If you talk to chief information officers (CIOs) and CFOs today, however, that clichéd vision evaporates. They are seasoned professionals, intensely aware of the importance of finance and IT talking and walking together in the face of ever-escalating demands for corporate systems to provide everything from automated financials and procurement, to real-time links to global offices, to protection against a myriad of viruses and other operation and security threats - and do so cost-effectively.
"There is clearly a need for financial executives and IS (information systems) executives to come closer together," says Ed Trainor, CIO of Paramount Pictures and the 2003 president of The Society for Information Management (SIM). "There is a mutual desire to do that, and we all can do better." FEI is co-locating its Forum on Finance and Technology with SIM's annual event, the SIMPosium, in Chicago this month, giving top finance executives and CIOs an opportunity to rub elbows and compare notes.
The evolving relationship between CFOs and CIOs doesn't date back that far; as recently as the 1980s, relatively few companies had designated someone as a CIO. More than likely, the top technology manager at that time ran a data center or some other back-office function, and didn't have the C-level interaction with the CFO, COO or CEO that many do today.
And if you go back more than a generation, when computer projects were distilled from stacks of IBM Corp. punch cards and programmers still sported horn-rimmed glasses and pocket protectors, automation and finance were still mostly in separate worlds.
"When I started, we were still in a mode of transitioning from manual general ledger entry to a general ledger package, which then interjected the first direct relationship with IT in support of an application," says Todd R. Stephenson, CFO of Lincoln National Life Insurance in Fort Wayne, Ind., a 27-year veteran of the insurance industry. "With the interface of that data into the general ledger, the accounting folks became more computer-literate."
It's been onward and upward from there for most organizations, yet over the years the stories have persisted about companies that still had IT and finance in separate "silos" - and some where the IT group was seen as insufficiently aware, or concerned, about the cost of systems. In such cases, finance came to view IT as one of the dreaded corporate bogeymen: a cost center.
"Where I've seen silos, it's where [IT] was seen as a cost center. But what ends up happening there is you get a very disjointed strategy," says Michael Doyle, CFO of EasyLink Services Corp. in Piscataway, N.J., and a former finance executive at companies including Pepsi-Cola Co., AlliedSignal, Cendant Corp. and Dun & Bradstreet.
In some, mostly smaller organizations, there have been situations where the CFO has taken charge of buying applications for finance, apparently because finance either didn't trust or respect the IT group enough to involve them. "I would have a real issue with that," Doyle says. "Some ERP [enterprise resource planning] systems might not accommodate all of a CFO's needs, but you still need that link to the CIO."
Paramount's Trainor is similarly taken aback by the notion of the CFO buying finance applications and bypassing IT. "I've never experienced that situation," he says. "That means you'd be talking about a very decentralized function; it sounds illogical. In that kind of instance, you are building silos. There would be duplication of information. There would be redundancy, and more expense."
Doyle chuckles at a reference to the CFO as a "Dr. No" taking a scalpel to IT budgets. "The challenge we face is the tendency for the systems folks to say, 'We have to have best-in-class for everything.' I've faced that as a divisional CFO, and here [at EasyLink]. We have to make sure that the IT activity and the resources match well with the strategy.
"Sometimes it's a question of how often you upgrade," he adds. "You don't always have to have best-in-class." Corporate security costs, he notes, keeps coming down, thanks in part to vendor competition.
"What's important is that IT and finance are in a partnership to improve efficiency and bring down costs," says Elizabeth Monrad, CFO of TIAA-CREF, the New York-based pension and mutual fund giant. "What may have happened in the past was that IT was asked to build what I would call 'intergalactic' homegrown systems aimed at solving all the information needs for an organization. When that software was homegrown, there was often a high failure rate or significant cost overruns. By the time those packages were ready, the organization's needs may have changed, and that's why IT sometimes had a reputation for being difficult to control."
And it's too facile simply to blame the IT managers for escalating budgets, says Stephenson. "Over time, those [cost] discussions have included the business process owners for the systems application or hardware tools; they also have opinions," he says. "As much, if not more, it's been the user area that has a desire for more sophisticated hardware, not the IT folks. Today, the IT folks are more likely to partner with finance to ensure that the long-time cost of ownership is something that is considered when systems are being developed."
CFOs and CIOs interviewed agreed that the overall jump in computer literacy in the past couple of decades - facilitated by the personal computer - has helped IT and finance communicate better. "I've seen a lot of evolution because business people in general have become, through business and college training, more computer-literate. They're no longer behind the glass wall," says Stephenson. "There's greater partnering because the ability of both sides to talk the same language has improved."
"IT leadership should bridge the communication gap," says TIAA-CREF's Monrad, "and be able to translate complex technical matters into layman's terms - just as finance professionals need to be able to communicate technical financial matters (such as derivatives, stock option, pension accounting) in plain English. Our CIO is excellent at such communication - I can't think of a conversation where she hasn't put technical issues into understandable terms." Cooperation and partnership are brought up often, and it's often noted that this has been facilitated by emergence of the CIO as more of a "player," as companies have anointed a single person as their head technologist and given him or her a stature commensurate with other key managers.
