Last summer, a joint survey by Gartner and the Financial Executives Research Foundation found that 42% of IT organizations report directly to the CFO. The percentage soars to 60% at smaller businesses with revenues between $50 million and $250 million.

The same survey pointed out that finance chiefs alone authorize 26% of all IT investments, while chief information officers approve only 5%. This makes sense: in tough economic times finance inevitably asserts itself and casts a gimlet eye on spending. In fact, an October 2011 report by CDW, one of the world's largest technology resellers, said that only 40% of IT decision-makers expect their budgets to rise this winter, down 8% from last year and the lowest level of IT investment increase since October 2009.

Given the oft-unequal CFO-CIO relationship and constrained IT spending, it's not surprising that the techies seemed more downcast than usual in another poll, CIO magazine's 2011 "State of the CIO" survey. Only 33% of CIOs believe they're seen as a "trusted partner or business peer," and even fewer (31%) see themselves viewed as a "valued service provider." Only 11% think IT is providing competitive differentiation — again not a surprise, given how cloud computing is propelling IT toward a utility model.

The fact that two out of three CIOs don't believe that they're seen as a trusted partner is not good news for CFOs. That's because to remain competitive, businesses need their top finance and IT managers to maintain a productive relationship.

At CDW, for example, finance chief Ann Ziegler counts herself fortunate to be "surrounded by experts in technology," she says. By having "the luxury of working with a CIO who is very financially literate," Ziegler has improved what she calls her own "fluency in technology." This is critical, she says, because it allows her to allocate scarce resources more knowledgeably.

Tension between finance and IT can lead to what former Taco Bell CIO and Chevys Mexican Restaurants CFO Susan Cramm has called "the schizophrenic CFO-CIO relationship," in which "the two parties play an ongoing game of chicken, with CIOs asking for more money and CFOs asking for more justification." At best, such a relationship is organizationally dysfunctional; at worst, it's an institutionalized competitive disadvantage.

Companies need to be able to do both: identify the next opportunity while determining the appropriate level of investment based on the organization's current condition. But they can't do both optimally unless the CFO and CIO are able to talk. To better understand where that conversation can break down, and how to keep it productive, CFO spoke with two CIOs who began their careers in finance.

"Can You Fix It?"
Hyatt Hotels and Resorts CIO Mike Blake was head of capital budgeting at Sears in 2000 when his CFO called him in to his office. Recalls Blake, "The CFO said, 'You know, Mike, we spend a little less than $800 million a year on IT, and you know what? I don't really have a good understanding of what we're spending it on, and our business lines don't believe they're paying the right amount. Can you fix it?'"

"Right then," says Blake, "a new role was created at Sears: director of IT finance." Blake had studied accounting at the University of Utah and received his MBA in finance and economics from the University of Chicago. But what did he know about IT? "Nothing," he says. "I broke it down into products and services. You consume this particular application and it costs x dollars per year. What I came up with shocked people."

For instance, says Blake, "I had a conversation with the head of logistics who was paying $300,000 a year for a system, and he said only three people read the report [produced by the system]. We were able to get rid of it. It was eye-opening.

"Creating that kind of transparency got me excited about IT," he continues. "Finance is a way of seeing how the business operates through language and numbers. IT is a way of seeing it through transactions. In IT, you can see what's happening in the business, [and] what will happen, before dollar one hits."

No More Black Box
Blake says the transparency he worked to create at Sears has become more easily achievable in the cloud-computing model, and that has made it easier for CFOs and CIOs to communicate. "IT is no longer about how you develop and code," says Blake. "It's no longer a black box.

"With cloud computing, things are brought down to cost accounting. It's price p times quantity q equals whatever you're buying. The CFO deals with p times q all the time. Now, the CIO deals with p times q because, in the cloud, quantities are smaller and prices aren't as high. IT used to come up with ideas and run it through the solution delivery lifecycle [build, test, deploy], and it could take years. Now you can drop in an app in less than two minutes. No one's waiting for IT anymore."

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