THE GREAT DIVIDE
Or, what your CIO would really like to say to you if only the job market were better.
By Laton McCartney

A chief information officer recently complained to an executive recruiter that his company's CFO was making his life a living hell. "The CIO came on board to effect change," says Kevin M Rosenberg, a managing partner with BridgeGate, an executive recruitment firm in California. "But he is constantly being pummeled by demands from his company's CFO to focus on cost controls and produce savings, while expecting service levels and IT efficacy to increase." Forced to pinch pennies, the CIO has been unable to roll out the services he envisioned for the company, and "his stock has fallen drastically with his users," says Rosenberg.

The IT chief's unhappiness with his CFO is hardly unique. Many CIOs voice the view, publicly and privately, that CFOs often don't grasp the strategic importance of IT, that they use CIOs as scapegoats for cost overruns and failed IT projects, and thanks to their increased role in IT management, have so devalued the position that no quality CIO would take the job - at least if he or she had to report to a CFO.

CFOs, of course, have their own gripes, which can be largely summarized as: "IT is expensive, complex, and often fails to deliver, so let's do something about it." CFOs answer to investors on a quarterly basis, and with IT now accounting for more than half of all capital spending, it's not only a logical but an essential place to look for savings. That said, few would disagree that greater harmony could be brought to bear in CFO-CIO relationships.

Blame the Consultants

As one example, consider a recent survey by The Hackett Group in the US that found that at nearly half of 22 companies polled, there is no IT representation on the critical steering committees that are addressing Sarbanes-Oxley compliance efforts. "CIOs are being ignored even though no company can possibly deal with Sarbanes-Oxley without IT," says Allan A Frank, president and chief technology officer at Answerthink, The Hackett Group's parent company.

CIOs didn't help their cause - or their credibility - much when many of the major IT initiatives of the past few years proved less successful and more costly than expected. "There was push-back after many Y2K, CRM, and ERP efforts didn't deliver as advertised," says Michael Zammuto, a former corporate CIO who is now chief technology officer at software company Ecometry in the US. "As a result, the CIO position today is more reactive than proactive."

"CFOs believe that CIOs do not care, can't manage budgets, and always require more money for systems that generate no revenue," says Dhafer AlShahri, CIO at AlFanateer Hospital in Saudi Arabia.

AlShahri argues that this image of the CIO as the last of the big-time spenders - and IT as a money pit - is hopelessly out of date. And many CIOs argue that expensive and ultimately disappointing (or worse) projects were sold by big consulting firms, which pitched ERP and the like as silver bullets to CEOs and CFOs, often going around, instead of through, IT.

"The consultants come in and say, 'Your IT people are good' - because they're not supposed to criticize IT - 'but we can help you do the job much better,'" says Thomas Bihun, former IT director at Wabash Technologies. "They're often the ones who created unrealistic expectations."

On occasion, Bihun and other CIOs assert, CFOs will take the lion's share of the credit if a project is a success, while being quick to point the finger at IT if the opposite is true. Worse, once the project is up and running, CFOs may lose interest in it even though their continued involvement is key to maintaining its effectiveness. "It's not only the CFO, but most of the CXOs, including the CEO, who fail to follow up," says AlShahri.

The lack of follow-up can create problems, especially with ERP systems that dictate an organization utilize one central database so that all its numbers and data are consistent. "Without the CFO's backing, people start using spreadsheets instead of the ERP system," says Bihun. "And the numbers may not jibe.".

A Matter of Time

With the recent economic downturn and the demands of Sarbanes-Oxley, many finance executives today have little time or energy to devote to technology issues, CIOs assert. "Because of the state of the economy and the competitive environment we are in, the CFO has to concern himself with the financial condition of the company," says Bihun. "That was not true in the past. The CFO was there when I needed him."

"The CFO function is changing, with more time required for risk management, due to Sarbanes-Oxley, versus strategy," says Randy S Stone, vice president of enterprise information technology at US electronics manufacturer Teradyne.

AlShahri adds that CFOs often have a "quarterly oriented mentality," given their focus on meeting Wall Street projections every three months, while CIOs are process-oriented and take the longer-term view. "It is like two people; one is having a magnifying lens and the other has a wide lens," he says. "Who can see more of the road?"

Stone agrees that it is critical for a CFO to have a broad lens when looking at IT investments. For example, when Teradyne moved some of its electronics manufacturing operations to low-cost regions such as the Philippines and China, its technology costs went up because of the need for systems and communications capabilities to operate in these areas. "CFOs have to appreciate this kind of thing," she says. "Their lens has to be very broad." Stone says that Teradyne CFO Gregory Beecher "absolutely" understood her concerns. Score one for teamwork.

