A recent study conducted by Gartner and Financial Executives Research Foundation says that CIOs alone have authorized only 5 percent of all IT investments whereas CFOs have authorized 26% of all IT investments. The study also says that 42% of IT organizations directly report to the CFO, whereas 33% report to the CEO. These facts may mislead us to the conclusion that CIOs are losing control over IT.
I am yet to come across any organization where the CIO or the CFO alone is authorized to make IT investment decisions, especially in context of mid to large enterprises.
I am not too sure if the study conducted included only small scale organizations or mid to large enterprises.
Let us first understand the responsibility of the CIO to align IT with business. A business would always have some predefined mandates typically known as goals or objectives, which are set by the top management. A CIO is not responsible for setting business goals but is an integral part of the top management that jointly owns the responsibility of achieving these goals. Once the goals are set, the management looks at various initiatives to be performed in order to achieve them.
These initiatives may call for an investment in some cases. Thus, it is evident that any investment proposed by the CIO has to necessarily stem out from one of the strategic initiatives of the organization and must not simply be aimed at implementing a new technology.
Having established the process of originating a need for investment, let us now understand the process of investment approvals. If you look at the way an enterprise works, you will find that an organization with a reasonable size of operational maturity has a well-defined process in place for investments. It is not about authorizing CIOs or CFOs respectively but as an organization, any approval must be processed as per the authorization matrix. There exists a well-defined empowerment matrix in every mature organization.
In my experience, approving investment is a joint exercise between the CIO and the CFO. It is the role of CIO to provide business a competitive edge by suggesting breakthrough innovation which could be in the form of adoption of a new technology or application of existing technology in such a way that it creates a next practice.
The CIO is the only person in an organization who leads from the front when it comes to achieving business objectives through the use of technology and making sure that the organization stays ahead of competition in providing value to its customers.
A CIO does the technical evaluation and is the first person to be convinced of the return on investment before the case is presented to the management.
I am yet to see a case wherein a CIO would not have got the approvals from the management for IT enablement which helps an organization in achieving its strategic goals.
Are we saying that since the budget approvals are co-owned by the CFO and the CEO, thus the CIO is losing control over IT?
I definitely do not agree to this view. I do not want to question the authenticity of the study but would certainly be interested in knowing under what circumstances the CIO or the CFO alone are empowered to make investment decisions all by themselves. Let us not forget that it is not just about the signing of the investments by the CIO. It is about the CIO taking the sole responsibility of understanding technology trends and making use of the technology in providing a competitive edge to his organization.
I do agree with Daya.. the fact which have been submited is truly not showing any firm analysis however the analysis which has been shared by Daya is very good.
I 100% agree with Daya. Such studies are mostly made to favor IT vendors in some or the other way. The percentage of CIOs reporting to CFO seems to be unrealistic. It is other way round and is mostly in SMBs.
I agree with the views expressed by Daya Prakash. A CIO can provide an investment proposal to bring new technology to enable the business. Thereafter it becomes a joint decision-making responsibility of the CIO and CFO. I never came across a situation in which my management rejected an investment proposal when there was a real requirement. So, I do not agree with the view that CIO is losing control over IT.
I agree with Daya Prakash when he says CIO alone is not authorized to approve IT investments. I think it has to be that way. When you say IT is a business enabler and not a mere cost center, it is quite natural that IT investment decisions have also to be made by the CEO and the top management team. This does not mean CIO is losing control of IT. CIO is a facilitator in IT investment. He is in control as long as he is able to convince the top management on his initiatives and how it actively supports Business Strategies.
A CIO loses control only when in doubt. In a structured organization, IT governance structure more or less makes it imperative that an IT proposal is born out of a joint ‘CEO-CIO’ KRA, is refined as an investment proposition along with the CFO and put to vote in the executive management team. The CFO plays the same role as he plays in all other investment dynamics.
However, I find all my industry colleagues in this debate happen to be from India where last decade and half has seen an unprecedented IT evolution in companies that themselves have been growing at a hectic pace. The CEOs have enjoyed unprecedented powers here and the boards have not shown a flair for IT debate. The dynamics there have been skewed towards a situation where, once the IT investment decision makes sense to him, the CEO quickly passes it on to the CFO for due fiscal diligence and finalization for two reasons:
Only in the last few years have I experienced the Indian CEOs actually tossing over IT initiatives to the senior management teams for evaluation and on-boarding. I see this changing rapidly in days to come and in line with international practices. The debate, I feel, is going to be put to rest soon.
I do not think if the budget approvals are co-owned by the CFO and the CEO, the CIO is losing control over IT.
I would rather say that CIOs are working for business and getting buy-in from Business.
CIO thinks more of compliance, compliance and compliance and therefore many times they need support from Business for change, that is where CEOs jump in with their ability to see future and risk taking capability.
In my opinion as soon as a CIO starts seeing the future and ready to take risks he becomes ready for the position of CEO.
Question of CIO gaining or losing control over IT is not relevant. In fact, CIOs taking IT decisions in isolation ie without business alignment has a higher probability of resulting in negative results for the business. Hence CIO should proactively engage the CEO, CFO and other business stakeholders to work with IT team for solutioning, managing change and driving adoption!
Dear Sreeji, In large enterprises IT definitely plays a strategic role thus chances of CIOs working in isolation does not arise at all. However you may have a situation in mid-small enterprise, I am not too sure about it. In any case I agree to your thoughts that IT must work very closely with all stakeholders to ensure achievements of business goals.