David McCann, CFO.com | US
December 17, 2009
The most effective way of dealing with Finance-IT gap is to have individuals, who have an academic and working background in Software Engineering (not MIS) along with a MBA in Finance. This mix of background is essential for effective program governance. This is techno-finance position and not a finance-techno position. The cultural divide between a technology organization and a finance oranization is too wide. To be successful one has to have credibility with the techies.
Posted by Saty Ghosh | Dec 21, 2009 4:54 PM ET
Any IT investment is an item of spend from Finance perspective and as such it needs to provide returns to justify the spend. Most of the CIOs lack in this segment and as such needs help from Finace team to sell their invesment plans to the Board - do a feasibility study, funding options, try to quantify the benefits,etc,
Finance and IT can work together to make this happen and it would be great if the org has an IT professional with finance background/experience (not uncommon nowadays).
The ultimate decision making belons to the CEO and the Board.
Posted by Rajesh Annamalai | Dec 21, 2009 3:51 AM ET
Being familiar with and supportive of Mary's work in quantifying intangibles such as intellectual capital, I support her assessment of the need to establish a peer relationship between the CFO/CIO functions. I have to wonder, and offer, whether the real problem is not more deeply rooted, in that our current accounting rules and regulations, emergent from 16th Century practices, certainly updated but still rooted therein.
Our current systems require further adaptation of accounting practices to accommodate knowledge workers and their contribution. Stockholders may provide the capital to facilitate [and facilitize] the company, but it is employees who provide the "capital" to continue to operate the company. This becomes more and more critical as the portion of "market valuation" that exceeds fixed assets, this "knowledge factory", continues to grow within most companies.
An initial addressing of this concept, and an offering of exploratory options of a new look for stakeholdership, emerges in the book "The Divine Right of Capital" and is being espoused and discussed among many leading thinkers currently. A concern becomes the "ownership" of the intellectual capital and its appropriate assignment, as well as the entitlement of these owners to rights and prerogatives comparable to stockholders.
The "C-Level" in America is changing as the "knowledge factory" begins to vastly overshadow the "material factory" aspects of most businesses. Our thoughts about knowledge, leadership and accountancy must similarly change to achieve the fullest benefit from this intangible capital source.
Posted by Galen McPherson | Dec 20, 2009 9:32 AM ET
I agree that the CFO and CIO should be peers so that IT investments can be understood in context.
IT is critical to the development of the knowledge side of business (which represents 50-70% of total corporate value). If you understand this, then you see that having a CFO oversee IT is similar to having a CFO oversee a factory--a bad fit in most cases.
But the truth is that both the CFO and the CIO are hampered by accounting and MIS customs that do not look at IT in a full investment context and do expense most of the investment each year.
Where the CFO can help is in creating management reports that track the full investment in IT (as part of structural capital) along with other intangible capital expenditures in training (human capital), networks, partners and brands (relationship capital)
Posted by Mary Adams | Dec 18, 2009 9:20 AM ET
Both IT and Finance are equally important for any business. Completely agree CIO and CFO should be at same position. We should not forget Finance is based on principles and practice but IT in true sense works as per demand-Customise.
Posted by om prakash | Dec 18, 2009 1:23 AM ET
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