Deloitte Spots A Digital Transformation Silent Killer — Toxic CFO-CIO Tension

Rising economic uncertainty directly spikes the corporate tension between digital transformation acceleration and cost control. As companies rush to stabilize cash flow, neglecting strategic tech imperatives can imperil long-term competitiveness.

Addressing that fundamental challenge requires an effective CFO-CIO partnership.

That’s quite rare at many companies. For decades, real or perceived business acumen shortcomings hampered technically-sound finance and IT functions. Today’s turbulent markets hand both an opportunity to jointly close those capability gaps, build lasting competitive advantage and drive meaningful results.

Yet, if not well-managed and data-driven, cross-functional collaboration often quickly unravels into blame-shifting. That’s where external perspective can help.

Red alert

Deloitte’s CFO Signals quarterly report details finance executives’ perspectives on economic conditions, business risk and performance prospects. Tucked in the most recent edition is a special “managing the IT function” feature which outlines senior finance leaders’ views on tech spending, business value and performance.

Deloitte surveyed approximately 100 CFOs from mostly large, multi-billion dollar North American companies — the results should give many CIOs cause for concern.

• First, and most troubling, only 5% of the study’s CFOs were “very satisfied” with their organization’s IT function — that’s quite problematic in a tech-driven economy. An additional 29% chose “satisfied” — leaving two-thirds of IT departments in apparent need of considerable improvement.
• Next, Deloitte asked the finance executives to identify the top three “challenges to realizing value facing their IT function.” They ranked talent, non-standardization and business partnering at the top. Open-ended comments cited “having the right people in IT who know how to add value” and a “dearth of technology professionals with intimate knowledge of the business they are trying to support.”
• The perceived shortfalls were, not surprisingly, closely tied to CFOs’ top three expectations for improving IT function performance — greater agility, accountability and business acumen. When asked further about “what actions has your organization taken to enhance the value derived from the information technology function and technology spend?” the top-selected response was “change IT leadership.” That hardly sounds like partnership.

In sum, the survey results show that CFO-CIO collaboration work may be more strained than tech leaders realize. That only worsens digital transformation odds.

Penny wise

Much of the discord likely stems from antiquated IT spending approaches which treat tech expenditures as corporate overhead rather than value chain costs. Deloitte’s results confirm that CFOs continue to view IT as a support function cost center rather than a business accelerator. Three findings particularly stand out:

• CFOs ranked “cost as a percentage of revenue” and “systems reliability measures” (i.e. downtime) as the most important tech department metrics. ROI ranked a distant fifth behind user satisfaction and help desk statistics. Open-response comments confirmed this administrative cost burden view.
• 47% of CFOs indicated that IT spend was less than 2% of total revenue. Another 28% reported spending between two and four percent. Fewer than 10% reported allocating more than 6% of top line sales to tech budgets.
• CFOs also reported that 52% of IT spend “maintains day-to-day operations,” with the balance split between “enhancing capabilities and operations” (26%) and “creating new business capabilities” (22%). Such results indicate companies continue to struggle to free resources from lingering technical debt, cybersecurity needs and routine IT maintenance.

Inflation’s budget squeeze will only compound these IT spending challenges and hinder companies’ efforts to accelerate tech modernization and strategic aims.

Crossroads

The Deloitte report findings perfectly frame the next, inescapable CFO-CIO talk. Tech leaders need candor and clarity about their C-suite counterparts’ satisfaction, strategic role expectations, funding priorities and capability needs.

For top performers, the survey results will validate exceptional collaboration. Conversely, companies which lack a dynamic, high-functioning IT-finance partnership likely stand ill-equipped for digital era competitive challenges ahead.

The stakes have never been higher. Who’s ready, willing and able to lead?

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