Do You Need a CFO of IT?

Here's why a hybrid IT and finance person may be your next hire.
Martha HellerNovember 19, 2014
Do You Need a CFO of IT?

Why is it that months after you approve a multimillion-dollar IT investment, you’re still not sure what you’re getting for your money? Why is it that a software vendor quotes your vice president of sales a dollar amount for a new product, but a full year after implementation, the costs are significantly higher? What are the hidden costs of migrating your IT services to the cloud? How much should you be spending on IT security?

Martha Heller_Rnd_Corners

Martha Heller

Most likely, your CIO has all the answers to this vexing array of complicated questions. But that person is busy stabilizing operations, managing outsourcers, developing new technology products and focusing on delivery. Plus, he or she may not have the specialized finance acumen and communication skills to establish a common ground of understanding between IT and finance.

Enter the CFO of IT, an executive role that reports to the CIO and is responsible for establishing a tight connection between the IT organization and its partners in finance. Many companies over a couple billion in revenue have such a role, which also may be called vice president or director of IT finance.

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A strong CFO of IT will do more than manage the IT budget. She will also direct the strategic and operational financial planning processes for the IT organization, create a better understanding among the executive team of the intricacies of IT cost structures and investment strategies, develop a solid approach to communicating the IT financial picture to the entire business community and educate business partners about the cost and value of IT.

While “IT finance” is the focal point of the CFO of IT, many of these executives play additional roles. With their ability to dissect the financial picture of large vendor contracts, some CFOs of IT function as head of the vendor management office. Likewise, when it’s time to upgrade finance systems, the CFO of IT is often asked to lead that program.

Where to Find Them

So, where do you find a finance leader with the skills and experience to turn finance into an IT organizational strength?

For starters, try looking in your own finance organization. Is the finance director who works closest with IT a respected leader with the ability to think strategically? Is he or she a good communicator with the patience, persistence and interpersonal skills to improve the relationship between finance and IT? If your IT finance director has executive potential, then you may want to move him into the IT organization. Most CFOs of IT will tell you that they are more effective when they report to the CIO than the CFO. Their ability to stay close to the decisions behind IT investments improves the closer they are to IT.

If you have to go outside for your CFO of IT, then look for executives with the following:

  • An advanced degree in finance
  • 15+ years of finance leadership experience, with at least five of those in IT. (Don’t think you can take a finance person who has never managed the IT budget and plug them in. That experience working directly with IT budgets is critical.)
  • The ability to educate other finance executives on the complexity of the IT supply chain, operational expenses, cost structures and total cost of ownership.
  • Experience providing strong oversight of financial controls and measurements for Sarbanes-Oxley compliance (if yours is a public company)
  • Strong analytical and communication skills with the ability to extract relevant information from a variety of data sources in a timely manner, and present that data in a meaningful way to diverse audiences.
  • Process improvement skills, with the ability to identify and creatively address opportunities to enhance efficiency and productivity throughout the organization.

Search Strategy

 As far as your search strategy, start in the IT organization of a company that is in your own industry and is of similar size. The person who reports directly to the CIO and is responsible for the IT budget is your best bet. Qualified candidates may carry the title of CFO of IT, or vice president of IT finance, or even vice president of governance or strategy.

Your second search strategy is to look in the finance organization of those same companies for the person in finance who works most closely with the IT organization. Make sure these candidates are well-aligned with IT and have worked with newer IT investments like cloud infrastructure services.

If you still haven’t found the right candidate, go outside of your industry, and look first in IT and then in finance.

Assessing the Candidate Pool

Once you have a pool of candidates who can check “managed a large IT budget,” assess whether the candidates have improved the financial management capabilities of their IT organizations. Can they cite examples of how they’ve used finance strategy to improve IT investment discipline? Can they describe how they’ve improved the relationship between the IT organization and its partners in finance? Can they drive change?

With massive innovation in cloud, social media, mobility and data, technology is getting much more complicated and the field of IT vendors is growing rapidly. As a result, “total cost of ownership” as a concept is changing, business leaders outside of IT are starting to buy their own technology, and getting a return on every IT dollar spent has never been more important.

Your IT organization must have the financial discipline to manage all of this spend, and the members of your executive committee must be on the same page about what the company is spending on IT and why. If you don’t have a CFO of IT, it may well be time to make the hire.

Martha Heller is one of the most widely followed voices on the role of the CIO. She has been a CIO magazine columnist since 1999, and is the author of “The CIO Paradox: Battling the Contradictions of IT Leadership,” published in 2012. Martha is president of Heller Search Associates, an executive search firm that specializes in IT leadership positions.