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IT An Integral Part Of The Modern Day CFO

Responsibility?

Mr. Sohil Parekh is Vice President – (Finance and Accounts) with Sai

InfoSystem (India) Limited (SIS), one of India’s fastest growing ICT

conglomerate with group turnover of Rs.2000 crore, backed by a team of

2000 professionals. SIS has the business expertise in verticals of Hardware

manufacturing, Software development, System Integration, Telecom

Products, Disaster Management, eHealth, Data Center and Call Center

Solutions. SIS has more than 100 support centers across India with

overseas operations in Canada, US and Dubai.

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He has overall 10 years of experience in the areas of Finance and

Accounts. Academically, Mr. Parekh holds a degree in Law and is a

Chartered Accountant from The Institute of Chartered Accountants of

India.

Mr. Parekh is part of Management Core Team and Head of Department of

a 30-member team, covering the functions of Accounts, Finance, Audit –

(Statutory & Internal), Legal and Secretarial affairs. He is actively involved

in advising management on strategic business partnerships, joint ventures

and viability of new business avenues. He further manages evaluation,

due-diligence, documentation and post-merger integration for all

acquisitions both – overseas and domestic for different business verticals at

SIS.

Prior to joining SIS, he was working with Azure Knowledge Corporation as

Chief Financial Officer and has also worked with Motif Infotech as

Director Finance in past.

Is IT a part of modern day CFO responsibility?

In today’s world there is no denying the importance of IT. The last decade

has seen information and communication technologies dramatically

transforming the world, enabling innovation and productivity increases,

connecting people and communities, and improving standards of living and

opportunities across the globe. The scope of today’s IT includes complete

process of computer based information systems, Functional IT systems like

MS, statistical analytical software, Network IT Systems like email, IM,

electronic conferencing, Management IT Systems like HRMS, Financial MIS,

Dashboards, Enterprise IT Systems like accounting software, CRM,

Computing Hardware, Telecom equipment and services, E-Government, e-

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commerce, e-security, e-health, e-banking, ITES, BPO, Application

development, Operating Support and security services, Networking, Data

design, development, communication and conversion, Storage and

Retrieval and many more.

There are few reasons that attributed to an IT failure like System failures

and breaches of data security, great expectation and inability to deliver,

inadequate spending due to lack of long-term strategy & high risk, lack of

adequate skilled manpower and infrastructure, IPR, compliance and

transfer of policy issues, poor project planning, weak business case, lack of

top management involvement, new technology advancements etc.

It’s important to put the relationship between IT and the CFO into historical

context as a backdrop for effective discussion on this topic. The good news

is that IT has become better aligned with other areas of the business; the

bad news is that IT has lost most of the benefits of reporting to the CFO

(i.e., scrutiny, rigor, professionalism, credibility, legitimacy, etc.). We shall

discuss the need for IT and CFOs to reengage – to perhaps forge a new

relationship – one that will favorably impact the IT ROI.

Today, successful CIOs blend few roles that seem contradictory, but are

actually complementary – To make innovation real, being a value creator,

raise the ROI of IT and expand business impact at lower costs. Top of

CIO’s agenda today is business involvement, business transformation with

clear objectives, choosing a single vendor for integrated suite of

application, having a clear business case for outsourced vs. in-house and

benefit tracking during and after implementation.

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The challenges to CIOs are that they are sometimes challenged to bring

meaning to the vast amounts of data across the organization, lack of clarity

around data and analytical requirements and data ownership, poorly

defined business requirements and unclear business processes and data

integration.

The CFO’s agenda today reveal a shift in focus from core finance to more

enterprise focused activities. CFO today needs to have direct operational

experience to think beyond budget and annual financial plan. A CFO with a

long-term view on growth and profitability will segment IT spend into

operational and investment buckets. Looking for cost reduction in the

former and viewing the latter as an investment to drive scale efficiencies

and speed to market across the enterprise. A broader enterprise focused

role requires core Finance efficiency be in place to reliably support business

insight and decision making.

The challenges to CFOs with respect to IT are that they are challenged to

bring fact-based business insight on financial performance, lack of clarity

on the performance scorecard, poorly designed predictive models,

structural complexity of data and processes and adapting to changing

business dynamics. Nowadays CFOs are more actively involved in

Enterprise cost reduction, Selection of KPI’s, Capital asset management,

Risk Management and Strategy/Business model innovation.

These are the few survey results that have been conducted by different

agencies to understand the CIO-CFO relationship 2011 Gartner FEI

technology study: More than 51% of the CFO has increase in their roles

and responsibilities then in 2010; More than 27% are delaying work on

IFRS. 40% of IFRS impacted organization has not yet involved IT and only

32% CFO see CIO as true partner in strategy.

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Many organizations have experienced friction between CFOs and CIOs.

