In the arc of technology management, IT procurement had moved from a line item on various department budgets, to a central control under the CFO. Then, with the help of too many vendors and consultants, the CIO role grew in stature to become a C-Suite position, assuming responsibility for all technology procurement. However, due to a lack of proper process, partnership, and financial experience, this has created a siloed approach and an overarching issue with IT purchasing. It's time for the CFO to exert more rigorous control over IT spend.
A survey by Augmented Financial Technology of 122 CFOs across 7 different verticals consistently finds that they should no longer be ignoring this issue.
Key Findings
In the survey, at least 63% were able to say with either moderate or high certainty that the organization was receiving some benefit from the dollars spent on all technology purchases. However, less than 1 out of 10 have any certainty that their organization utilizes even half of the capabilities of these purchases.
It was encouraging that a comfortable majority (83%) of respondents reported that the technology stakeholders in their organization considered themselves financial stewards of the organization. However, only 11% responded that the Finance team is invited to participate in any technology discussions until it is time to move forward with the purchase or approval.
The final pair of questions showed that 100% of the respondents said that IT budgets were bottom-up, but that all of these were constructed through a growth factor applied and through new pricing gathered from vendors. This approach has a negative impact on any strategic approach where a risk or NPV-type calculation could compare projects within IT as well as across the corporation to identify what should be funded.
The Path Forward
The findings of this survey identify that though the IT team has both great technical know-how and good intentions, the lack of a direct reporting relationship to the Finance organization breeds a siloed approach that presages cost inefficiencies.
For example: Is it always necessary to purchase support and maintenance, and if so, is it necessary to purchase the premium version? Is this assessed annually, or does it just become an automatic cost once purchased? These are the kinds of financially-minded questions that CFO involvement would surface.
"Less than 1 out of 10 CFOs have any certainty that their organization utilizes even half of the capabilities of their technology purchases."
Virtual Procurement Services works alongside finance and technology leadership to bring rigor, data, and accountability to IT procurement decisions. Contact us to learn more.