Ten IT Talking Points Your CFO Will Love

Irwin Teodoro

I have nothing against CFOs. It's a tough position with a lot of pressures that can easily be misunderstood. That being said, it is the money people who generally stand in the way of engineers and technologists and the spending required to accomplish great things with IT. 

It is a common problem we all have -- dealing with accounting, the CFO or other non-IT management. Of course, our running joke is that the CFO thinks of technology as a $499 PC they can pick up at Staples or OfficeMax. They don't understand why $29 billion is collectively used to power and cool IT infrastructure: 50 cents for every dollar spent on servers. They do understand the 'space crunch' that IT manifests at $2,400 a server, and $40,000 a rack at $1,000 a square foot. They see the money going out the door. Then they read about 'server sprawl' and the $140 billion in excess server capacity available in the U.S.-a three-year supply. No wonder they get so upset: 'You're spending how much?  On what?'

So we walk away with the feeling that they simply don't get IT. But some of the problem belongs with us - we don't communicate in the language of the CFO. And because we don't, we shouldn't act surprised when we get pushback on spending requests. This needs to change. Here are 10 areas where we, as the promoters of IT, can begin to communicate better with the CFO.

1. Think TCO, not ROI

Traditional ROI thinking won't work anymore for us. To the CFO, return on investment is how much money you're going to give back to the company. Let's face it. Most IT projects - no matter how compelling - don't bring 'return' to the organization like an additional sales person, a new marketing campaign, or a new product launch. Discuss projects with CFOs in terms of total cost of ownership (TCO). Repeat it until you are blue in the face -- IT projects are overhead. You get over this by demonstrating fiscal stewardship, showing that you are providing the lowest cost. To do that, you must provide options, comparisons, case studies and examples.

2. Clouds

CFOs like what they hear about cloud computing as a cost saver. Don't fight them on it. You can leverage what they are hearing in order to steer cloud spending on the right IT projects. All CFOs understand that you don't want private customer records or sensitive financial data 'in the cloud,' for example. Incorporate cloud or managed services for tactical, not strategic, applications.

3. Green IT

For all the talk about green IT, are you not surprised that for CFOs it still has nothing to do with the environment? The reality is that no green projects exist unless they have a better TCO. You can forget about there being a market to pay a premium for green IT. Again, it is important here to build a case on typically hidden facts. What are you really paying for power, space, etc., that might help justify the business spend on green technology? Once you build a solid business case on facts, only then bring up the PR and community relations intangibles of being a solid, environmentally conscious firm. 

4, 5 and 6.  Virtualize, Virtualize and VIRTUALIZE

This subject takes up three spots because there are three key virtualization targets -- servers, desktop and storage. But again, the key here is how to justify and how now NOT to justify.

Let's start with server virtualization - it's the easiest to justify TCO-wise. The challenge is to provide accurate savings estimates upfront. In other words, don't guess as to the savings. Many times, virtualization projects are viewed as unsuccessful because the savings don't match the upfront promises. This can be avoided by running a formal assessment before asking for funds. Collect real-world usage statistics to build an accurate business case. And don't use low-traffic period estimates. If your IT use peaks during the end-of-the-month business close, then include that time period in your assessment.

Desktop virtualization projects usually require a multi-year business case. It's tough to justify a full-scale VDI program in the first year because of the upfront capital expenses. But VDI can extend the typical three-year desktop refresh cycle, reduce operating costs for support, maintenance and upgrades, and reduce subsequent year capital expenditures.

Finally, check into the new wave of storage virtualization products. They can lower capital spending by up to 90 percent.

7. Adopt IT-Centric Business Continuity

Three major concepts (risk management, disaster recovery and business continuity) have become blurred over the years because the responsibility of planning has been foisted upon IT leadership without the explicit participation of business leadership (the CFO?).

This needs to change. And the change can come about by the adoption of new planning for business continuity that is IT-centric. By adding a couple of critical steps in the planning process line, the overwhelming burden of IT leadership to determine which business units are most important, what priorities should exist after a disaster, and how to ensure business continuity is removed. Decisions no longer will be made in a vacuum and will result in the optimal dynamics within the cost, time and risk relationship for a particular enterprise.

