Wednesday, November 08, 2006

CIOs are from Mars, CFOs are from Venus:

For 2006 the number one business priority for CIOs was surveyed to be business process improvement – implementing technology to help the business become more streamlined and easier to do business with.[1]. To help accomplish these elusive priorities, IT organizations are reorganizing by hiring one or more business / financial experts as key members of the IT executive team. These resources are hired to help provide a catalyst for change, and implement a singular focus on business process alignment and value management within the IT organization.

Often these resources are called IT CFOs, IT Finance Controller, IT Investment/Finance Managers or IT Value Management Officer. Many Cx level executives think that these business savvy managers hold the key to achieving the elusive silver bullet for improving the ROI from IT. Unlike most IT managers and executives, these financial experts haven’t worked their way up the IT organization with their technical and project management skills.

These new business re-engineering champions within IT are often experienced CFOs or financial analysts, controllers or accountants, and are almost always MBAs. They are being hired to put financial tools and metrics in place in order to assess business priorities, assure business alignment and generate business cases (ROI and TCO analysis) on proposed investments.

Most enjoy early wins around the creation of rudimentary infrastructure for value management – most often developing home grown spreadsheets in order to provide a standard template for investment assessment. However very receive the support and resources necessary to implement bona fide IT portfolio management scorecards which can be used to track project success, project risks, spending and contribution of the projects to business goals – proving IT alignment.

The most common obstacle is that most IT organizations lack the capability and maturity to readily understand, adopt and use these tools to drive fundamental and substantive change. These initiatives often face resistance from technical managers, most of who do not have an MBA or financial analysis background , and who do not always understand the benefits of, or what is needed to create a successful business case. Secondly, the collection of company-specific data is a challenge, particularly when a fundamental understanding of the business and key performance indicators is required or when greater complexity such as discounted cash flow analysis and business process improvement metrics are involved.

The fundamental change management issues faced by many companies we have analyzed suggest that most technical staff are extremely resistant to the financial due diligence process, whether that be business case analysis, scorecards or portfolio management. Without strong executive sponsorship and mandated adoption, the technical staff tends to perpetuate avoidance of disciplined investment analysis that has been the norm for decades of IT spending growth, usually coming up with reasons to not comply with IT investment analysis procedures nor contributing to the changes necessary to make the process effective.

Even in cases where technical staff is supportive of IT investment analysis, it is often difficulat for business unit managers to collaborate and reach consensus and mutual buy in on opportunity analysis, project costs and risks and ultimate benefit projections.

Based on decades of prior conditioning, technical staff are most comfortable playing the role of technology subject matter expert, focusing on technical features and functions rather than business value. Hiring financially savvy resources will not yield instant results without apply education and change management to existing technology staff.

Although the achievement of success does not occur overnight, a few key actions can be used to ensure that these new IT financial managers are successful:

Start with simple, easy to use tools and selective projects (to achieve early demonstration of the value of IT investment analysis) rather than attempting to boil the ocean multi-million dollar portfolio management projects
Pre-populate analyses with as much standardized internal data as possible
Use industry standard third party metrics at first to ease data collection
Implement financial and tools training
Communicate and reaffirm executive sponsorship regularly
Celebrate success around “better decisions” and “improved contribution to business goals”
Require business case analysis for all projects above a certain investment value
Provide assistance and support throughout the analysis and assessment process


The Bottom Line:

The new breed of IT professionals, ones with financial management of IT experience, is here to stay, and this new career path promises to be a good one, but one which will take time to catch on - not with management, who are quickly reorganizing to add these valuable resources, but with the rest of the IT team members.

One of the biggest issues the new IT finance manager faces is that as Venusians, they are very different from the rest of the Martian IT team. As such, they will initially face resistance to their improvement initiatives.

In order to ensure success, these IT finance managers must have unwavering management backing and clear policies that support their mission. By keeping things simple and focusing on an ongoing process of incremental improvement they are much more likely to create sustainable change within today’s context of full plates for most technical staff.

Providing technical staff with 101 level IT investment training, celebrating and communicating success, and offering frequent assistance to Martian technical staff that explore the Venusian world will eventually make traditional technical staff as savvy at managing the value of IT as they are technically proficient.

[1] Growing IT Contribution: The 2006 CIO Agenda; Gartner EXP Survey of 1,400 CIOs worldwide.

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