David McCann, CFO.com | US
November 4, 2009

Who is "Account"able

For poor planned projects, overruns, re-works, etc. all these cost have a price attached and drains cash. In time where "Cash is King", it is a hard sell to continue a project that is over budgeted and becomes a drain on cash. Then you are faced with stopping the project or continue to "throw" money at it until it is right. As a Financial Analyst, I see from the ground where a IT project is approve on one set of cost and performance projections and turns out to be totally (I mean) totally different. Then the IT Project manager changes the scope (more $$) to save face and sells it to accounting as is.

Posted by James Blackwell | Nov 5, 2009 1:35 PM ET

CFO's need to "get real" too

One of the biggest barriers between CFO's and CIO's is how they view the cost of projects. CFO's are trapped inside an accounting model that expenses a lot of investments. Recent macro data suggested that US businesses spent $1.7 trillion on intangibles versus $1.2 on tangibles. For the most part, intangibles get expensed, tangibles get capitalized.

This means that over time, neither the CFO or CIO has any idea of the "installed base" of knowledge assets--which make up 60-70% of the average company's value.

Isn't it time to create management reporting that helps everyone do a better job?

Posted by Mary Adams | Nov 5, 2009 9:59 AM ET

Operationally Oriented CIO required

Obviously there is opportunity cost associated with every capital expenditure. There's never enough money to go around. The key to funding any capital project whether it be a new ERP system or CRM initiative comes down to what are the company's most critical objectives and how will they be met with the help of more robust systems, process etc. Keep in mind that when you take a measure and suddenly turn it to a goal, you lose sight of what you're there for in the first place.

CIO's need to be as operationally focused as everyone else. CIO's must be comfortable in a forward facing role with customers,suppliers,etc to ensure they truly understand the business in order to provide the value add they were hired to ultimately deliver to internal and external customers.

Posted by Bill Ward | Nov 4, 2009 7:17 PM ET

2000% ROI?

Steve's comments above are generally spot-on, although I'm a little less an enthusiast of the new meme of "there are no IT projects" (because of course there are). That said, the general thrust on proving business value has to be from the business entities with a vested interest in the functionality of whatever IT system is being initiated or upgraded. So the CFO (and CIO) observations quoted in the article that this should somehow fall to IT, well, that's backwards.

My favorite quote in the article is "Stop saying that it's going to produce 2000% ROI. Nobody believes you." This reflects how IT people glommed onto the ROI metric but did so almost as just an internal sales tool, without having a deep understanding of its purpose. I've written a two-part series on this, entitled "Financial metrics for IT: the holy grail of ROI, and how it misses the point". The first part can be found at http://www.peterkretzman.com/2008/03/19/financial-metrics-for-it-the-holy-grail-of-roi-and-how-it-misses-the-point-part-1/

I'm also stunned by the CFO statement about a given project, that "[IT took] out certain functionality that they saw as interesting but not essential which we saw as critical." Whaaat? Not the way projects should be run. Scope decisions at any stage of the game are a matter of cost and schedule, and should never be dictated unilaterally by IT against the wishes of stakeholders. It's a partnership, not an adversarial relationship.

Posted by Peter Kretzman | Nov 4, 2009 5:22 PM ET

Biz Projects vs. IT Projects

The main problem I see are enterprises with IT organizations that drive business change, as opposed to enterprises with business sponsors leveraging technology for business change.

CFOs should stop asking CIOs to prove the value of "IT Projects" and instead, they should insist there is no such thing as an IT project - only business projects with technology components.

In this model, it is Business Leadership, in conjunction with the CIO, that must prove business value and ensure technology investment success.

Steve Romero, IT Governance Evangelist
http://community.ca.com/blogs/theitgovernanceevangelist/

Posted by Steven Romero | Nov 4, 2009 4:23 PM ET