With that, technology leadership isn't enough for CIOs anymore, says David Luce, assistant vice president and CIO of The Rockefeller Group, a commercial real estate services company based in New York City, and SIM's president-elect for 2005. "There's a greater emphasis on having a good understanding of the industry we represent," he says. "We need to be businesspeople. Technology happens to be our product. It's extremely important for me to be able to talk with senior people about commercial real estate, and I need to relate the technology to the business requirements that we have."
Change from the Old Ways
"I think [organizations] are most successful where it's perceived that the business processes own the systems and look to and work with IT as partners in enhancing those systems," says Lincoln National's Stephenson. "What happened a long time ago was that a systems person came into the business manager's office and asked, 'What information do you want to get out of the system?' Then IT designed an [application] to create those reports. Unfortunately, if you decided later that you wanted other information later, it didn't have the flexibility" to do that.
Today, many of those "tell me what you want" conversations are more interactive - and it's widely agreed that regulations like The Sarbanes-Oxley Act, with its intense focus on internal controls, can only drive IT and finance closer together.
"In general, each year we continue to drop five days [from the deadlines for] the 10-Qs and 10-Ks," notes EasyLink's Doyle in a reference to Securities and Exchange Commission filings for public companies. "The need to get information faster will force a need to automate faster. Ideally, you want to have systems that are limited in complexity, and you can eliminate manual processes. Having one good integrated system, with the ability to deliver greater transparency, will allow us to segment and drill down more effectively."
Adds Trainor at Paramount Pictures: "The two sides have to work together, [yet] I don't think the things that are covered by Sarbanes-Oxley are where all the vulnerabilities are. Departments have to go beyond Sarbanes-Oxley in protecting those assets, such as corporate data and networks," and making sure they are protected from outside intrusion.
Interestingly, as worrisome as Sarbanes-Oxley has been in corporate finance suites, it's become equally troubling for some CIOs for another reason entirely, noted CIO magazine in its June 2004 cover story.
"Some CIOs see a darker agenda at work [with Sarbanes-Oxley] - a conspiracy," the article noted. "They fear [Sarbanes-Oxley] has become a stalking-horse that CFOs are using to assert control over IT and displace the CIO as the company's business process expert. Egging CFOs on, this theory goes, are the Big Four accounting firms, desperate to reassert themselves after the Enron debacle (which turned the Big Five into the Big Four after Arthur Andersen bit the dust) and needing consulting revenue to replace what they lost when most split off their consulting divisions."
The article added that only 12 of 22 companies surveyed by The Hackett Group had IT representation on their Sarbanes-Oxley steering committee, and just 65 percent of 75 companies surveyed last fall by Gartner Inc. said IT was involved in those committees.
Provocative as it is, this "agenda" theory remains mostly rumor and innuendo. The CFOs and CIOs interviewed for this article consistently underscored the need for a stronger working partnership between finance and IT.
"At Pepsi, [the relationship] worked extremely well because IT was very tied into the strategy and what we were doing," Doyle recalls. "They had a seat at the table. We were revamping a lot of processes and how we got to the customer." Adds Stephenson: "Success comes when the IT folks think of themselves not just as contract programmers doing a specific chore, but have experience and interactions with business line people."
Luce says, "For a CIO to be successful, you need a strong partnership with the CFO. So much of what we do revolves around funding and the resources that are required. Analysis for major projects needs to have the blessing of the CFO.
"There's a tremendous emphasis for the CIO to be a stronger business leader, and to have a better understanding of the financial impact of business decisions," Luce adds. "The CFO needs a stronger appreciation of what technology is about. [IT] can be very instructive to the CFO in helping gather the necessary level of understanding."
Who Does the CIO Report To?
In perhaps half of companies with the relevant titles, the CIO or an equivalent reports to the CFO, according to technology industry surveys. But that's apparently most common in smaller organizations, and most of the executives interviewed for this article disagreed with that structure.
At EasyLink, the CIO reports to the to chief operating officer, which is "very appropriate," says CFO Michael Doyle. "It's a technology company, so that makes sense - IT is a support center and part of product development, and not folded under the CFO. Even if you're not a tech company, you can make a case for the CIO having that seat at the table.
"There are very few things in terms of product development and delivery that systems won't touch, across the organization. If you keep the reporting at the COO level, I think you get a very effective organization."
At Lincoln National Life, CFO Todd Stephenson says the CIO reports to the COO, which enables him to "co-manage and leverage technology for the purposes of process improvement." Having the CIO report directly to the CFO, he says, "is not the most effective model."
"It depends on the business," says David Luce, CIO of the Rockefeller Group, who reports to the CEO. "If it's highly financially oriented, [reporting to the CFO] may be the [appropriate] case. The situation has been changing rapidly in the past five to 10 years, and there's been a different view of what technology means to an organization, and the importance that has to be given to it. You tend to have CEOs that have a far greater interest in it."
Adds Elizabeth Monrad, CFO of TIAA-CREF: "The CEO may want IT as a direct report when technology represents a strategic, competitive advantage for the company, and the CEO wants to stay close to the area."
