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It’s always been important for the C-suite to understand the cost benefits and value associated with technology projects, but today’s complex infrastructure needs are requiring greater levels of input from financial executives, in particular. Technology spends are increasing dramatically, and there’s a need to balance the shorter-term benefits of specific tactics with the long-term strategies that will help move the organization forward. The days of technology teams making do with the funding that they are allowed are over, as technology becomes more tightly intertwined with business strategy. It is crucial that the big dollars invested in technology and innovation are tied to true business value in a way that can be communicated throughout the organization — making the CFO an integral part of the decision-making when it comes to determining the IT spend.
Technology is advancing at an unbelievable rate, with new software applications and methods of reaching customers coming at breakneck speed. Making several poor decisions around technology can create a miasma of problems that can take years to resolve, but that risk is mitigated when financial leaders work closely with technology teams to ensure that there are adequate measures and milestones in place. CFOs must ensure that the organization has the funds available to budget for items that are critical for continued business operations that support corporate strategy and sustainable growth initiatives. This has to be balanced with the additional risk that can be assumed by waiting for “something better” (an application, a way of controlling data or reduced legislation) to come along. According to Gartner, worldwide IT spending is set to reach $3.8 trillion this year, with ongoing increases in spending attributed to IoT, shifting on-premise computing to the cloud, software applications and maintenance fees. With this shift comes a fundamental change in the way technology dollars are budgeted: from capital expenditures to a SaaS model that is billed as an operating expense.
Starting with the strategic initiatives of the business and slotting in technology where needed may be the way CIOs and CTOs are familiar with budgeting, but the new paradigm requires additional work. The risk potential of having business systems vulnerable to a cyberattack is an ongoing concern and one that can require a significant amount of spending in any given year. Data silos are being broken down and consolidated as older legacy systems reach their sunset years. This tension between supporting an often-aging infrastructure and providing a stable base for the future creates a need for creative budgeting throughout the organization. Having the CFO work with technology executives can help bring greater visibility to the IT needs of the organization and how they align with specific strategic initiatives.
Part of the budgeting process involves being intentional about determining business ROI for the various technology initiatives and being unafraid to boldly cut or fund projects based on the changing needs of the business. New threats occur on a regular basis — as well as new opportunities to seize dominance in a particular market. Having the flexibility to pivot and create revenue may require a continual review of the various projects as well as a fundamentally different approach to what have traditionally been multi-year IT projects. Vigorously defending projects that no longer provide business ROI can put a major drain on limited organizational resources, especially in light of changing features and functionality for even the most stable business platforms.
Now more than ever, CFOs must have a solid understanding of the business value that IT projects plan to deliver and a solid review of milestones. This shared responsibility with CIOs and CTOs creates not only a greater accord in financial decisions but also a deeper understanding of the value that various projects have for the entire business.
Essential Solutions, LLC is an IT company that relies on its strengths: customer satisfaction, quality service, and the fulfillment of our clients’ needs. Let us put our experience and expertise to work for you. Our IT solutions are an essential part of your success.