Greater accountability and real-time data can help bridge the trust gap and ease tensions between IT and finance, finds a new study
While digital transformation has strengthened collaboration across the C-Suite, giving a boost to growth and innovation in many ways, it has also blurred the lines of roles and responsibilities. A new report by Apptio finds seven out of 10 business and technology leaders say that digital transformation has made strategic differences between IT and finance more pronounced.
IT, finance and the tug of war
The survey, conducted in partnership with FT Focus, the independent research arm of the Financial Times, throws the spotlight on two very important positions in the C-Suite: The Chief Information Officer (CIO) and Chief Finance Officer (CFO) - who are expected to – collaborate effectively and drive business value together, especially, with digital transformation projects underway at the majority of organizations.
While historically CIOs and CFOs faced challenges working together over budgets and technology investments, digital is completely transforming the IT operating model, demanding CIOs and CFOs to work collaboratively, states Sunny Gupta, CEO at Apptio.
The survey finds that more than two-thirds (68%) of global respondents agree that digital transformation has strengthened collaboration across the C-Suite when it comes to developing new products and services. Yet, 47% of business leaders say digital transformation blurs the lines of roles and responsibilities.
This doesn't mean that all leaders are necessarily aligned on business priorities or technology strategy. CIOs and CFOs are seen as the least aligned, with only 30% of respondents saying the two functions are in deep alignment. These new dynamics are creating tension – especially between finance and the IT leadership.
Can CIO’s power of persuasion help?
Amidst tension in the C-Suite, the study also shows that this dynamic creates an enormous opportunity for CIOs to drive change. Survey findings highlight that CIOs are now considered the C-Suite leader most effective at delivering change based on customer insight, even more than the CMO or CEO.
In the US-centric firms, with global offices, this trend is more prominent, where 28% respondents believe that the CIO is most effective, compared to the global average of 18%. But in order for CIOs to take advantage of the enormous opportunity this poses to be the change-driver in their organization, CIOs need to communicate effectively with the rest of the business and influence all stakeholders.
71% of CFOs say that CIOs needs to develop greater influencing skills in order to deliver the change their business requires. CIOs also need to develop those communication skills within their teams and ensure that they are equipped with the right blend of technical, business and influencing skills.
In such a scenario, companies are unsettled about how important technology decisions are made and evaluated. The cloud is crucial to meeting digital aspirations, but concerns over governance pose challenges for adoption and migration, causing only 30% of leaders to feel confident in IT's ability to govern cloud across the business.
Agile delivers value in accelerating adoption of new technology and enabling digital transformation, but greater clarity is needed on tracking performance as less than one fifth of companies (16%) have a clearly defined framework to map success across the business.
Leading with data
Real-time data gives CIOs the power to assess their investments in new technology and make better decisions. According to 51% of leaders in our survey, the IT function is taking a more proactive stance on data leadership across the business compared with other functions, and they say that this approach is paying off. Of those who say that the IT function is taking a more proactive stance, 58% say that this approach is very effective in helping to meet growth targets.
More than half (56%) of organizations who are embracing digital transformation say they are adopting an agile, flexible strategic approach that constantly evolves based on continual learning from the business and customers. And while technology leaders seek to drive growth through innovation, they expect to maintain almost the same proportion of effort enabling business model change over the next three years, as they balance the need for growth with the need to operate existing IT systems.
Gupta opines, “CIO and CFO need to accelerate new delivery models, such as AI, cloud and agile, optimize technology spend to fund new innovation, and boost financial agility to make resource decisions that are aligned with the speed of business.”
While the relationship between the CFO and CIO can make-or-break the organization’s ability to transform, CFOs must understand and value the potential that CIO and his IT team brings, in the form of enhanced data analytics and technology adoption, Deloitte Consulting’s Principal Matt Schwenderman observes in a recent Deloitte study.
He believes, while in many organizations CIOs report to CFOs, progressive and innovative CFOs have a very different view of that relationship. “They actually look to the CIO for ways to improve their own function, and drive the CIO to bring knowledge and skills that can be leveraged by finance.”
In fact the Deloitte study shows, in organizations in which the CIO reports to the CFO, the allocation of IT budgets to day-to-day operations is slightly higher (60%) than in those in which CIOs report to CEOs (53%) and these organizations also spend less on business innovation and incremental business change.
From these reports, we can conclude that to reduce the gap, and for greater success therefore, CIOs should work hand-in-hand with the organization’s financial leader, persuade him to invest in meaningful technology and share knowledge or data (for greater accountability), in order to demonstrate business value to the organization.