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.
Technology and Marketing Collaboration
Technology and marketing departments are collaborating more than ever before. As a CFO, you need to fully understand marketing and sales goals and how technology can play a role in achieving better financial results. Today’s market is focused on mobility, cloud computing, business intelligence and social media.
Seventy-eight percent of our population uses the Internet. The average affluent American spends 30 to 40 hours a week online. Social media is particularly important with the emergence of the millennial generation. Therefore, search-engine optimization (SEO) and social media campaigns are two of the key areas in which the marketing team, the technology team and the CFO should work jointly to understand its impact on the revenue steam.
SEO has been a huge focus during the past few years. Some organizations have shied away from this expense, while many others put a massive investment into increasing placement on search engines. As a CFO, you must have a plan in place to measure its impact. How does your organization best compete in search rankings? How long does it take to feel the impact of SEO, inclusive of lead qualifying and base-conversion ratios? What are the costs per lead and how well do they result in sales dollars? Those are all important questions that the CFO needs to ask.
Your organization should also have an innovative approach to social media. Increasing brand awareness through outlets like Facebook, Twitter and LinkedIn has become a powerful advertising source for many businesses. Organizations are using social media to generate reviews and referrals for their products.
People are using Facebook, for example, as a resource tool before they purchase a product. Be sure to have maximum functionality with popular social media platforms along with an informative website. Every organization should also have a designated resource in charge of all social platforms. Your social media solution needs to be a comprehensive marketing system inclusive of referral systems and reputation-management programs.
Keep Up To date
It is important to keep up to date with any trends or recent changes that will affect your particular industry. Educate yourself on the platforms that are available. Organizations are now implementing more enhanced operating platforms. These completely integrated, single-stack solutions cab enable us to consolidate front-office and back-office operations on a single platform. In that way the front office and the back office can combine operational, financial and supplemental data for exceptional business intelligence.
Centralization of core functions and enhanced reporting tools are also important areas of focus for a CFO. Today’s systems must have fully automated workflows. Sales and operating staff no longer need to be sitting at a desk or have access to a computer. They are using tablets and mobile devices to work with prospects. Sophisticated dashboards are at the fingertips of every CFO, enabling them to drill down into any facet of the organization to measure financial impact and accountability.
The collaborative nature of modern-day technology platforms is changing the way companies operate. Most often, innovation now occurs externally rather than internally. Our customers are dictating the change, forcing us to be more flexible and responsive in the marketplace.
New technologies promise efficiencies, repeatable results and opportunities to gain better business intelligence and, therefore, make quicker strategic decisions. There is an ongoing movement toward mobility, with mobile devices dictating the way we conduct our business.
From the perspective of a CFO, technology initiatives are a critical component to effectively operating a business in today’s world. So be prepared to evolve in order to keep your organization ahead in these rapidly changing times.
Jennifer McLean is CFO of GFI Capital Resources Group, a real estate and insurance services firm.
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.