By Pankaj Maru
CIOs across organizations are responsible for helping drive the business using technology. However, it’s the CFOs who usually accept and approve the technology procurement or demands made by the CIOs in their respective organizations.
Over the past many decades, there has been a so-called ‘old war’ between these two key
personalities – the CFOs and the CIOs – primarily in the context of IT budgets. While the CIOs see great value in bringing new technology into their organizations to drive efficiency and reduce cost, the CFOs have an extended role to play in addressing the financial needs of each and every department and not just the IT department.
As it happens, the CFOs always are faced by monetary constraints and at times are unable to fulfill the demands made by CIOs in terms of IT budgets.
However, this old ‘tussle for budget’ is slowly getting changed now or has already changed
to an extent in some organizations, owing largely to the emergence of new technologies and concepts like cloud computing, enterprise mobility, bring your own device (BYOD), virtualization, on-demand services and others.
In fact, these technologies have given a new dimension to the way IT budgets were made in the
past and importantly,it has created a breathing space for the CFOs in a manner that they are able to consider the demands made by CIOs in IT budgets. All these years, it has been the CIOs that have been talking and making loud noises about IT budgets but it’s time to hear what the CFOs actually think of these new technologies and how these have brought about a change in the traditional IT budgeting and planning process.
The shift in IT spends
In recent times, according to Vikas Kapoor, Director – Finance, Invensys India, the focus on IT spends has moved from a “contributor” approach to an “enabler” one. The genesis of this approach is “can I do more with less?”and if spending has to be increased, what is the “incremental benefit” it brings in.
“(IT) Spends are now not only evaluated for setup but also running estimates for the next five years so as to enable correct costing. Tablets are preferred to laptops for ‘Vow’ factor besides being cheaper to maintain and easier for the field force. If data security is not compromised, cloud computing is preferred to avoid large storage networks and to lower the cost of maintenance,” says Kapoor.
Tablets and laptops are replacing those bulky desktops and monitors from ‘cost’ as well as ‘look and feel’ stand point, while the assurance on data protection is paving the road for cloud
computing in organizations today.
“Historically a fair amount of IT spend was measured against the relatively inexpensive manual labor available. That has now changed in the last decade with volumes, wage inflation and competitive pressures demanding the need to be quick, efficient and frictionless,” explains Natarajan.
“There is always the need to ensure that we invest prudently and appropriately in order to be able to remain relevant in the market, differentiate on customer and product delivery and optimize returns on investment (and consequently, equity) to the shareholder,” he adds.
In his view, cloud, enterprise mobility and BYOD – all offer compelling alternatives to investing upfront in captive infrastructure and solutions to the company. Sharing the changes in IT spends made at Fullerton India, Natarajan informs, “We are now moving a reasonable amount of our IT spend away from the conventional own/build structures to purchases of capacity and capability on-tap.”
As seen by CFOs, it is the flexibility and efficiency offered by new technology that is bringing value in the IT budget planning today compared to fixed, quantity-based hardware procurements and affordable manpower.
Bangalore-based K R Veerappan, CFO, Global Greens, holds similar views as expressed by his counterparts. “In recent years, the focus has been to get more value out of the IT spends and the emphasis is more on productivity. The IT budget has been on the decline. The capital expenditure budget is being reduced and the stress is on reduced revenue expenditure,” says Veerappan, who previously was in-charge of Madura Retail and Garments as Vice President -Finance.
Clearly, CFOs across organizations and enterprises across verticals are taking a very close look at the changes that are happening in the IT space and equally adapting to those technology shifts by incorporating them in their IT budgets to an extent. From CIOs’ perspective, this is an encouraging sign and is a proof that CFOs are not just thinking of money all the time but also understand technology considerably.
New tech and CFOs
Given that several CFOs have brought in some changes in how they budget for IT, it would be
interesting to learn how they view the new trends shaping up enterprise IT.
According to Singh, currently, the cloud solutions are predominantly used for nice-to-have modules or add-on modules. “BYOD is an evolving concept but it could be piloted for a particular group within the organization like IT or marketing, where employees are tech savvy and can take care of their own devices. At the same time, the organization will have to reimburse them the cost of maintaining their devices.”
Moreover, he says, “The risk of pirated software and malware will be more in case of BYOD, but a proper verification process would curb that menace. Budgets are tight but if we are able to show value to the organization on new technology implementation, it becomes easier to justify the spends. At the same time, some technologies need to be implemented as the environment and platforms change – for which IT needs to be on the forefront of latest trends.”