8. Align with the Big Picture

It should go without saying that IT projects should align with the benefit to the organization's core mission. Unfortunately, many projects do not. IT has to get this message out and communicate it beyond the IT group. To align IT with key business objectives, you have to understand how IT is the differentiation or delivery of the product or service.

9. Proactive Cost Reduction

DuPont is like a lot of big companies that learn the hard way. Organizations that retain documents beyond required retention periods will face higher costs and greater risks should that information be subject to discovery. So DuPont did a three-year internal study of document discovery requests. They learned that in three years, 75 million pages of text were reviewed. They also learned that 50 percent of the documents that were reviewed were kept beyond their required retention period. DuPont estimated the cost of reviewing documents past their retention periods was $12 million. For this particular example, 'e-mail archiving' is a good way to demonstrate to CFOs that IT can be proactive in cutting costs. Always be on the lookout for these kinds of projects.

10. Reduce Data Center Costs

Modular data centers are becoming a way to cut costs. Google and other major players are starting to look to this model to avoid building and construction costs. The use of managed or hosted services should be another consideration. This combination can reduce capital expenses with incremental expansion. It can also bring about 40 percent lower cooling costs in 1/8th the space.

While the relationship between CFO and CIO can sometimes have more debits than credits, it is definitely worth the investment in time and effort to highlight IT projects in terms the CFO will understand. This means working hard to determine the full financial impact of your programs, demonstrating that you are looking at the total cost of ownership, and considering the company-wide financial impact of your projects. While past performance is no guarantee of future returns, if you can successfully strengthen the relationship between you and your CFO, the return on investment -- excuse me -- I mean the total cost of ownership, can be stunning.


