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CFO of IT Competency Model

CFO of IT establishes the framework for managing IT-related investments and fund innovations that deliver competitive advantage. The CFO of IT role builds upon the foundational practices of accounting and expense management — what we call the Technology Controller and Cost Optimizer roles — to drive the greatest returns, improve business alignment and accelerate change for their enterprises. The CFO of IT — or whatever the title of the executive who leads the business management of IT — is not just a financial leader; he or she often is essential to the success of the technology organization and the business that depends on exceptional technologies and innovations. An effective CFO of IT (or the equivalent) fulfills at least five different roles, as described by the Competency Model below. [1]


CFO of IT Competency Model
source: TBM Council


Technology Controller
The top five functions of the Technology Controller role are:

Challenges

  • Roles, responsibilities and processes are often missing for this role. This is exacerbated by frequent organizational changes within the C-Suite.
  • The data needed for strong controllership often is missing or the quality of data is poor, and processes for data governance often are insufficient or non-existent.
  • Strong financial acumen often is missing within the IT organization. IT leaders need more financial management training.
  • Lines of communication regarding financial matters often are unclear and the metrics needed for managing financial outcomes (between stakeholders) are missing or poorly defined.

CFOs of IT will have to drive improvement in these areas; they will not be able to count on others to do so. Strong leaders can define this role, implement the systems and data needed, roll out an education program for their IT leaders, establish metrics and formalize reporting. This role is foundational to the CFO of IT. When the Technology Controller role can ensure accuracy of the data and integrity of the processes, he or she builds trust with IT and the business.

Cost Optimizer
The Cost Optimizer role is not just one person’s job — it is fulfilled by multiple people. The top five tactics used to optimize costs and create operating leverage are the following :

  • Shifting to cloud hosting
  • Implementing new, more efficient technologies
  • Rationalizing and consolidating applications
  • Shifting to Software-as-a-Service (SaaS) solutions
  • Rationalizing vendors

Challenges

  • Organizational change management, governance and accountability often are needed to drive cost efficiency. This must start at the top but must be addressed by key leaders throughout the organization, not a single person or group.
  • IT must provide transparency to the lines of business about the services or technologies they consume, how much it costs and what options they can take. Business demand remains a significant lever for driving great efficiency and value.
  • Metrics are an important but often-missing tool for driving cost optimization. Service owners, project managers and end consumers must be given the proper metrics to understand the impact of their decisions and drive the right outcomes.
  • Chargeback or other methods that drive financial accountability are important tools for optimization.

CFOs of IT must collaborate with the key leaders in the office of the CIO as well as the corporate CFO and finance organization to drive the necessary changes. Cost optimization depends on a clear financial accountability model, which is missing in many IT/tech organizations. Establishing it will take time and patience. CFOs of IT should position themselves as trusted advisors: optimizing costs does not come naturally to most IT leaders who often succeed by showing technical and organizational management proficiencies, not financial management ones.

Investment Manager
While most companies fulfill the Investment Manager role with multiple people there are some that fulfill it with a single person. This role creates value in the following six ways:

  • By helping the CIO convey the value of IT investments in business terms
  • By implementing portfolio management techniques to optimize IT spending
  • By developing strong partnerships with Finance to support IT budgeting and forecasting
  • By helping the CIO secure funding for IT investments
  • By helping the CIO identify cost savings opportunities
  • By implementing and managing strong IT project financial management practices

Challenges

  • Training is needed for both IT and non-IT leaders, including corporate finance. This will not only improve skillsets but help address the disconnect that often exists between IT, line-of-business and finance leaders regarding investments and priorities.
  • Better processes and metrics are needed for prioritization of investments, especially regarding risks, business cases and budgets.
  • IT leaders need better processes and metrics around vendors to drive consolidation, management of performance and cost optimization – and to help negotiate contracts.
  • Value itself must be better defined, especially in the context of business outcomes and how it is measured. Categories of value should be created to help show alignment of IT spending and resources to business strategy.

CFOs of IT must create and roll out a financially oriented model for managing IT portfolios. In the modern era of “as-a-Service” delivery, the IT investment management model should encompass not only new IT investments, such as software development and acquisition (i.e., capital expenditures), but also the costs to run or operate the business. In other words, a service

Agent of Change
Most companies fail to fulfill the Agent of Change role. Those that do fulfill it with multiple people. This role creates value in the following fives ways:

  • Champion innovation and transformative initiatives that can move the needle on cost structure
  • Enable alignment between business and IT strategies to create positive economic value
  • Communicate progress on delivery of promised business benefits of major initiatives/programs
  • Partner with the CIO to articulate new strategic direction and build the case to get it funded
  • Influence and manage the “brand” of IT to include financial and business outcomes

Challenges

  • Stakeholders and key relationships must be identified early in the transformation, and the right partnerships must be built.
  • Training is needed to refine roles and accountability, followed by refresher training and continuous engagement. This training along with results and value should extend to business partners.
  • IT should use transparency to show the TCO of legacy and/or aging applications and technologies and drive toward modern, more efficient technologies or higher business value capabilities.

CFOs of IT must understand the role they play in the transformation of IT and/or the business. Almost all types of transformation (e.g., IT-as-a-Service, digital, cloud) depend on an effective financial model to drive the right outcomes and accountability. Here, the CFO of IT can play a truly strategic role for the organization and the business.

Voice of the Business
Often, the Voice of the Business role is played by more than one person This role creates value in the following four ways:

  • Ensure budget and goal alignment between IT and the business
  • Work with IT to communicate technology changes that may impact the business
  • Participate in governance and demand management processes
  • Support business choices and decisions regarding consumption

Challenges

  • CFOs of IT should be able to connect business services and capabilities with IT costs and components. This allows IT and business leaders to understand tradeoffs in the context of business outcomes.
  • Most organizations need improved governance processes and metrics. For many, this means doing a better job of understanding business goals and priorities and translating them into sound IT strategies and financial constraints.
  • CFOs of IT must help IT provide the business with better levers regarding cost, consumption and performance of IT services.
  • IT must create a cadence of having the right conversations with their business partners.

CFOs of IT must seek to understand – at both a macro and strategic level – the needs of line-of-business partners and other executive stakeholders (e.g., corporate CFO, CEO, COO). They should have regular discussions with key leaders to establish the right financial management model for IT. They should also evaluate how IT engages with the business and how others (e.g., business relationship managers, enterprise architects, portfolio managers) capture and communicate business requirements.

The CFO of IT role, whether formal or informal, is a critical business partner for the CIO or CTO in driving transformation, optimizing costs, ensuring business alignment and improving credibility with line-of-business partners and corporate leaders. But, for most organizations, this role needs attention and represents a significant opportunity for improvement.[2]

A strong CFO of IT will do more than manage the IT budget. S/he will also direct the strategic and operational financial planning processes for the IT organization, create a better understanding among the executive team of the intricacies of IT cost structures and investment strategies, develop a solid approach to communicating the IT financial picture to the entire business community and educate business partners about the cost and value of IT.

While “IT finance” is the focal point of the CFO of IT, many of these executives play additional roles. With their ability to dissect the financial picture of large vendor contracts, some CFOs of IT function as head of the vendor management office. Likewise, when it’s time to upgrade finance systems, the CFO of IT is often asked to lead that program.[3]


See Also


References

  1. What is CFO of IT TBM Council
  2. CFO of IT Competency Model, Challenges and Recommendations ISG
  3. What are the roles and responsibilities of CFO of IT? Martha Heller