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Of all the C-suite relationships in organizations, one of the most strategically important in the age of digital commerce is that between the CIO and the CFO. More than ever, deciding which technologies to invest in to improve the business can mean the difference between success and failure.
However, a recent study by technology consultancy Gartner shows that many organizations fall short of this close partnership. Only 30% of CFO-CIO relationships are characterized by strong collegiality and a business focus, according to a survey of 183 technology and finance executives.
According to the report, these two key attributes define a strong digital partnership, without which organizations struggle to find funding for digital initiatives, keep digital spending in line with the budget plan, and achieve expected digital business results.
“We operate [in] an environment where corporate margins are under pressure due to input price inflation and potentially stagflation,” said Randeep Rathindran, vice president of research within the finance practice at Gartner.
“Generating higher revenue or asset productivity through discretionary technology spending and digitalization can help offset this pressure on margins,” he added. “That’s why CFOs and CIOs need to be ‘joined at the hip; “to ensure that the benefits of digitization initiatives are extracted and reaped.”
Add to this that discretionary technology spending is accelerating and largely occurring outside of the corporate IT budget. A strong CFO-CIO partnership is essential to ensure that these expenses are not duplicated and are used to fund narrow-scope initiatives that result in positive business results, Rathindran says.
A competitive advantage
At consumer financial services company Synchrony, a strong partnership between the CIO and CFO is helping drive digital transformation.
“Coordinating with the CFO and my role extends to culture, digital transformation and data governance,” says CIO Bess Healy. “The partnership allows for more innovation which can lead to a competitive advantage in the market.”
Synchrony’s chief financial officer, Brian Wenzel, “is an indispensable business partner,” says Healy. “It provides more than the means to help us with our strategy. It also helps us embrace the implementation of new technologies and drive our digital transformation.”
Digital transformation has forever changed the role of the CIO, says Wenzel. Once responsible for running IT systems, CIOs now have to “work with other C-suite executives, especially the CFO, to drive business performance,” he says. Indeed, digital technologies such as online sales, internal collaboration systems, internal development platforms have a substantial and growing impact on the bottom line of most organizations.
CFOs need “continuous and close engagement from the CIO to make the right decisions,” says Wenzel. “We are a team.”
Since Synchrony’s IPO in 2014, the company has invested $5 billion in cloud, artificial intelligence and machine learning, and developing technology that allows partners to easily add Synchrony services such as credit screening technology to their applications, says Healy. “This investment was based on our CFO’s understanding of how this technology can propel us to growth,” she says.
Costs of non-collaboration
There’s a huge downside when CIOs and CFOs don’t work together, Rathindran says.
“Organizations without this strong partnership perform worse than those with strong partnerships in terms of lower success rates of digital initiatives, inability to secure the funding needed to sustain digital initiatives, and being prone to cost overruns. costs on digital initiatives,” he says.
In other words, “a strong CFO-CIO partnership is essential for transforming digital technology into digital capabilities, which then drive business, financial and strategic results,” Rathindran says.
The first element – getting along – is the easy part. “The majority of CFOs and CIOs would say they have a collegial relationship,” Rathindran says. “Many even cite a constructive tension in the relationship. However, when you add the second element – a business-centric relationship rather than a purely IT-focused relationship – that’s where the partnership seems to be on less solid foundations.
Many CFOs view their CIO as a functional budget owner, so the relationship tends to be function-centric, Rathindran says. However, in this age of digital acceleration, CFOs must effectively rely on their CIO as a business strategist.
According to the study, strong CFO-CIO relationships are 51% more likely to easily find funding for digital initiatives, 39% more likely to keep digital spending in line with the budget plan, and 18% more likely to achieve expected business results.
Database software vendor MongoDB also benefits from a strong working relationship between its technology and financial leaders.
CTO Mark Porter and CFO Michael Gordon say they work together at least once a week, sometimes daily. “We routinely work together on budgeting, space management, recruiting and mentoring employees,” Porter says.
Gordon “is responsible for allocating capital as I pretty much spend money hoping to produce products that delight customers and make money,” Porter says. “Michael regularly asks me why and how we think about this very ambiguous thing of software development, and compares it to the parts of his job that are well-defined and those that are just as ambiguous as mine.”
Benefits the company derives from their partnership include building better software faster and getting products to market that satisfy customers faster, Porter says.
“I think it’s critical that CTOs and CFOs collaborate successfully,” says Gordon. “I think that’s one of the key ingredients to a successful high-growth business. Of course, in any leadership team, you need strong collaborative relationships, both between individuals and across team. I believe that we, as a team, make better decisions as a result of having multiple viewpoints represented around the table.”