Much of it stems from these two executive roles having different

backgrounds and not completely understanding the challenges and

complexities of each other’s world. When projects experience difficulties,

for example, return on investment is affected and frustrations rise. This

often causes CFOs and CIOs to “grow apart.” Here are few actual business

scenarios where CIO reporting to CEO and CFO can be broadly

categorized:

Business Scenarios where CIO can report to CFO:

CFO can ensure that IT spending is controlled

CFO can help liberate CIO with the problem of negotiating prices and

maintenance fees with technology vendors

If the business is only looking towards new IT investments and

continuous improvements

Companies which have business driven by costs which can offer low

prices by achieving economies of scale, cost control and efficiency

Can help CIO become strategic partners rather than simply

purchasing managers for IT equipment

CIO should welcome CFO who takes interest in where a company

places its IT Investment bets

As the business is all about profit and revenue earned, CIO should

review the requirements in financial terms for executive decision

making

IT enabled Intelligence is what CFO should command as a task

master from his CIO and MIS teams

CFO directs decisions and budgets purely on basis of information and

its reliability rather on subjectivity

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CIOs choose and evaluate systems, but cannot direct and execute

decisions without a 360 degree view which the CFO commands and

enjoys

Business Scenarios where CIO can report to CEO:

As CEO focus is on business’ overall strategy and management,

CIO should report to CEO in order to recognize and promote the

relevance of IT to the business

Where the company and industry is highly information-intensive

(for example, banking and media) or moderately information-

intensive (for example, services such as travel and retail)

While a technology-dependent business model or company

transformation is under way — for example, merger and

acquisition process integration

While a heightened state of information-related threat or risk is in

play — for example, cyber warfare, industrial espionage,

regulatory compliance or information-intensive business volatility

With both IT and CFO reporting to CEO, CEO can break any ties

regarding strategy versus costs

With CIO reporting to CEO, some of the innovations will not get

stifled due to a cost issue alone

CEO can look across all business segments and can actually

account for the productivity, innovation, and synergies

Everyone uses the same set of tools to select IT projects

(payback, NPV, alignment with corporate goals). Everyone uses

common industry indicators (IT as % of revenue). Existing

measures aren’t perfect but they are good enough. Assessing IT

ROI is difficult. The key point here is that we should not blame the

tools. Although improved tools always help, the means to IT value

is improved governance procedures to guide IT investment

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decisions – not measurement. Below are the relevant questions

that CFOs should ask for right integration with IT

1. Whether IT understand the information need from stakeholders’

perspective – shareholder, Board, Statutory reporting, Top

Management.

2. Are the IT investments meeting the organization requirement?

3. Whether the enterprise strategy is as detailed as possible with

respect to definitions and integrity? Global systems have local

variation which should be factored into to provide analytics.

4. Whether the company has the right tool to manage, retrieve and

analyze data?

5. What are the correct way to use the multiple tools for information

access and delivery, how to deploy them and have the business

adopt the same?

6. Whether the IT cases and budgets are in line with the organization

strategy?

7. Whether the charge back mechanism is identifiable and pre-defined?

8. Evaluate the opportunity costs of investments in IT. It should

compete with other capital projects in terms of feasibility assessment.

All internal IT projects should be certified and should compete with

other IT projects. It is best if CIO has no money and is forced to

spend “everyone else’s money”

9. The IT projects should be accepted and evaluated on merit rather

than on ego. If a system fails to receive funding or gets cancelled, it

reflects badly on the sponsor/owner.

10. The project is forced to pass through a “gate” at the end of

each stage of development. The gate is basically a “go/no go”

decision. Both the costs and benefits should be evaluated at each

stage by the CFO. Revisit current KPIs, departmental goals, and

metrics to ensure that technology and IT are aligned to these

important business measurement

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11. How much time it will take to recover the costs? How the IT

assets are to be written-off? What are the maintenance costs of any

IT project?

12. Whether it has been determined to which projects and cost

centers the IT costs be allocated and in what basis?

responsible CFO invests time and energy in understanding dashboard views

that predicts and reflects state of affairs. Multi locational, high volume

companies suffer from creating and storing data that has not been

analyzed and provide very little value to decisions support systems; it is the

CFO who points to such data and coverts into information that can fortify

MIS. With islands of information available on different set of systems, CFO

would be a pivotal force in making bridge and view that showcases

sensible data assists CIO in setting up of process aimed at higher value of

returns from existing investments. CFO also needs to get close to the CIO

and understand technology so that they both can work together and

implement the best possible solutions in their organizations

One of the important thing that comes out of this is the fact that a CIO

today needs to upgrade his skill set and be aware of finance and business

dynamics to ensure that his position in the company is viewed with equal

importance like that of a CFO. IT should become the bridge between the

CEO and CFO and thereby integrate business leading and lagging

functions.

CIOs and CFOs can collaborate to address their challenges above by

defining the company performance scorecard, developing and supporting

“one version of the truth”, instituting a data governance process, improving

performance reporting with defined risk indicators, implementing

Governance Risk and Compliance solutions to monitor business process

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changes, supporting automation and collaboration efficiency with enabling

technologies, developing consistent policies and standardization of

processes. The IT function should take ownership of the technology, the

business takes ownership of the organizational transformation and the CFO

takes stewardship of the benefits

Read the full article here: http://mycfo.in/blog/?p=38

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