cfo update: the top 10 technology priorities from the 2011 gartner...

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Publication Date: 24 May 2011 ID Number: G00213015

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CFO Update: The Top 10 Technology Priorities From the 2011 Gartner FEI Technology Study

John E. Van Decker

Gartner and Financial Executives International (FEI) have conducted their third-annual survey of CFOs to gather their perceptions about technology, key trends and planned improvements to operations. Financial executives should use these findings to align spending with organizational priorities and better understand how technology can support corporate performance.

Key Findings

The most telling CFO perspectives reflected in the top 10 survey takeaways are:

CFO influence in IT is growing; 42% of IT organizations report directly to the CFO.

Only 47% of those surveyed view IT as being strategic.

IT spending is expected to recover conservatively in 2011, with more capital investment as the economy improves.

Organizations are willing to spend to gain competitive differentiation and improve efficiency.

CFOs cite "gaining business insight" and "improving business efficiency" as top technology opportunities; but capturing those opportunities hinges on the quality of the company's business intelligence (BI) programs.

Corporate performance management (CPM) tops the list of CFO technology investment priorities, followed by BI and performance management.

CFOs would like to reduce ERP instances, and expressed a preference for "vanilla" implementations — i.e., implementations that do not require excessive customization.

CFOs are still concerned about achieving business benefits from IT.

IT success relies more on understanding and working with the business than on technological excellence.

Consistent with findings in 2010, eXtensible Business Reporting Language (XBRL) and International Financial Reporting Standards (IFRS) projects continue to lag in firms.

Publication Date: 24 May 2011/ID Number: G00213015 of 19

© 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Recommendations

Communicate technology priorities to senior financial executives.

With more IT departments reporting to the CFO, IT teams must be able to explain costs, encourage adoption and share information with non-IT employees who use the technology daily.

CFOs and IT departments should work as business partners, enabling the business to move to best-practice business processes with better business insights.

Organizations should review the results of this technology study to see how the CFO likely regards IT.



ANALYSIS

This is the 13th year of the FEI Technology Study, and the third year that Gartner has sponsored and conducted the study, along with analyzing the results and sharing our insight on CFO priorities.

We conducted the study to better understand senior financial executives' perspectives on technology, and focused on:

The economic environment

The CFO's role in technology

The CFO's perspective on ERP

Survey participants' views on business applications, BI and shared services/outsourcing

Regulatory impact on technology, and the CFO's perspective on the IT organization

Although there are many consistencies with the prior years' findings, there are just as many standouts this year, including CFOs' emphasis on BI and business applications, and the role of the CFO in IT decisions.

The 344 respondents in this year's study were highly qualified in providing a perspective on technology deployment within the enterprise. Granted, those who did not fit that criteria were eliminated from the survey, so there is a bias toward senior financial executives who care about technology. Sixty-six percent of the respondents were enterprise CFOs, 9% were business unit CFOs, and 95% could be considered senior financial executives. A broad spectrum of industries was represented, and responses were mainly from North America (given FEI's large North American membership). However, 47% of the firms represented in the survey had global operations. The survey contained organizations of all sizes, representing the spectrum of FEI's membership.

CFO's Influence in IT Is Growing: 42% of IT Organizations Report to the CFO

Consistent with the past two years, 42% of IT organizations report to the CFO, with 33% reporting to the CEO. This is consistent with last year's study, in which 43% of IT organizations reported to the CFO. When asked where IT should report, 46% of the participants responded that IT should report to the CFO.

These results vary by size of the company:

In companies with less than $50 million in revenue, 47% of IT departments report to the CFO.

Fifty-eight percent of companies with revenue of more than $50 million and less than $250 million have IT departments that report to the CFO.

Forty-six percent of companies with $1 billion or more in revenue have IT reporting to the CFO.

This high level of reporting to the CFO demonstrates the need for companies to ensure that their CFO is educated on technology, and underscores just how critical it is that the CIO and CFO have a common understanding on how to leverage enterprise technology.



In the study, we noticed a clear trend that has continued for several years. When we asked if CFOs wanted IT to report to them, more than 46% replied positively. This is an interesting contrast to the 2010 study, where 53% of CFOs wanted IT to report to their organizations, rather than to the CFO directly. This year's results show an increasing enterprise requirement for greater financial control of technology initiatives in the firm, as well as better alignment between the technology and the strategic direction of the enterprise, with the CFO primarily leading this coordination (see Figure 1).

Figure 1. Where Does IT Report?

Source: Gartner (May 2011)

We noticed an increasing involvement of the CFO in IT decisions, up from 2010. The CFO alone has authorized 26% of all IT investments — 51% when combined with the CIO. This is much higher than the CIO alone, where only 5% of IT investment authorization is made by the CIO, down from 2010. Again, the CFO's understanding of technology is critical as the role continues to evolve. In this scenario, the CFO must be well educated on the use and potential for technology (see Figure 2).



Figure 2. Who Authorizes IT Investment?


