Return of the Guru

Survey Reveals Shift of IT Decision-making to CFOs

Ara Trembly
Insurance Experts' Forum, July 8, 2011

A recent survey has found that in an increasing number of organizations, the CIO is not the person who decides what IT projects should get investment dollars. Instead, the CFO is making the choice.

According to a joint survey conducted by Gartner Inc. and Financial Executives Research Foundation (FERF), more IT organizations report to the CFO than the CEO or any other executive. Forty-two percent of IT organizations surveyed said that they reported to the CFO, and 53% of CFOs said that they would like to move to this reporting arrangement.

The 2010 Gartner/FERF technology study, conducted from October 2009 to January 2010, sought senior finance managers' views of technology. The survey was conducted from October 2009 through January 2010. More than 74% of respondents were senior financial executives, including CFOs and controllers. In the study, 42% of organizations said their IT organization reports to the CFO, 33% to the CEO, 16% to the COO, 2% to a chief administrative officer and 7% to other officers. This was fairly uniform across companies of all sizes, says Gartner.

"Where the CIO should report is a question as old as the CIO role itself," said John Van Decker, research vice president at Gartner, in Gartner's press release. “CFO reporting can lead to success if the CFO has a deep understanding of IT's value.”

This begs a few questions, however. First, what happens in organizations, and there are many, where the value of IT is not understood? Indeed, we also might wonder what happens when the value of financial expertise is not understood by IT executives. This latest information is actually a reflection of an age-old battle between business and IT within organizations. As a response to my recent columns concerning the causes of IT project failure, business executives were only too happy to pin the blame on IT, while IT folks pointed to the Luddite tendencies of business personnel as the problem.

So how should we view this apparent shift of decision-making power to CFOs? Certainly, the primary concern of financial executives is the bottom line. In an insurance company, for example, the CFO’s performance is judged not on what kinds of IT projects will deliver better service or improved customer retention. Instead, the emphasis will be on projects that show demonstrable ROI immediately, if not sooner. Promises of future success or happier insureds don’t do much for a CFO’s reputation. 

I would predict, then, that if this power shift continues, we will see far more short-term IT fixes that deliver immediate savings. Thus, BPO vendors should see increased sales. This trend could also mean that we see an increase in middleware fixes for legacy system-related problems, rather than wholesale systems replacements. Policy administration system replacements are long and risky projects that are destined to disappoint more than half of the time, conventional IT wisdom says, so a more focused middleware fix—while it may only be a band-aid—is far more appealing from a financial point of view.

In the end, only a true balance of power between the CIO and CFO will yield the kind of business/IT alignment that most of us believe will make for both more successful IT projects and an enhanced bottom line. We can’t lose sight of the fact that, for better or worse, business and IT remain in an adversary position. A shift of too much power to either side will not yield the kind of overall benefits that insurers and others want and need.

Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at ara@aratremblytechnology.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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