In today’s digital economy, a strong CIO–CFO relationship is a key driver of value. Digital technologies, from the cloud to the internet of things, offer the potential to transform enterprise performance and deliver profitable growth. But this opportunity demands significant change in how the IT function operates and how technology is funded at an enterprise level, requiring strong alignment between IT and finance leaders.
EY’s global study – Partnering for performance: the CFO and the CIO – asked over 650 CFOs about their relationship with the CIO and their collaboration on four critical activities: cybersecurity, analytics, information management and digitizing the IT function. In this week’s post, I take a look at the final issue – how organizations are transitioning to a digital IT function – drawing out how CIOs can build collaboration with the CFO by tackling this critical area.
In the survey, a strong focus on transitioning the IT function to a digital world is linked to higher rates of EBITDA growth. 50% of CFOs who made this activity a very high priority report EBITDA growth of 10% or greater, while only 34% of the rest of the sample achieve the equivalent growth rate. Given this opportunity, what are the key priorities in transforming the IT function?
- Collaborate on digital strategy
The transition to digital must begin with an overarching strategy that articulates how the organization will use digital IT across its value chain. The CIO, as digital leader, brings the understanding of what new technologies can do and CFOs bring a focus on profitable growth and shareholder value – working together is not an option, it is a must.
- Plot a way out of the legacy trap
Legacy IT and the “technical debt” of unproductive and inefficient technology can be a significant barrier in a digital economy. The CIO and CFO need to work closely together to establish the business case for retiring or replacing legacy IT, deciding on budgets and the time frame to make the transition happen.
- Shift the digital IT investment mindset from Capex to Opex
Organizations today can access the best new technologies via the cloud as a service. In this environment, the traditional argument for preferring Capex is less compelling and Opex has advantages. The CIO and CFO will need to reach agreement on the technology that is required and how it will be funded.
- Manage digital IT risk exposures as part of enterprise risk
If the associated risks are not managed, the value that digital technology brings can be undermined. Working together, the CIO and CFO need to review digital IT risks on a regular basis, as changes in business strategy or to the regulatory and competitive environments, can create new vulnerabilities.
Digitization offers organizations opportunities to rethink the customer experience, the ways of working and the business model. This puts the IT function under growing pressure to deliver the required new enabling technologies and to do so at speed. Working together, the CIO and CFO can cement the IT function’s reputation as a driver of organizational value in a digital world.