and learning more about the business is still a pending task for CIOs.

Although the relationship between CIO and CFO is interconnected, the different focuses of the post-holders on business and tech mean they must find a common language, Ravin says. “This report highlights the heightened importance of digital transformation for CFOs but reinforces that IT investments must have clear business value to receive CFO support,” he adds.

Cristina Lago

Associate editor

Cristina Lago is associate editor of Tech Monitor.