Bridging the Finance-IT Gap

(Editor's note: This article has been revised from the original version to clarify the structure of Nationwide's IT finance team.)

No one doubts that managing the funding and expense of technology operations at a Fortune 500 company is a big responsibility. In fact, it's a puzzle why more companies don't have a team devoted solely to overseeing the finances of the IT department.

Nationwide Insurance has such a team, led by Michael Leach, the CFO of Nationwide Services Co., a subsidiary that owns and manages all of the parent company's technology. He and William Miller, associate vice president and controller for NSC, have a bird's-eye view of both the finance and technology functions in their role as liaison and, occasionally, referee between the two.

For Miller, who recently sat down for an interview with CFO, the keys to the job are understanding that some principles of running a company do not apply to the IT department, absorbing as much information as possible about available technologies and vendors, and helping IT and finance view each other in a realistic light.

But Miller and Leach are finance professionals first. That identity was reinforced this year, when Leach began reporting directly to Nationwide CFO Mark Thresher. Previously he had a solid line to the CIO and a dotted one to the finance chief, but now those relationships have been flipped. Following is an edited version of the interview.

What is your view of your role and the value it brings to the company?
Over the 10 years that I've been involved in IT financial management, the deeper I've gotten into it, the more I've recognized that it really is a unique specialty, much like accounting or treasury. The fact that I get asked about it over and over again means people recognize that there's a value in that specialty.

Our board of directors is looking to my team every year for an update and analysis of what's going on. They've continued to fund us and want us to continue our work.

Do you have an overarching philosophy about IT economics?
The IT trend line is different from the company's trend line, whatever business you're in. IT economics don't follow insurance-industry norms, and the same is true at car dealerships or any other type of organization. When people try to make decisions about financial investments in IT while thinking about the industry they deliver products and services in, rather than about the IT industry, they tend to make mistakes.

For example, car sales may be down, but the dealership still needs to manage every car sale, so there are still IT investments that it has to make. A financial-services company may have stopped making mortgage payments, but it still has to store all the transactions that come through for the mortgages already on the books. And it has to build into systems the functionality to deal with all the regulatory changes relative to handling mortgages.

The reverse is also often true, where a particular service may be in high demand and sales are going gangbusters, but the IT systems in place are adequate and appropriate. So it's about keeping the two pieces in check. You have to understand the business in its industry, and understand the industry of IT and its impact on the business.

To what degree do you need to understand how the technology works? Or is it just a business equation for you?
I don't think you can do this unless you understand how the technology works. That's probably the biggest barrier to getting people to where they can straddle this fence effectively. I am by no means an IT expert, and there are times when CIOs go way off the page for me. But you have to understand the basics of how data storage and compression work and be able to translate that into the financial implications for the company.

If you look at IT as an asset, and you try to apply other asset models that are more mature, like real estate occupancy, to data storage, you'll get the wrong answer — because storage occupancy is not the same as building occupancy. Sometimes people get confused because they don't understand the finer differences between technology and other physical assets that people manage.

How did you get up to speed on technology, and how do you stay current?
When I started 10 years ago, I spent a great deal of time studying. I started down the path of getting a master's degree in MIS. I didn't complete that work, but it gave me a good start. Now I read technical magazines, I attend seminars and briefings, and I bug the heck out of our technical guys about how things work.

What are your views on the way the interface between IT and finance should work?
My perspective is that any organization that doesn't have its CIO and CFO on equal levels is asking for trouble. Historically we've seen a lot of CIOs report up to CFOs, and what that does is create a view of technology not as an asset or investment or a value proposition, but as an expense.

• 1
• 2
• 3
• next »