The Business End of

By Edward Cone  |  Posted 01-16-2008 Print

As technology matures as a corporate function, the CFO must bring its financial management up to the standards applied to the rest of the enterprise. This is an area in which a surprising number of companies are deficient. A recent report by Soumitra Dutta, chair of business and technology at French business school INSEAD, says 60 percent of CFOs and CIOs don't understand the scale or value of their core software assets and CIOs are poorly positioned to figure it out. "CIOs are hard-pressed to make assessing the value of software assets a priority for themselves and their teams," says the report, Recognizing the True Value of Software Assets. "The costs and complexities of determining the business value of software assets, especially older systems, is seen as giving little return to CIOs and their teams on the use of their precious time."

External factors--particularly the changing regulatory environment--also pull the CFO into the technology realm. The federal government has unleashed a torrent of financial regulations, including Sarbanes-Oxley and HIPAA, that put a lot of IT resources to work on jobs that fall naturally to the CFO. "Compliance is a big driver of this," says Robert Keefe, senior vice president and CIO at Mueller Water Products, a $1.8 billion provider of water equipment in Atlanta.

Ultimately, the decision to push more of the traditional CIO role into the CFO's portfolio looks like a simple math problem: If a large proportion of the time and money spent on IT involves operational matters, and the CFO has a growing role in operations, then the CFO is the natural overseer of those IT functions. "People might look at a billion-dollar IT budget and think they can do something with all of it, but a vast amount of the typical IT budget is not subject to discretion," Player says. "If 60 percent or more of the budget is locked in to keeping the phone system and the backbone up, then it should be under the CFO." The remaining part of the IT budget that is dedicated to strategic spending also falls under the CFO's domain as capital investment, he says.

The Business End of IT

"The business unit managers and the CEO have to be leading the drive, with the CIO and CFO supporting it," MIT's Brynjolfsson says.

If the CFO is the natural heir to much of the IT portfolio, the business units are inheriting some of the choices parts: influence on choosing the stuff that actually makes money for the shareholders by helping people do their jobs better, and the visionwork that creates fresh opportunities for future growth. Micro Focus's Moultrup points to the popularity of business intelligence software as evidence of the underlying need for change. "Why is business intelligence so big? Because end users are begging for information about systems the CIO can't deliver," he says. "The end users and the CFOs are buying it, and then going to the CIO and telling him to make it work."

Page 4: CIO as Referee

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