IT Directions 2.0

Our second annual survey of CFOs and senior finance executives finds a surprising degree of optimism about technology, with companies not only prepared to spend more but also continuing to believe in IT as a source of strategic advantage. Given all the talk about IT as a “utility,” not to mention CFOs’ alleged tightfistedness (if not downright antipathy) regarding IT, the survey results suggest that finance leaders do in fact value technology and plan to invest accordingly. But there is room for improvement: CFOs are far from dazzled by the payback their companies have seen from IT, and many believe their companies have overbought. They are also strongly divided on the value of ROI analysis, and buying plans are highly varied, with no single technology qualifying as “hot.”

Results are based on the responses of 262 CFOs and senior finance executives polled during the latter half of July. Approximately half of the respondents work for small companies (under $100 million in sales), while one-quarter work for midsize firms ($100 million to $1 billion) and one-quarter work for large enterprises ($1 billion-plus). In some cases, results may be +/- 100% due to rounding.

Compared with one year ago, your current IT budget is: Up 1% to 5%  29% Up 6% or more  19% Flat  24% Down 1% to 5%  18% Down 6% or more  13% Next year’s IT budget compared with this year’s will be: Up 1% to 5%  37% Up 6% or more  16% Flat  29% Down 1% to 5%  11% Down 6% or more  7%

Two questions of particular interst to us involved the role of IT in addressing new regulatory requirements, and the broader issue of IT as a perceived source of strategic differentiation. We found CFOs bearish on one, bullish on the other. They were also split on the issue of new and/or closer ties between finance and IT.

Will the demands of Sarbanes-Oxley and/or other regulatory requirements affect your IT budget? No, compliance does not hinge on IT  40% IT can play a part, but existing systems can be easily adapted  23% Yes, we’ll spend more on IT  20% Not sure  13% Current economic conditions rule out an IT solution  4% Going forward, will IT be a source of competitive advantage for your company? Yes  61% No, but it never was  23% Not sure  10% No, current economic conditions limit what we can do  5% No, our IT priorities have changed, probably for good  4% In the past year, has your relationship with your CIO changed in any way? No substantive change in our relationship  48% We work more closely together  35% Yes, now the CIO reports to me  8% Yes, now the CIO reports to another C-level executive  6% We work less closely together  3%

In the past year, has continuing budgetary pressure prompted you to:

• Delay purchases of new hardware/software: 57%
• Create stronger ties between IT and finance: 43%
• Reduce IT staff: 29%
• Cancel/renegotiate some existing outsourcing contracts: 21%
• Enter into new IT outsourcing arrangements: 18%
• Establish IT governance or similar approval/oversight committees: 18%
• Enter into business-process outsourcing arrangements (payroll, benefits, etc.): 16%
• Lower dollar amount that requires senior-level sign-off: 16%
• Expand current outsourcing arrangements: 14%
• Lease hardware/software that was previously purchased: 11%

Have your IT expenditures produced the returns on investment you expected? Yes  40% No  35% Not sure  25% Applying some sort of formal ROI analysis to IT investments is (multiple responses allowed): Essential  34% Desirable  32% Moderately useful  25% In need of new thinking/methodologies  21% Overrated  12% Impossible  6%

Over the past three years, has your organization procured an excess of technology relative to actual needs? 2002 Yes  20% No  75% Possibly/Not sure  5% 2003 Yes  10% No  74% Possibly/Not sure  16%