This is the fourth of four articles that explore the outlook for technology spending — and why corporate tech budgets are bound to rise. The other three are IT Outlays Are Poised for Takeoff, which looks at what’s driving the burgeoning budgets; CFOs Holding CIOS’ Feet to the Fire, which looks at how finance chiefs asking top tech execs to justify spending; and IT Budgeting Descends to Business Units, which reports on the cloud’s role in decentralization.
As a CFO, I find that it is often unclear what roles we should play in technology initiatives and how much technical knowledge we really need to have. Yet in today’s environment, CFOs need to be savvier than ever before. Technology is one of the major drivers affecting our financial statements, which is why most organizations now have a direct line of reporting between the chief technology officer and the CFO.
Technology today has a greater impact on revenue maximization, expense management and effective use of internal and external resources than ever before. So how can we, as CFOs, make the most effective decisions regarding technology to positively affect our companies’ bottom lines?
Directing the annual budgeting process for technology spending is one of the key initiatives that should be led by the CFO. Historically, our approach to technology spend has been very rigid. Recently, however, there has been significant movement toward using technology beyond the core business functions of an organization. Technology today is more outward facing than ever before. Therefore, the annual information-technology budgeting process should involve key individuals from the operating and marketing teams.
Annual IT budgets need to be done for every department and division and include all components of IT: telecommunications, hardware, software, operating-system upgrades, customer-relationship- management tools and cloud-based platforms. The team should factor in what is needed for enhanced performance, revenue generation and marketing purposes. It is very important to reflect on prior-year spend.
Further, effective budgeting includes some component of return-on-investment analysis. There are many mathematically sophisticated tools available that can enable the CFO to judge the effectiveness of various IT-related campaigns. Such tools allow you to streamline the budget process.
Your team needs to set financial, operating and marketing goals before assigning dollars to the budget. You must first identify your business objectives. After that, you need to jointly work through an implementation plan that will be effective for the entire organization. Monthly team meetings should take place to monitor progress and reflect on the effectiveness of each initiative.