Rising input costs, labor shortages, and supply chain delays create economic uncertainty. Investment initiatives for security and future efficiencies directly conflict with cost control. As companies forecast demand and expenses to stabilize cash flow, neglecting strategic planning and the cost center of IT investments can impair competitiveness and profitability.
The budget squeeze from cost increases will compound IT spending challenges. The need for reliability is a constant as companies struggle with the technical debt of legacy systems and stalled cloud migration initiatives. Reconciling this challenge requires an effective Finance-IT partnership.
Clarity and Candor
Technical leaders need clarity and candor from the C-suite. Keeping the lights on and responding quickly to fires is the sunset for IT leaders. Business leadership must communicate strategic expectations, funding priorities, and capability needs.
A Deloitte Q1 2022 survey of CFOs provides insight into the expectations and disappointments of IT. When the finance executives were asked to identify the top three “challenges to realizing value facing their IT function.” The CFOs ranked talent, complexity and non-standardization, and business partnering and alignment at the top.
Other comments included technology debt, prioritization and execution, and time to value as the following most common challenges. The demand for IT services continues to accelerate.
Perceived IT shortfalls link to CFOs’ top three expectations for improving IT function performance — greater agility, accountability, and business acumen.
Measuring IT Effectiveness
Measuring the effectiveness of information technology continues to be a struggle. CFOs look to metrics to gauge IT’s ability to deliver effectively. Corporations continue to view IT spending as overhead rather than value chain costs. CFOs view IT as a support function cost center rather than a profit enabler. These three findings stand out:
- CFOs ranked “cost as a percentage of revenue” and “systems reliability measures” (downtime) as the essential 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 spending was 2% or less of total revenue. Another 28% reported spending between 2.1% and 4%.
- CFOs reported that 52% of IT spend (53% for manufacturing) “maintains day-to-day operations,” with the balance split between “enhancing capabilities and operations” (26%) and “creating new business capabilities” (22%). This stat indicates that companies struggle to free resources from lingering technical debt, cybersecurity needs, and routine IT maintenance.
The resistance to change and the pace of change varies significantly between companies and people. CFOs communicated actions needed to realize greater value from the IT function. The four main areas include:
- Speed, agility, and innovation
- Governance, accountability, and transparency
- Talent, skills, and business acumen
Management of data interfaces, analytics, insights, and operational execution and efficiency were other areas that, if improved, could position the IT function to provide more value.
CFOs noted other challenges in reaching alignment and value. These conflicts can occur between business drivers and various data privacy needs and cyber risks related to legacy systems:
- Lack of business acumen among IT professionals
- Lack of tech-savviness within finance
- Managing transformation costs
Tearing Down Walls to Enhance Value
Confusion is a common occurrence during joint Finance-IT meetings. The differing perspectives and vocabulary often lead to frustrations and further disconnects. People become offended during planning meetings and embarrassed while seeking clarity.
These occurrences are incredibly unproductive, and yet they continue. To enhance the value derived from your IT function and technology spend, we provide a guided process to bring stakeholders together in a collaborative process.
Within the facilitated structure of collaboration, no question or idea is stupid. This freedom to openly answer questions and exchange ideas is free from accusations and finger-pointing.
As finance and technical teams improve shared knowledge and mutual understanding, actions to enhance value from technology investments become apparent. Collaboration becomes less strained as cooperation toward shared goals sets the stage for enhanced value.
If you are preparing for a budget squeeze or have IT spending challenges, there is a check valve to release the pressure and reduce waste. Too many initiatives and operational issues extend the time to value. Don’t neglect strategic planning and allow the cost center of IT to impair your competitiveness and profitability. We are ready to see you succeed.
As a proud supporter of American companies, Certitude Security® is working diligently to inform leaders and facilitate essential asset protection priorities for manufacturers throughout the United States. If you are interested in learning about the empowering services that Certitude Security® can offer, visit our website.