First demonstrate effective IT cost management, then partner with the CFO to use technology to optimize enterprise costs.
Too often, when CIOs attempt to focus on using IT to optimize business costs, stakeholders see it as a defensive move. You’ll hear the heads of other business units mutter, “IT can’t find enough money to cut in its own budget, so they’re coming after ours.”
Building an effective partnership with the CFO helps mitigate this issue, says Jim McGittigan, research vice president at Gartner.
“Generally speaking, CIOs haven’t demonstrated effective IT cost management to their CFOs’ satisfaction,” says McGittigan. “A lack of understanding of the contribution of IT to strategic business goals often leads to cost cutting and not true cost optimization.”
This belief must be flipped on is head to successfully fund innovation and digital business initiatives, McGittigan says.
Build an effective partnership
There are four steps you can take to build an effective partnership with your CFO.
Step 1. Optimize the supply side of the IT budget
The typical general ledger may be limited to an asset-based view of the world – labor, hardware and software – split between operational and capital expenditure. However, this is the world that the CFO lives in.
Do the basics of budgeting, forecasting and contract management well enough to effectively manage IT costs from the CFO’s perspective. Build practices that support effective fiscal management and ensure budget accountability throughout IT.
Step 2. Provide visibility to stakeholders
It’s difficult for enterprise stakeholders to understand the value of IT if you only talk about assets, opex and capex. Create a service catalog in client-facing terms such as projects, products and services and give stakeholders a choice where possible to help manage demand.
CIOs can use benchmarking to explain the root cause of increases in technology spending. Hint: often the root cause is the demand or volumes, not the rate or cost of the service.
Step 3. Work with the CFO to optimize IT spending
On average, 81% of IT spending is in a CIO’s budget, with the remaining 19% split between sanctioned business unit IT spending and unsanctioned spending — or shadow IT.
Work with the finance team to build effective governance on all IT spending across the enterprise, while avoiding a command-and-control mentality.
Step 4. Use technology to optimize business costs
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