The increasing number of CFOs and their peers from Generation X and Generation Y that are now 
heading up Finance functions are irked by poorly performing business systems that fall way short of the likes of Google and iTunes that deliver exactly what you want in seconds. So it’s not surprising that many have accelerated automation projects already underway to enhance core financial processes with technology solutions that lead to increased productivity and lower costs. It’s the only way they can free up headcount from traditional finance functions like reporting, treasury and transaction processing to engage in supporting other commercial and operational functions and they themselves can take the lead in driving the company’s business model and overall strategic direction.
An increasingly proportion of these younger CFO’s will not have come up through the traditional accounting, consultancy or treasury track like the previous generation, but have made their mark as financial leaders in pre-IPO companies where making best use of limited funds, wining the next deal and excelling at financial planning and analysis are the pre-eminent financial skills needed for success. These people and their peers are now bagging CFO jobs in listed companies, where they are grasping technology to drive transformation; many with an enthusiasm and vision that convinces their boards and CEOs to give them the CIO as a direct report.
As yet, this is far from universal with only 21% of the 2,300 CIOs who participated in the 2012 Gartner Executive Programs CIO survey saying they reported to the CFO and although 69% of CIOs responding to the survey said their CFO had an excellent understanding of IT budgets, I doubt whether this gradual change of reporting line is solely based on the need for better cost control in an area of major corporate spending. I suspect it has more to do with this new generation of tech-savvy CFOs having better credentials to oversee IT in that they have increasingly relevant skills needed for the leadership role. The findings of the Gartner survey show that CIOs themselves are increasingly recognizing the situation:
- 40 per cent of CFO’s were seen as having strong knowledge of IT governance
- 37 per cent of IT strategy
- 33 per cent of IT service levels
- 28 per cent of IT metrics
- 27 per cent of IT project and portfolio management
- 14 per cent of IT security
However these scores indicate that the majority of CFOs still have gaps in their knowledge and skills in terms of basic IT management and leadership practices – which in turn accounts for why only a fifth of CIOs currently report to the CFO as mentioned above.
My belief is that the newly emerging CFO’s from Generation X will soon close the gap as they are increasingly taking time away from Finance to gain operational experience heading up divisions or managing major business transformation projects where they will soon discover that the important thing about IT is that it actually has to function properly to make the supply chain and other business critical processes work – and not just how much it costs. This hands-on experience will undoubtedly temper any tendency the CFO may have to see IT expenditure simply as foregone profit rather than an investment in developing distinctive capabilities and long term efficiencies and that ensure sustainable returns. Experience outside of Finance also means the CFO will have had to deal with a wide range of people with differing priorities and customer-facing, business-critical processes, which will stand them in good stead in managing the diverse group of people typically found in IT.
At the same time, many companies are extending their use of outsourcing for back office functions and cloud solutions for HR, CRM to core financials and entire transactional platforms. As I’ve written before this is resulting in the traditional IT function withering away to be replaced by a smaller department with greater skills in negotiating and managing serviced-based contracts and monitoring delivery with the focus firmly on getting value from IT rather than simply ‘having’ IT, All of this seems to weaken the role of the CIO and shift the ground in favour of the CFO as the one having ultimate responsibility for IT.
But the fundamental reason why an increasing number of boards and CEOs can be expected to give the CFO responsibility for IT is that they can be expected to be accountable – that any IT investment is capable of delivering a tangible return; that it eventually does deliver and that it is on schedule and on budget. The CFO is increasingly the chief scorekeeper already measuring and monitoring performance and risk across a gamut of financial and operational areas that can easily be extended to incorporate a cash hungry function such as IT which increasingly looks to be a natural bedfellow. It’s already happening and the speed at which the change is occurring will only get faster and what might seem like a seismic shift to IT folk today will most likely be a done deal by 2020!