Add Comment      Leave a comment on this blog post
Jan 4, 2010 6:01 PM Anonymous Anonymous  says:
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Feb 1, 2010 4:02 PM Doug Brockway Doug Brockway  says:
Irwin - I like this post. It resonates well that IT is part of a business and has to communicate in terms that the business can absorb (wouldst that the business would better understand its side of that coin...). I'm going to mull the TCO vs ROI commentary. My friends who rail against the use of ROI for Social Media might find it compelling. Doug Brockway Reply
Feb 4, 2010 1:02 AM Anonymous Anonymous  says:
I found this article very helpful. It was a good reminder of ways to sell IT projects. Reply
Feb 4, 2010 2:02 PM Enrique Gonzalez Enrique Gonzalez  says:
Excellent article. This is the missing dictionary to build a solid bridge between IT and Finance people. Reply
Feb 4, 2010 3:02 PM Anonymous Anonymous  says:
Really I found that talk between IT and CEO of even worse CFO are endinf usually in disaster if we are not espressing the needs of IT into money and better into producing money. I found that it does not matter if you are talking TCO (total cost of ownership) or ROI (return on Investment) or even IRR (internal rate of return) the CFO will not budge it what you are talking does not make sense to him/her. In now days what has more value? a positive cash flow or a pie in the sky? So I am suggesting all the IT managers and the CIO's to get back into the classroom and study Financials for non financial people. Secondly and More important is the modality on how the communication is conducted. THe CFO usually are Visual people (if they talk the numers in figures) and the CIO are usually Kinestetic people (they like to see and handle things with the hands (keyboards and cables?). so training is the only solution to the answer!!! Reply
Feb 4, 2010 5:27 PM Anonymous Anonymous  says: in response to Anonymous
For the most part I agree with the comments except for the statement "...suggesting all the IT managers and the CIO's to get back into the classroom and study Financials for non financial people..." bothers me. It seems it is typically left to the IT Managers or CIO's to simplify the technology discussion so the CFO and CEO's can understand what Information Technology is trying to achieve to further benefit the company’s bottom line. Yet IT Managers and CIO's need to return to the classroom to become savvy numbers crunchers too! IT Managers and CIO’s, when they have achieved the title, usually have the knowledge to discuss financials at a higher than basic level. Why, then, can't the CFO's and CEO's go back to the classroom to be more educated in technology and how it will add value to the company? IT Managers and CIO's are continuously trying to prove the value of technology and to close the gap between business and Technology but CFO's and CEO's don't seem to notice the value or the gap! Reply
Feb 5, 2010 12:02 AM Master Business Continuity Professional Master Business Continuity Professional  says:
I agree with some of your points, but I also have to say that I can't agree with all, and in particular #7, Adapt IT Centric Business Continuity. Disaster recovery, i.e. IT, is only a portion of overall business continuity and if that is the center of your BC world, you'll be missing a lot. The key word in business continuity is BUSINESS. I have seen too many cases where "business continuity" was driven by an IT department that didn't bother to factor in the business needs in their planning and ended up with RTOs and RPOs that were way off base, and they never even considered RTOs for the business functions! IT supports the business, not the other way around. Sure, the loss of a data center could be disastrous, but there are far too many possible disasters that could affect a business location while leaving the data center untouched. Yes, there should be bridges between IT and the business, but we're in business to make money for ourselves, our employees, and our shareholders. We're not in IT to make money... We'll some IT providers are, obviously, but hopefully you get the point. Reply
Feb 5, 2010 2:02 AM TigerJayne TigerJayne  says:
Great article -- feeling your pain. No really. I'm a TV writer/producer. Watching our CFO's head explode is in my job description. Reply
Feb 5, 2010 3:02 PM Way Way  says:
I agree with most of the points. However, the first point is not 100% valid. Although most IT projects fall to the category of "nessesary evil", some IT projects are the enabler of key business capabilities to increase revenue. That includes time to market, customer relationship management, collebrative innovation etc. I believe a great CEO should be capable of leveraging his CIO as a true business partner, instead of simply toss him under the disposal of a CFO, who triditionally mindlessly stuff IT on the cost side of an income statement. Reply
Feb 7, 2010 6:02 PM Mark Hogan Mark Hogan  says:
I believe it best to take a process centric approach to Business Continuity. This can be achieved by looking at Critical Business funtions (Process's) and focusing on those supporting Applications and finally technical dependencies. This is a way to move from a Server and Gigabyte conversation to an Operational and Cost benefit conversation.... A CxO's language. Reply
Feb 9, 2010 1:02 AM Jason Munk Jason Munk  says:
I am on the sales end of the picture, motivating the IT team to pitch the services up the chain and this will be a tool I use, Thank You Reply
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Your comment has absolutely nothing whatsoever - nada, zip - to do with the topic at hand. Reply
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May 14, 2010 6:05 PM Ravi Shanker Ravi Shanker  says:
IT is just a back bone to business. What ever IT has to do.. like introducing new technolgy or taking up new projects, it is only to help the business not to help IT. So getting approval for any new project is not IT job....Operations (or development or production)team has to take the approval and then IT should only implement them. IT job is to understand the business requirements of operations or production and suggest them the new technologies and solutions to increase the productivity. Taking approvals and deciding to go with new technologies is their part. It is easy to explain people who in need than explaining to CFO....What do you people think about it? Reply
May 19, 2010 7:38 PM Kevin Peters Kevin Peters  says: in response to Ravi Shanker
I agree with Ravi. There are really two sides to IT support for any business. One side is on-going support which can be addressed through TCO and IT greening, however this is an on-going, year-to-year part of IT support. The other side is the development of new IT technology. This should be directed by the business executives. If a business executive perceives that some new technology or way of doing business might benefit the company then it should be up to that person to put together the business case and sell it, with input from the IT Department regarding such things as resource planning and costs for technology. If executive management works as a team then the most important projects, perceived to provide the most benefit to the company should then be approved and funded, with IT being the project management "contractors". I see it like owning a house. A technology contractor (IT) tells me I need new windows which will show a ROI. If it does great, if it doesn't then I (business manager) am upset with the contractor, however I (business manager) was the one who gave the approval and funding. On the other hand, if as a home owner (business manager) I decide that it is better to add a room (expand technology) rather than to buy a new house (new technology) I should obtain quotes, TCO, ROI, etc. from contractors (such as IT and the CFO), however I am the one selling the idea (to the business executives). Reply
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Yes, there should be bridges between IT and the business, but we're in business to make money for ourselves, our employees, and our shareholders. We're not in IT to make money. Reply
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I believe a great CEO should be capable of leveraging his CIO as a true business partner, instead of simply toss him under the disposal of a CFO, who triditionally mindlessly stuff IT on the cost side of an income statement. Reply
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I like this post. It resonates well that IT is part of a business and has to communicate in terms that the business can absorb (wouldst that the business would better understand its side of that coin...). I'm going to mull the TCO vs ROI commentary. Reply
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