- Companies with strong CFO-CIO relationships are 51% more likely to easily find funding for digital initiatives, a Gartner survey shows.
- They are 39% more likely to keep digital spending in line with the budget plan.
- When the CIO-CFO relationship is strong a company is 18% more likely to achieve its intended business outcomes.
Of all the C-suite relationships at organizations, one of the most strategically important in the age of digital business is the one between the chief information officer and the chief financial officer. More than ever, deciding on which technologies to invest in to improve the business can mean the difference between success and failure.
However, recent research by technology consulting firm Gartner shows that many organizations are not achieving this close partnership. Just 30% of the CFO-CIO relationships are characterized by strong collegiality and business centricity, according to a survey of 183 technology and finance executives.
These two key attributes define a strong digital partnership, the report says, without which organizations struggle to find funding for digital initiatives, keep digital spending in line with the budget plan, and achieve intended digital business outcomes.
"We're operating [in] an environment where companies' margins are under pressure from input price inflation and potentially stagflation," says Randeep Rathindran, vice president of research in the finance practice at Gartner.
"Generating higher revenue or asset productivity from discretionary technology spending and digitalization can help offset this margin pressure," he added. "This is why CFOs and CIOs need to be 'joined at the hip;' to make sure that the benefits of digitalization initiatives are being extracted and harvested."
Add to this that discretionary technology spending is accelerating, and much of it is happening outside the corporate IT budget. A strong CFO-CIO partnership is essential to making sure that this spending is non-duplicative, and is used for funding tightly-scoped initiatives that translate into positive business outcomes, Rathindran says.
A competitive advantage
At consumer financial services company Synchrony, a strong partnership between the CIO and CFO is helping to drive digital transformation.
"The coordination with the CFO and my role spans across culture, digital transformation and governance of data," says CIO Bess Healy. "The partnership allows for more innovation that can lead to a competitive advantage in the market."
Synchrony CFO Brian Wenzel "is an indispensable business partner," Healy says. "He provides more than the means to help us with our strategy. He also helps to embrace implementing new technologies and driving our digital transformation."
Digital transformation has changed the role of the CIO forever, Wenzel says. Once charged with keeping the IT systems running, CIOs must now "work with other C-suite executives, especially the CFO, to drive business performance," he says. That's because digital technologies like online sales, internal collaboration systems, internal development platforms, have a substantial and growing impact on the results at most organizations.
CFOs need "ongoing and close engagement from the CIO to make the right decisions," Wenzel says. "We are a team."
Since Synchrony's initial public offering in 2014, the firm has invested $5 billion in cloud, artificial intelligence and machine learning, and in developing technology that allows partners to easily add Synchrony services such as credit prescreening technology to their applications, Healy says. "This investment was based on our CFO understanding how this technology can propel us for growth," she says.
Costs of not collaborating
There's a huge downside when CIOs and CFOs are not working together, Rathindran says.
"Organizations without this strong partnership underperform those with strong partnerships in terms of having lower success rates of digital initiatives, being unable to secure the necessary funding to keep digital initiatives going, and being prone to cost overruns on digital initiatives," he says.
Put another way, "a strong CFO-CIO partnership is key to having digital technology turn into digital capabilities, which then deliver business, financial, and strategic outcomes," Rathindran says.
The first element — getting along — is the easy part. "A majority of CFOs and CIOs would say that they have collegial relationships," Rathindran says. "Many even cite a constructive tension in the relationship. However, when you layer on the second element—a business-centric relationship rather than a purely IT function-centric relationship—that's where the partnership seems to be on less solid footing."
Many CFOs think of their CIO as a functional budget owner, so the relationship tends to be function-centric, Rathindran says. However, in this era of digital acceleration, CFOs need to be relying on their CIO effectively as a business strategist.
Strong CFO-CIO relationships are 51% more likely to easily find funding for digital initiatives, 39% more likely to keep digital spending in line with the budget plan and 18% more likely to achieve the intended business outcomes, according to the research.
Database software provider MongoDB also benefits from a strong working relationship between its technology and finance leaders.
CTO Mark Porter and CFO Michael Gordon say they work together at least weekly, sometimes daily. "We work together regularly on budgeting, space management, recruiting, and mentoring of employees," Porter says.
Gordon "is responsible for capital allocation while I pretty much just spend money in the hopes of producing products that delight customers and make money," Porter says. "Michael challenges me regularly on why and how we're thinking about this very ambiguous thing called software development, and compares it to the parts of his job that are well-defined and those that are just as ambiguous as mine."
The benefits that accrue to the company from their partnership include creating higher quality software more rapidly and getting products that satisfy customers to market faster, Porter says.
"I believe it's critical that CTOs and CFOs collaborate successfully," Gordon says. "I think it's one of the key ingredients to a high growth company's success. Of course, across any executive leadership team you need strong, collaborative relationships—both between individuals and across the entire team. I believe we, as a team, make better decisions as a result of having multiple perspectives represented around the table."