CFOs and IT Spending: Best Practices for Cost-Cutting
CFOs must proactively address the challenge of identifying outdated or redundant technologies that are driving up IT spending.
To maintain a high level of security and innovation while also cutting costs, organizations have a lot to consider when it comes to IT spend.
Operational efficiency, profitability and productivity all factor into the multifaceted pressures facing business leaders anytime, but particularly during an economic downturn.
When IT spend is categorized and prioritized by business priority, the chief financial officer (CFO) can clearly determine where spend is disproportionate.
Bob Feller, CFO at Auvik Networks, says it’s important to regularly evaluate the appropriateness of key technologies -- at least every one to two years.
“It is also important to have a control process to avoid application expansion,” he says. “With SaaS, it is very easy for individual departments to purchase a subscription without involving IT but later these groups usually look for integration and other IT service.”
Feller notes having a process and system to track and evaluate IT subscription spending is crucial in today’s application environment.
Bringing CFOs and CIOs Together
From a technology evaluation perspective, CFOs should leverage a partner that can provide technical expertise to maximize technology investments’ value.
Amy Lindenmeyer, CFO at Keeper Security, says the CFO and CIO each bring unique perspectives and skill sets to their roles, which is why fostering collaboration is key to optimizing IT effectiveness.
“For true optimization, both must bring their expertise to share,” she says. “The CIO with respect to new and emerging technologies and the unique company IT environment, and the CFO with business objectives and cost analysis.”
She suggests that while legacy IT solutions require heavy implementations, as well as dedicated on-premises infrastructure and staff that have a significant impact on budget, switching to a next-generation cloud solution could provide significant financial benefits.
Mike Voss, field CTO at SHI International, explains CIOs can better align themselves to the CFO by speaking the language of finance.
“When the CIOs understand how the CFOs wants to view and present financial data, they are able to optimize and prioritize IT spend,” he says. “We also find that CIOs who are skilled in speaking the language of finance get more IT budget.”
Financial Planning, Cost Discipline Key
“To achieve cost savings, it’s critical to drive urgency on cost discipline, maintain access to credit to preserve liquidity, and generally, incorporate worst-case scenarios into financial planning,” Voss says.
Financial leaders should also prioritize the reduction of employee-related costs, with layoffs considered only as a final option.
He adds tool sprawl is a real issue, especially in areas of security and DevOps where customers face pressure from software vendors.
“Offer posture reviews to baseline a customer’s portfolio and identify overlapping solutions, as well as gaps,” he advises. “We find this is an ideal way to approach security at a programmatic level, consolidate tools and reduce sprawl.”
He explains many organizations struggle with lifecycle management and technical debt--not only does technical debt drive up spending, but it also adds additional risks around security and system uptime.
“Older and outdated systems are prone to hardware failure and support costs increase as the system or asset ages,” Voss says. “Having a formal approach to managing technical debt is the most important thing.”
He adds most organizations suddenly realize their technical debt is ballooning and only then do they make it a priority.