Bangalore-based Narayana Health is one of those organizations that are adopting the cloud and
BYOD concepts. “We would like to be associated with technologies that give our patients a quick but comforting and economical way of availing the services. IT budgets will be on the rise, including the provisioning for a large-scale ERP implementation, sizable bandwidth and a good supporting technology that can enable access to medical records on the move,” says Kesavan Venugopalan, Group CFO, Narayana
“We are already in the concept-adoption stage of cloud, enterprise mobility and BYOD trends.
While we looked at a very frugal, bare essential cost for IT till recently, the time has come to look
at full-scale IT, including the technology to support remote medical consultation and diagnostic
services,” adds Venugopalan.
“We continue to invest in technology and IT infrastructure. As a retail service provider with a customer base of close to a million customers and a distribution network of over 350 branches covering over 330 towns, technology remains our fundamental backbone for product delivery,” Natrajan stresses on the need of IT investments for business.
He informs that his organization is in a stage of transformation and therefore continues to invest
heavily in the business infrastructure and so IT spend hasn’t reduced. “While our IT spends have not reduced, how we outlay the money is significantly more productive than it used to be earlier.”
It’s quite true that new technologies and concepts are changing certain dimensions of traditional IT budgets and planning – and today’s IT budgets have an increasing presence of operational expense against capital expense, driven largely by cloud-based applications and pay-per-use components.
A common ground for CIOs and CFOs
Overall, it appears that the new technologies have helped to bring the CFOs and CIOs together from an IT budget perspective in certain cases. To an extent, it has diffused the ‘old war’ between the two and made their relationship less stressful. But do the CFOs think or feel so?
“Yes, today with the fast-changing technology landscape, CIOs and CFOs have to maintain a
cordial relationship. Poor communication can get in the way of the CIO-CFO relationship. CFOs may find that CIOs speak in abstract terms or ‘technology-speak’ or focus on the ‘big picture’ while the CFO would prefer more granularity,” says Singh of Tata Housing.
“Both have a lot in common. They face the same challenges and issues in the organization – staff, budget, intervention from management and project prioritization. They both have a bird’s eyeview of the entire organization,” he adds.
Singh further notes, “Both face rising expectations from higher management but need to have
the entire organization engaged and on board in order to implement new, effective policies. So it’s obvious that the relationship will have to be cordial to work together toward organizational success,” Veerappan of Global Greens agrees and adds, “These technologies have really helped increase productivity and challenge the high IT budgets. The relationship between the CFOs and CIOs has become more cordial.”
Giving more insights into the CIO-CFO relationship, Kapoor of Invensys India says, “There is more camaraderie between CIOs and CFOs, as both are realizing the impact of IT spending and the utility of IT innovation as they deal with one another. With more focus on justifying each spend in light of the recent downturn, a cordial relationship does exist.”
However, not all CFOs accept the notion of existence of an uneasy relationship between CIOs and CFOs in the first place. In fact, Natarajan of Fullerton India terms the the existence of any stress between the two key personalities as nothing but ‘constructive tension.
“I don’t believe that the relationship has been stressful ever, in a ‘destructive’sense. There
will always be a ‘constructive tension’ between delivery and control functions and these are usually beneficial to the overall development of the corporation. So long as there’s a mutual understanding of the corporate priorities and appetite, the roles of the CIO and the CFO are complementary,” argues Natarajan.
Natarajan is critical of the lack of technology understanding among his fellow CFOs and also expects CIOs to be better equipped on the risk assessment front. “There’s a greater need for the CFOs to understand technology, their drivers and the investment cycles better and for the CIOs to optimize the risk-reward assessments today than it was earlier,” he says.
“As a CFO, I look to the CIO to scan the market for opportunities that allow the company to optimize its resources, improve productivity and reduce transaction costs on one side and be competitive, if not market-leading, in terms of product delivery,” Natarajan says.
Reinforcing Natarajan’s thought of ‘constructive tension’ but with a slight twist, Venugopalan of Narayana Health expects the CIO-CFO relationship to be more of ‘constructive dialogues’ wherein the cordial relationship between the two benefits not just the company but also the customers.
“New technology gives newer challenges but it has to be in line with what the organization can afford to be competitive and creative. Hence there will be more ‘constructive dialogues’ that will happen to make it more affordable to the patients/customers, which is our vision,” concludes Venugopalan.
Though the literal meaning of the terms ‘constructive tension’ and ‘constructive dialog’ are
different, the core essence for CIOs and CFOs today is to come together, work as a team and achieve progress using technology and pass on the benefits to customers or people.