With more and more aspects of business becoming digitalised, a recent survey from EY highlights a drawing together of the CFO and CIO functions. With more collaboration in these areas, organisations may be able to develop strategic advantages through, for instance, better leverage of data analytics and improved business wide decision making.
In a recent survey from EY, reported in ‘Partnering for performance Part 3: the CFO and the CIO’, the professional services firm explores the changing relationship between an organisation’s Chief Financial Officer and Chief Information Officer. The global survey of 652 CFOs was conducted by Longitude Research on behalf of EY, and involved a series of in-depth interviews with CFOs, CIOs and EY professionals. Of respondents, 73 belong to companies with revenue above $10 billion and 121 with revenue between $100 million and $250 million.
Against the backdrop of the ever increasing pace of technological development, the relationship between the CFO and CIO is on the move. Technological innovations, from the cloud to mobility, offer the potential to transform organisations’ operations, customer experience and organisation model. Competitive advantages are now often determined by digital technologies, whether in deploying big data analytic or in developing omni-channel shopping environments for uber demanding customers.
The study finds that over the past three years the level of collaboration between CFO and CIO has increased – with 23% of CFOs saying it has increased significantly, while 38% say it has increased only slightly. Of the respondents 8% say that there has been a decrease in the relationship. CFOs also highlight that they are much more involved in IT, with 71% of CFOs saying there has been an increase, while 5% say there has been a decrease.
One critical area through which companies are able to improve their competitive advantage is through improving their business decisions based on information leveraged through analytics of available data. The survey also looked at consequences of companies investing in robust IT programs that gave analytics priority, finding that with a strong data analytics program companies are able to generate considerable long term value. 48% of organisations that have made it a priority have seen their EBITDA up 10% over three years, compared to 35% for organisations that have not.
By having CFOs work closely with CIOs, organisations may be better able to improve their organisation wide analytics capabilities, with the survey highlighting that CFOs see the need for such a relation: 32% of CFO respondents saying that the need for more accurate, available and accessible data is their key reason to engage with the CIO, while 31% say that they need to improve the organisations business and analytics capabilities.
“Finance leaders are clear beneficiaries of the growth in analytics. Analytics tools can give them greater insight into, to name just a few, customers, competitors, profitability and processes. Analytics can strengthen CFOs’ ability to drive strategic decision-making and investment planning”, says Chris Mazzei, Global Chief Analytics Officer at EY.
Barriers to collaboration
While the relationship between the positions has been on the increase, the survey too notes that a number of barriers exist between the two Officers. One of these barriers is related to maintaining cost discipline in the face of the ambition to innovate with IT, while another relates to difficulty in communication and thereby collaboration on potentially critical issues facing companies.
The survey finds that the biggest issue selected by respondents is that CFOs have insufficient knowledge of IT issues, thus no common understanding on which to have a significant relationship (44% of respondents). Another key issue is an absence of KPIs linking changes in IT with financial performance (42%). The third and fourth issue are the incompatibility of tools across the functional areas (36%) and the lack of resources able to be supplied to IT (34%).
To perform effectively and drive profitable growth in the digital age, EY argues that close collaboration between finance and IT is mission-critical. The consultancy notes five critical channels through which successful interaction can be stimulated:
1. To drive innovation through new digital technologies, such as improvements in the leveraging of big data to improve business decisions, which may include financial decisions.
2. With the increase in availability of cloud based services, CFOs and CIOs may need to get together to evaluate the best model for the organisation – with IT services changing so rapidly, renting might be cheaper than owning. The result might be a shift in the IT operating model from Capex to Opex.
3. With the adoption of new technologies, CFOs and CIOs may need to come together to discuss the inevitable IT risks that come with adoption – whether from costs related to budget or to privacy and cyber security concerns.
4. The relationship between CFO and CIO may need to change, with in many organisations CIOs still reporting to CIOs. By having both at the same level, a culture of collaboration between the parties may be able to produce more fruitful results.
5. Having CFOs understand wider issues faced by IT and how systems works will improve the space in which fruitful collaboration can take place with the CIO on innovation and other business wide issues, related for instance to data analytics.