CFOs must partner with CIOs to guide investments in their companies’ digital transformation agenda to maximize returns and mitigate risks.
Digitalization initiatives were significantly accelerated in supporting new business-critical requirements courtesy of the COVID-19 pandemic.
Companies were reinforced with the notion that technology investments are consistently an enabler for rapid change and ongoing flexibility among enterprises. Innovations such as artificial intelligence (AI), machine learning and the cloud are no longer just the CIO’s parlance. CFOs must partner with CIOs to guide investments in their companies’ digital transformation agenda so that they can maximize returns and mitigate risks.
Rimini Street’s “2021 CFO Peer Insights: Digital Transformation and IT Spending Priorities” report is based on a survey conducted by Dimensional Research of more than 1,500 CFOs from all industry and company sizes around the world to understand more about their 2020 activities.
DigiconAsia discussed the findings of the study with Andrew Seow, Regional GM for Southeast Asia and Greater China, Rimini Street.
What are some key findings from the “2021 CFO Peer Insights: Digital Transformation and IT Spending” global survey?
Seow: Some of the key findings revealed that 80% of CFOs ranked digital transformation among the top five priorities on their corporate agenda.
It is interesting to note that 71% of CFOs surveyed believe that digital transformation investments are vital to their organization’s success. Another 77% said they would work with their CIO to fund new digital transformation projects that have promising returns. Modern CFOs are more knowledgeable on technology and more aware of the right IT investments that would create strategic savings for the organization to free up funds to invest in other innovations.
In these unprecedented times, there is a high interdependency between financial leaders and their business counterparts as 92% of CFOs believe that a great relationship with their CIO is key to success.
While 71% of CFOs believe that digital transformation is key to their organizations’ success, 73% of CFOs said that COVID-19 increased their organizations’ investment in digital transformation. What are the possible reasons for these high percentages in their responses?
Seow: Even before 2020, technology investments consistently enabled rapid change and ongoing flexibility. COVID-19 significantly accelerated technology adoption to support new business-critical requirements, from remote work to virtual customer interactions to supply chain sourcing.
As CFOs become more willing to accept digital transformation initiatives and support projects with clear business outcomes, they are increasingly willing to lead funding efforts for projects that meet their primary value objective. Modern finance executives are on the fast track to being potential change agents within their organizations. By funding key digital transformation and technology initiatives, they prioritize critical resources for innovation and strategic moves that grow investment value.
95% of CFOs agreed that technology investments are vital to recovering from COVID-19. But how critical a role does the CFO play in technology investments?
Seow: The role of a CFO has evolved dramatically over the years. CFOs can no longer focus merely on financial barebones. From financial gatekeepers and creators of cost structures, they are now responsible for much more, especially as the responsibility of controlling costs has become increasingly complicated.
Funding strategic IT priorities can be difficult at companies where rising costs outpace revenue, making it challenging to sustain growth and profitability. Many legacy cost items that were once seen as necessary, such as managing data centers, maintaining software licenses, or undertaking expensive and disruptive vendor-directed upgrades, are now coming under scrutiny.
CFOs are responsible for keeping IT spending considerations in mind while prioritizing projects that yield positive business outcomes.
How has the CFO-CIO relationship evolved amid the pandemic?
Seow: One of the brighter takeaways of our survey was that the COVID-19 pandemic of 2020 as well as numerous trade, economic, and political uncertainty across the world, strengthened the CFO-CIO relationship. 77% of surveyed CFOs agreed that the challenging business landscape of 2020 challenged them to forge a stronger bond with their CIOs.
However, the 23% of CFOs that reported a worse relationship with their CIO were dissatisfied with their CIOs’ lack of expertise in key areas (33%), inflexibility (32%), and plans with no demonstrated ROI (31%). This goes to show that closer collaboration between IT and finance is crucial to an organization’s success.
Fortunately, more than two-thirds (69%) of CFOs were satisfied with their CIOs. with 47% stating that their CIO is a partner who helps connect the dots between technology and business decisions and another 22% praising their CIOs as innovative change agents who drive business strategy.
We expect the CFO-CIO working relationship to strengthen in the years to come.
What are some useful steps to developing a strong CFO-CIO partnership for business growth?
Seow: Although a strong CFO-CIO partnership is ideal for business growth, the working relationship can become frayed when CIOs struggle to communicate IT project ROI, business priorities and costs on account of their more technological focus. On the other hand, CFOs don’t always have an adequate understanding of the technology involved to make the right financial decisions.
Apart from having a solid foundation of a company’s financials, modern CFOs must also be equipped with a solid understanding of customers, markets, and the way that technology connects with these aspects. Successful CFOs should learn the language of technology while successful CIOs must adopt the standard CFO mindset.
The past year has enlightened both CFOs and CIOs about flexibility, collaboration, and the importance of technology for resilience and innovation. Whether it’s digital transformation or infrastructure, this means taking a critical look at operational expenses and treating every line item in the IT budget as one that should demonstrate value.
A closer collaboration between IT and finance will be the touchpoint of a successful strategy for both CFOs and CIOs in 2021 and beyond.