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By Bill Gerneglia
Recently a joint survey by Gartner and the Financial Executives Research Foundation found that 42% of the IT organizations top person - the CIO, reports directly to the CFO. The percentage increases to 60% at smaller businesses - those defined as companies with revenues between $50 - $250 million.
In addition, the survey pointed out that CFOs approve 26% of all IT investments, while chief information officers approve a mere 5%. This is most likely due to the current state of the global economy as in recessionary markets the CFO must keep a close eye on all expenditures.
The same report by Gartner in 2010 and the Financial Executives Research Foundation suggests that the CFO is increasingly becoming the top IT decision-maker in many organizations. That study, which was based on a survey of 482 senior finance executives, also found that more IT organizations report to the CFO than to the CEO or any other executive.
A recent report by CDW in October 2011, one of the largest global technology resellers, said that only 40% of IT decision-makers expect their budgets to rise this winter, down 8% from last year and the lowest level of IT investment increase since October 2009.
Given the current CFO-CIO relationship and constrained IT spending, it’s not surprising that IT professionals seemed more dour in CIO magazine’s 2011 “State of the CIO” survey. In this report Only 33% of CIOs believe they’re seen as a “trusted partner or business peer,” and even fewer ( about 31%) see themselves viewed as a “valued service provider.”
Perhaps the most interesting of the survey results is the fact that a mere 11% of CIOs think IT is providing competitive differentiation. This view most likely stems from the current trend in cloud computing. The cloud is shifting IT toward a utility model. Some business units within an organization want the self-service, self-reliance choice of selecting and procuring their own SaaS solution. This tendancy can be a real stress inducer for the IT department because they are ultimately responsible (through inheritance) for a procured service that is outside their direct control. They may not have been part of the selection process but now they own it - no fun for the IT staff there.
Do CIOs resent reporting to the CFO? Possibly, because the same dynamic has been at the center of the CIO-CFO relationship for years. This very discussion seems to keep coming back to life but now it is stimulated by the ongoing shift in cloud computing.
See the Discussion Should a CIO Report to the CFO?
When CIOs ask for more money, CFOs are asking for more justification. This action just makes more work for the CIO who knows their purchasing decision based experience is the right action at the right time for the organization. Why should they have to go through another step of documenting the justification for their decision. At best, such a relationship is organizationally dysfunctional but more likely it is a real competitive disadvantage.
See Cloud Decisions Made by the IT Department
The simple fact that 66% of CIOs do not think they are perceived as a trusted partner should not be welcome news for CFOs. To operate efficient organizations, companies require their top finance and IT managers to maintain a productive relationship.
None of this is really surprising. Ten to twelve years ago, there seemed to be an increasing number of CIOs who were reporting to the CEO instead of the CFO. The Dot Com boom was at its zenith, helping to highlight the business value that technology can bring to organizations.
Much has changed since those glory days.
The global economy has endured not one but two major economic downturns since then. Following the post-9/11 downturn and in the wake of the run-up to massive Y2K investments, many CEOs began to question the amount of IT investments that had been made in the late 1990s and wanted to see these outlays stretched.
IT spending typically represents the biggest single area of capital expenditures within most organizations. Couple that with the kind of clout that CFOs typically gain during tough times along with the increase in regulatory and compliance activities in recent years (i.e. Sarbanes-Oxley) and it stands to reason why such a high percentage of CIOs and IT organizations now fall under the CFO’s watch.
Of course, who the CIO reports to depends on who you ask. According to IDG’s 2010 State of the CIO study, 43 percent of CIOs said they report to the CEO while just 19 percent said they reported to the CFO.
Some CIOs see the CFO reporting relationship as a curse. Many CIOs who report to CFOs feel like they have to cost-justify every nickel that goes into their IT budgets. It’s tough to do your job when you feel like you constantly have to look over your shoulder.
Reporting to the CEO is the promised land for many CIOs – excepting those IT leaders who vie to actually become the CEO. A lot of CIOs I talk to who either report to the CEO or wish they did talk about the importance of having a CEO who is a champion of IT and the value it can bring to a business. Many CIOs who report to the CEO truly feel like they’ve become part of the inner circle and rightfully so. They typically don’t exude that warm, fuzzy feeling if they’re reporting to the CFO.
It will be interesting to see how the reporting dynamics shift over the next few years as cloud computing adoption really entrenches itself in most organizations. Perhaps it will prove to be cyclical, akin to the kinds of swings that occur between centralized and decentralized IT operations following shifts in the economy. As the current economy continues to improve and companies invest more in growth-oriented projects, this should give CIOs an opportunity to shine.
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