When it comes to digital transformation and its significance amongst other corporate priorities, 80% of CFOs globally cite it is within the top-five of their list of priorities.
Furthermore, 71% of CFOs surveyed believe that digital transformation investments are key to their company’s success and 77% said they would help the CIO find a way to fund a new digital transformation project if the initiative delivered strong ROI, according to Rimini Street.
In addition, 67% of CFOs say they “refuse to waste precious dollars on IT investments that don’t move the needle.”
CFOs are bullish about digital transformation
Today’s modern CFO’s level of understanding of technology and its potential for delivering returns is higher than ever. When it comes to digital transformation, it is more than a buzzword for CFOs and definitely on their priority list.
In addition to the large majority who cite digital transformation as a top-five priority compared to other corporate initiatives, 59% cite it is actually in their top three priorities. In addition, of the 80% of CFOs who expect their technology spending to increase in 2021, 46% say this growth in spending is being driven by new digital transformation investments.
Due to the COVID-19 pandemic, consumers shifted dramatically to online channels and businesses responded by increasing digital investments. Although digital transformation was on the roadmap for many companies prior to 2020, the global pandemic removed internal barriers, aligned corporate teams and accelerated the adoption of technology to support new business critical requirements, from remote work to digital customer interactions to supply chain resourcing.
73% of CFOs indicated that the global pandemic increased their digital transformation investment, and 95% of survey respondents agree that technology investments are key to recovering from the business impacts of the pandemic.
CFOs see clear business value and ROI from optimizing existing technology investments
CFOs expect their CIOs to present technology investment proposals that demonstrate business value and strong ROI. When asked about the type of IT projects they personally want to see more of from their CIO because they see clear business value and strong ROI, “optimizing existing technology investments” topped the list with 44% of survey respondents. CFOs also cited “revenue-generating technology initiatives” (40%) and “process improvements and employee efficiency” (39%) as their second and third choices respectively.
CIOs that continually optimize their IT operations are in a strong position to create and secure new funding for strategic IT investments that are aligned with business priorities. As a result, IT resources – including time, money and personnel – can be reallocated to critical new revenue generating initiatives that create competitive advantage and growth for their organization.
CFOs refuse to waste precious IT resources on low value projects
One of the CFOs’ primary considerations for IT spending is prioritizing those projects that yield positive business outcomes – 67% of CFOs surveyed agree that they “refuse to waste precious dollars on IT investments that don’t move the needle.”
In addition, 70% of respondents say they want to cut spending on non-essential IT investments. When asked about the type of IT projects they personally prefer to cancel when they don’t see clear business value or strong ROI, responses included “next-generation disruptive technology initiatives” and “major ERP reimplementation and migration projects.”
When there is not a strong ROI, technology for technology’s sake or forced by major ERP vendors does not satisfy CFOs that want to see strong business value for IT investments.
Large technology investments that may not have a clear business case, such as some vendor-forced ERP migrations and upgrades, may be better deferred or avoided and instead ERP systems can be optimized through strategies like third-party support, enabling the CIO to free up IT resources to help accelerate digital transformation programs.
CFOs expect short ROI timelines for technology investments
In addition to providing a clear business case on new transformation projects, CFOs also expect the ROI on technology spending to be swift, with 46% of CFOs expecting to see ROI on their technology investment within two years, and 82% within 3-5 years.
Timing is also very important in terms of when the CIO should engage the CFO on a major new IT initiative. 88% of CFOs prefer that the CIO involves them before the business plan is fully crafted. In particular, 47% of CFO respondents would rather have the CIO engage as the business plan is being developed, and 41% want IT to partner with finance when the idea is fully formed but before the business plan is completed.
The CFOs growing acceptance of digital transformation initiatives, coupled with their willingness to support projects that have clear business outcomes means that they are increasingly willing to lead funding efforts for projects that demonstrate business value.
When asked how they would respond to their CIOs digital transformation proposal requiring additional investment that would likely deliver a strong ROI, 77% of CFOs said they would help the CIO find a way to fund the project, and 28% of CFOs would even go to bat with the board to help the CIO secure needed funding.
A strong CFO-CIO partnership is critical to success
Technology is expanding the role that CFOs and CIOs play in an organization, as well as the need for a close collaboration between IT and Finance. Today’s CFO and CIO must have a solid understanding of customers and markets and technology’s role is connecting them. If both roles collaborate, they can be a productive, powerful team for the business – 92% of CFOs agree that “a successful CFO has a great relationship with their CIO counterpart.”
The survey also revealed that 69% of CFOs have a favorable view of their CIOs, with 47% stating that their CIO is a partner “that helps connect the dots between technology and business decisions” and 22% stating that their CIO is an “innovative change-agent that drives business strategy.”
In addition, 77% of CFOs shared that last year’s challenging business landscape served to strengthen their relationship with their CIO. CFOs primarily attribute this change due to an increased focus on security, compliance and risk (52%), the urgent need to collaborate to make nimble technology decisions (50%) and the CIOs proactive engagement with them (42%).
For those CFOs who noted a worsening relationship with their CIO last year, a few reasons cited include the CIOs lack of flexibility on identifying ways to cut costs (32%), the CIOs plans did not demonstrate adequate ROI (31%) and the CIO did not welcome attempts to engage proactively (28%).
While the CFO/CIO relationship is interconnected, sometimes these roles can be divided as both may speak different “languages” about the same topic. According to the research, 92% of CFOs say that the CIO needs to be more business savvy now than they were two years ago, and 94% agree that CFOs need to be more technology savvy than they were two years ago.
“This report highlights the heightened importance of digital transformation for CFOs but reinforces that IT investments must have clear business value to receive CFO support. It’s not surprising that CFOs want to cancel IT projects that lack a strong ROI, like many software vendor-forced ERP reimplementations and migrations, given that resources can be liberated for new technology investments that accelerate achieving the businesses digital goals,” said Seth A. Ravin, CEO, Rimini Street.