The pressure is on to navigate economic uncertainty. Gartner’s downward revision of projected worldwide IT spending in 2023 from 5.1% to 2.4% growth underscores how inflation, interest rate fluctuations, and consumer spending are reshaping forecasts, investment portfolios, and the CIO agenda. Regardless of your company’s investment posture during this period of instability, interactions with the CFO have likely increased and become more consequential in the last few months. 

To effectively traverse these interactions, CIOs must start with empathy. Walk in the shoes of the CFO. Acknowledge that they are fighting a battle on multiple fronts, from investors, creditors, board members, regulators, and peers, to name a few. Recognize that if your company’s top line is shrinking, the business is planning to recalibrate, and the CFO needs your help.  

In this moment of need, will the CFO view you as a business-savvy CIO with the chops to take on an expanded role in the C-Suite, or a barrier to visibility into a high-spend function? The answer hinges on your ability to keep tabs on three related topics that will likely surface in conversations with the CFO.  

Keep tabs on the keep the lights on (KTLO) budget 

If you fall on hard times in your personal life, you pay for your mortgage, health insurance, and groceries first to cover the necessities: shelter, security, and food, respectively. What are the necessities in your IT budget to keep the lights on (KTLO)? All things related to maintaining the systems to land, expand, and renew business at forecasted volumes are no brainers. Securing the technical estate from bad actors? Of course. While not an ideal situation, the CFO needs to know what the IT budget could be if the company shifted towards a “KTLO only” posture.  

To get here, we recommend inventorying spend across all categories (labor, projects, technology, etc.) to identify areas that could be paused or removed and estimating financial impact. Solicit input from trusted deputies and document the risks and implications of specific line items. Articulate how the budget could look in terms of operating and capital expenditure over the next 12 months, acknowledging that termination clauses and knowledge transfer may limit the speed of battening down the hatches, and that cancelling some investments are riskier than others. Build multiple budget scenarios with increasing levels of cost reduction to illustrate the plays you could run in response to various market conditions.  

Build compelling (and corroborated) cases for sustained investments 

If there are non-KTLO expenditures that you believe should be sustained, be prepared to explain why. Discuss the risky ones. Explain the tradeoffs. Be forthcoming if you think cutting too deep in the short run will lead to avoidable expenses in the future. In a soft market, initiatives that buoy margins will have the most staying power. 

In a tight financial climate, however, the business case may only go as far as the BU leader’s willingness to corroborate the benefits. Coordinate with your counterparts in the business to make sure you are speaking the same language and that your request isn’t artificially inflated by double-counted technology line items. Separate recurring and non-recurring operating expenses to identify annualization impacts and discover where EBITDA add-backs could help the cause. And remember that while new capital expenditures are spread across several periods on the income statement, it’s all cash going out the door in the eyes of a cost-conscious CFO.  

Deliver multiple views of labor spend 

IT personnel is likely the largest or second largest category in your budget, so prepare accordingly. Be ready to break your labor spend down in several ways: full time employees vs. contractors, operations vs. innovation, fixed vs. variable, and projects vs. KTLO, to name a few. If you have individuals, or teams structured around products, working on KTLO and new capabilities, estimate the breakdown at the individual or team level. Even if the findings only provide directional guidance, you will make inroads with the CFO for proactively thinking this way. If your top line is shrinking, prepare for questions on adjusting your cost structure to sustain margins during the storm. Finally, if your company is in dire straits, or if your CFO has a penchant for zero-based budgeting, be prepared for the resource-by-resource breakdown to explain exactly how each teammate is spending their time.  

Immediate and long-term implications for CIOs 

If this information is a few clicks away, consider yourself ahead of the game. If it feels more like a long putt, consider sharpening your pencil, especially if you see clouds on the horizon. An inability to produce this analysis quickly may create friction with the CFO and lead them to take matters into their own hands (or worse, shift matters to the hands of a third party carrying a blunt instrument and a deadline). Economic conditions aside, developing financial acumen was the leading skill CIOs surveyed at the December 2022 Metis Strategy Digital Symposium were looking to sharpen as they contemplate expanded roles in the C-suite. Now is the time to hone those skills.   

CFO, CIO, IT Leadership

The role of the CFO has evolved in recent years from the person in control of the purse strings, to the trusted right hand of the CEO.

Their importance was further enhanced during the pandemic as they were often required to oversee changes in a matter of days or even hours that would normally have taken months or years to bring to fruition. They are no longer just the person in charge of the money, but a strategic planner whose insights and counsel inform some of the company’s biggest business decisions.

But although their role has evolved, the technology which helps them is still playing catch-up, with the lack of reliable analytics and data one of the biggest hurdles to progress.

A changing role and the need for data

The finance function has traditionally been known for its stability and process-based culture. But Covid brought about a need for quick-fire decisions, where the rule book had to be re-written overnight or thrown out completely. Data has always been central to agile business planning, forecasting and analysis – all tools which have become central to the modern CFO role. The pandemic sped up the need for this type of tech, yet many firms still lack these insights to do the job properly. 

This level of data collection and insight requires the right technology. But in a survey of CFOs by Ernst and Young, eight out of 10 respondents said legacy technology and system complexity was one of their top three inhibitors to progress. 

Data that tells ‘one truth’

Companies are awash with information, each different department has their own KPIs and methods of reporting. But what CFOs really need if they are to perform their modern role well is not just data, but to be able to connect the dots and gain an holistic view.

They need integrated financial insights on accounting and finances data, better traceability and operational reporting on things such as customer segmentation, products and revenue assurance.

 

To enable this, Teradata’s multi-cloud software integrates data fast across finance systems – such as Oracle, PeopleSoft, and SAP – to connect and  integrate in near real-time. It also has a pre-built financial data model that’s ready to receive and structure data to enable controlled, user-friendly access. This all helps reconcile data from a wide variety of different sources into a trusted, compliant platform

Turning insights into action

Just one example of how this level of data insight has helped a firm was when a global retail company needed to modernize their analytics ecosystem. Their processes were manual and time consuming. Their spreadsheet-based model results couldn’t feed downstream models and analytics.

Crucially, a lack of trust in the model also meant analytics results had limited use to the business. The company worked with Teradata to create a finance-driven data foundational model. It provided in depth detail into things like revenue and costs from aggregate views of branches, products, vendors and customers.

This information enabled the financial justification for strategic business decisions. It’s this level of detail that can continue to enable CFOs to retain their position of trusted advisor to the CEO and an indispensable asset to the company.

For more information on how to gain financial visibility across your business click here.

Financial Services Industry