CFOs who refuse to look beyond the bottom line tend to characterize IT as strictly a cost center. In these situations, the CIO serves essentially as a project manager with a mandate to get maximum ROI on every initiative, spending most of his or her time supervising vendors and outsourcers.

"When I worked as a CIO, the CFO had to approve all purchasing decisions and was very cash-flow-focused," says Zammuto. The environment was one in which Zammuto had to quantify benefits on everything, which he sometimes found unrealistic. "It is notoriously difficult to quantify benefits on various technology initiatives," he says. Frustrated at being excluded from mainstream management decisions, Zammuto resigned.

Stone says that at Teradyne, they talk about these costs as "balloons" and "anchors." By focusing only on IT cost cuts - the balloons - the CFO can effectively negate enterprise cost savings the anchors might bring about. "With some CFOs, the idea of IT functioning only as a cost center has become almost a mantra," says Stone. "Granted, CIOs should be expected to cut costs within IT, but there should be a more balanced approach, where IT acts as an enabler for reducing costs throughout the company. To accomplish that, the CFO and CIO need to have a balanced dialogue."

Ups and Downs

One challenge that has long confronted CIOs centers on with whom exactly they should have a dialogue. When IT was a back-office function, typically served by a mainframe or other large computer system, CIOs didn't talk with much of anyone. Throughout the 1990s and in the run-up to dot-com mania, IT emerged as a strategic discipline, and CIOs often found themselves reporting to the CEO. When the economy sputtered and "internet time" was tossed on the buzzword scrap heap, CIOs found themselves reporting to CFOs.

A number of CFOs, CIOs, and others say that, regardless of which way the lines fall on the organization chart, a successful partnership between the CIO and CFO is key if the elusive goal of IT/business alignment is to become a reality. That goal is further advanced when CIOs have the ability, through their own skill sets and the mandate that's given to them by their companies (read: bosses), to approach their jobs strategically.

As a model for just such a CIO, Rosenberg points to Guy Abramo, who as executive vice president and chief strategy and information officer for US-based Ingram Micro, the world's largest wholesale distributor of computer products, serves as chief architect for both the company's strategic business and technology direction. (Before becoming CIO, Abramo headed up worldwide marketing, giving him a big-picture view that some CIOs lack.)

CO-Equal Billing

CFOs may be relieved to learn that the onus is not solely on them. "Today, CEOs are far more interested in how information affects the strategy of an organization than in the past," says Stephen P Mader, president of executive search firm Christian & Timbers. "They want IT woven throughout the organization, and they are showing more sensitivity to CIOs, to having them work with CFOs and other senior managers."

This tends to be truer in some industries than others, notably media and consumer goods. "Companies that routinely turn on a dime need to know in a hell of a hurry what's going on in consumer trends so that managers can make quick decisions," says Mader. The input used in those decisions has to come from both IT and finance working in concert, he says.

Co-equal is a term that many experts pull out to describe a proper relationship between the CFO and CIO. That can be difficult to achieve, particularly when one reports to the other. At Rockford Health System, CIO Dennis L'Heureux was given a say in picking a new CFO. "I recommended finding someone who appreciated the strategic value of IT. Someone that I could work with every day," he says. Both executives report to the CEO and work well together, says L'Heureux.

Belt-tightening is a perpetual exercise at the US$400 millionplus company. Even so, working with the CFO, L'Heureux has been able to add new technologies. "Recently, we put in a time-and-attendance system, which increases our capital expenditure and operating and maintenance budgets, but is expected to reduce payroll expenditures by 1 to 2 percent."

The former CIO of both Federal Express and AT&T, Ron J Ponder, now CIO of US$20 billion WellPoint Health Networks in the US, has witnessed firsthand the dynamics of the CIO-CFO relationship. While Ponder does not report to WellPoint CFO David C Colby, he says they work closely together. In fact, they have achieved what many may consider the ultimate aim of a CFO-CIO partnership: budget-conscious strategic advantage. Colby, described by Ponder as "technology literate", worked closely with Ponder to achieve ROI from technology investments and ensure that they correspond with business objectives.

That close coordination, Ponder says, has enabled WellPoint to implement ambitious applications that will put the company significantly ahead of its competitors. In January, for example, WellPoint announced a US$40 million program designed to get physicians to stop writing prescriptions and instead to issue them electronically.

"We're working with Dell, Microsoft, and Cap Gemini Ernst & Young to jump-start e-prescribing," says Ponder. The program launch comes at a time when WellPoint is merging with another US$20 billion health-care company, Anthem, to create the largest company of its kind in the US. Ponder argues that a vital, mutually supportive CIO-CFO relationship is one of the cornerstones of such efforts.

Laton McCartney is a New York-based writer and editor.