Seven years ago, when David Lifschitz hired on as both the CFO and CIO at Los Angeles-based Gehr Enterprises, he did the unthinkable — he pulled the plug on the privately held company’s MRP project, then in the second phase of implementation. “I saw immediately that we were heading into more and more costs, hundreds of thousands of dollars on top of what was already spent, yet there was no buy-in among users,” explains Lifschitz, who previously had spent a decade as a consultant in the Enterprise Group at Arthur Andersen.
Gehr employees weren’t thrilled with the system; many felt it was automating processes that were out of date or had never been optimal. As Lifschitz studied the situation, he discovered that a full implementation would be, at best, a partial fit and would require extensive additional modifications. So he put a stop to the project and took an entirely different approach — in this case, a completely customized MRP solution.
Gehr, a diversified concern with interests in wire and cable manufacturing, wholesale industrial product distribution, and high-tech equipment sales and marketing, knows that many IT initiatives launch with great fanfare only to sputter and stall. Fifty-five percent of CRM projects, for example, fail to deliver measurable benefits, according to technology research firm Gartner. The result is often finger-pointing, with operations blaming IT, IT blaming the business units, and the buck stopping with the CFO — the executive who signed the big check for the project in the first place.
Caught in the crosshairs, CFOs are rolling up their sleeves and getting more closely involved in IT strategy. In fact, a CFO magazine/Morgan Stanley survey of more than 250 CFOs found that upward of 70 percent now spend more time on IT issues. (For full results of this comprehensive survey, see “Numbers Please.”) In some cases this simply means scrutinizing project costs more closely, but there are also companies at which CFOs are leading veritable IT revolutions: they’re demanding evidence of clear business values before funding IT initiatives, timetables of project deliverables, and hard ROI metrics that must be met before the next stages of project development are financed.
At their instigation, many IT departments are now responsible for building the business case for an IT project before it will be funded. And several CFOs are taking leadership roles in IT, working with business-unit heads to discuss IT requirements before the IT organization is even brought into the picture. These CFOs are piloting or co-piloting (with the CIO or CTO) their organizations’ overall IT strategy and specific IT initiatives, assembling cross-functional teams to examine business-process changes, obtaining full user buy-in, and managing user training and systems maintenance issues.
These changes are long overdue, says Jeremy Grigg, research director in the Business Management unit of IT at Stamford, Connecticut-based Gartner. “Many CFOs began to see IT as a cost center that had to be squeezed because it did not deliver on its promises,” he explains. “Now they’re scrutinizing ROI extremely closely, insisting that IT projects be broken into multiple pieces to determine at each phase if the project should continue. And they’re requiring that traditional financial concepts like earned-value analyses and real-options analyses be used to decide when to abandon an unsuccessful IT investment. The days of writing blank checks are over.”