CFOs, IT Collaborate Around Technology InvestmentsBy Leah Gabriel Nurik | Posted 2009-11-03 Email Print
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Focus on cost reduction is leading IT and finance to forge a closer relationship, and the two are working closely together to identify, evaluate and approve projects that provide measurable and tangible return in improving efficiency and productivity.
A new survey-based research report from CFO Research Services, released today, sheds some light on how CFOs and IT are working together to prepare for economic recovery. A close look at the survey results indicate new IT trends will emerge as economic recovery continues.
The report evaluates the survey results of 198 senior finance executives across the globe. Survey responders include representatives from big name companies through North America, Asia and Europe like 3M, Kraft Foods and McLaren Automotive. Respondents shared their views of IT’s role and business value to their organizations as well as the dominant business criteria for making purchase decisions.
It’s no big surprise results indicate companies are under pressure to cut costs. More surprisingly is the indication that most companies’ fundamental commitment to IT investment is still strongly intact. Underscoring that point, most respondents affirm that IT’s key role is two-fold: to improve efficiency and provide a competitive advantage. The enterprise’s focus on cost reduction is leading IT and finance to forge a closer and more collaborative relationship, and the two are working closely together to identify, evaluate and approve projects that provide measurable and tangible return in improving efficiency and productivity.
Companies are looking at technology and the subsequent operational efficiency it provides as a potential way out of the downturn. 71 percent of respondents also believe that IT and its operations are absolutely essential to their competitive positioning as the economy rebounds.
One respondent, a Belgian CFO in the real estate sector, shared, "IT is seen as an enabler to add value to the business and is taken more seriously as a possible way out of the downturn."
Although it may often seem that budgets have dried up, respondents said IT commitments made before the economic downturn are holding steady in most companies. 58 percent of respondents say that their companies remain committed to most IT projects approved prior to the downtown. 39 percent of respondents said project delays and scaling back is occurring at their companies, but they are still planning on forging ahead with the projects. Only 2 percent of respondents say their organizations are stopping IT projects without any expectation of restarting them.
3M’s director of finance for the industrial and transportation division, Ippocratis Vrohidis, said that, "IT, just like any other function, has been asked to prioritize projects and raise the bar on what projects get accepted." He continued, "For some projects, we have slowed down spending, but for the most part if it is a strategic project, we are moving forward with it."
When asked what IT Investments would prove most valuable as the economy improves, respondents cited improvements in administrative efficiencies as well as solutions that boost employee productivity. Respondents also said the most important metric for return on an IT projects is that it contributes to gains in efficiency (70 percent) and to cost savings (68 percent).
In this economic environment, most companies are looking to modify rather than replace existing critical business systems. At the top of the list of infrastructure that is most likely to be replaced rather than modified is ERP Systems (71 percent) and the IT Shared Services Center (71 percent). In good news for CRM vendors, CRM systems are still getting the replacement nod as well as web and ecommerce initiatives.
When deciding to move forward on a project, survey results indicate that finance is partial to projects that will produce a swift and positive return on investment. 64 percent of respondents say they are very likely to consider the amount of time projected to realize ROI when making IT investments. Further, when asked about criteria given to IT investment decisions, respondents said they are much more likely to give "a great deal of consideration" to an investment’s near-term benefits (34 percent) rather than long-term, difficult-to-measure benefits (19 percent).
A solid majority of respondents said that it’s at least somewhat difficult to measure the ROI on IT projects. 27 percent said it’s very difficult.
Vrohidis of 3M shed some light on why it is so difficult, "I think the hardest part is to quantify projects that you know in your gut make sense but whose benefits span across the organization—making it difficult to justify the cost of the project for any one business unit," he said. Trends show that as companies evaluate projects, they need to see the project’s effect across the whole of the enterprise. This need is leading finance, business owners and IT to work closer together to define metrics and apply them to potential projects.
The report was sponsored by application management vendor Micro Focus.