IT Spending to Recover Conservatively in 2011: More Capital Investment as the Economy Improves

Senior financial executives see growth in 2011, but 38% do not expect this growth to reach the level experienced before the recession in 2008. Most (40%) see the level of growth consistent with 2010, with a few (6%) expecting the economy to rebound this year beyond 2008 levels (see Figure 3).



Figure 3. 2011 Investment Expectations


Operational spending should neutralize in 2012, as about 50% of CFOs expect spending to level out. About the same percentage sees an increase, but sees budget cuts subsiding (see Figure 4).

Figure 4. IT Operational Spend Forecast




While 30% is a decrease in capital spending during 2011, 49% of CFOs expect an increase in capital spending in 2011. IT investment also improves, with 48% seeing an increase in spending (see Figure 5).

Figure 5. IT Capital Forecast


Organizations Are Willing to Spend Where Competitive Differentiation and Efficiency Can Be Achieved

Since IT spending is on the increase, we asked the participants how they were making IT investments, and which guidelines they used to guide investments. Consistent with last year (but slightly down), firms will invest where they see a competitive advantage driven by IT (86% versus 72% in 2011). Interestingly, business process outsourcing (BPO) indicates that it has a high influence on operations (20%). Business process efficiency has a strong showing at 64%. In terms of what is most important, investments that achieve competitive advantage rank as having the most influence, followed by BPO. Sixty-four percent of organizations are investing in efficiency, but only 2% see this as having a long-term influence on the enterprise (see Figure 6).



Figure 6. IT Investment Perspective


Gaining Business Insight and Improving Business Efficiency Are the Top Technology Opportunities

A majority of technology constraints concern the lack of business insight/BI availability, and the inability to leverage the IT platform for process efficiency. Facilitating analysis and decision making (46% of respondents), data quality (46%), creating an environment for sharing (42%), measuring profitability (33%) and creating an enterprise view of operations (32%) are all constraints that point to the lack of process and the opportunity for BI and performance management applications to gain traction. Reducing operating costs (43%) points to a desired improvement in business efficiency, potentially by leveraging business applications more effectively (see Figure 7).



Figure 7. Technology Constraints




BI/Performance Management Top IT Investment Plans, With CPM Leading Investment in Analytics

BI is the top technology initiative from the perspective of the senior financial executive, second only to enterprise business applications. For a combined 65% of choices, BI ranks as the technology with the highest demand, while 46% rank enterprise business applications, such as ERP and integrated financial management solutions, as investment priorities. When viewed within the larger scope of operations' infrastructure, however, business applications (30%) are seen as more important than BI (23%) in 2011 (see Figure 8).

Figure 8. 2011 Top Technology Initiatives


In 2012, the forecast shows both in a similar position; however, BI, analytics and performance management rank first by 26% over 21%.

Figure 9 ranks the BI and performance management applications from an investment perspective in 2011. Here, senior financial executives favor applications over pure technology investments, as



the top four investment areas all fall into the area of CPM, including planning/budgeting and forecasting (64%), performance scorecards (60%), financial consolidation/reporting (61%) and customer profitability (44%). This is a similar ranking to the investments forecast in the 2010 study; however, it is unclear how senior financial executives are investing in profitability modeling and optimization (customer profitability), areas where Gartner has observed very little technology investment.

Figure 9. BI/Performance Management Investment Focus, 2011


Reducing ERP Instances, More "Vanilla" Implementations Are Desired

In the 1990s and early 2000s, ERP instance proliferation was common. Many international firms have multiple ERP systems, representing a variety of providers. Now, CFOs prefer ERP consolidation, with 64% of organizations opting for a single-vendor ERP deployment. Still, 19% of organizations give their units some autonomy in determining whether they are to be part of the enterprise ERP implementation (see Figure 10).



Figure 10. ERP Instance Preferences


ERP and business applications have changed. More firms are seeking to implement solutions without significant customization, taking advantage of industry best practices that can be configured through inherent product configuration capabilities. More firms are taking advantage of best practices inherent in enterprise applications, rather than creating functionality in-house. In fact, 29% of organizations prefer strategies that do not require customization (see Figure 11).



Figure 11. Configuration and Customization


Achieving Business Benefit From IT Still a Concern

Of all organizations in the study, 41% believe that IT is appropriately funded for 2011, while 31% believe that IT has the technological capability to move the firm forward. (This assertion is based on survey questions in which CFOs were asked to rank each item in Figure 12 between 1 and 7.) However, only 30% believe that IT truly fulfills its mission, meaning that 70% do not believe that IT is providing business benefits. Only 32% of CFOs see the CIO as a strategic partner.



Figure 12. IT Has Room for Improvement


Only 47% View IT as Being Strategic

Unfortunately, 53% of CFOs believe that IT best supports an operating environment for enterprise applications (25%). Even fewer (28%) think IT fulfills what is asked of it. Thirty-five percent of organizations see IT as being a strategic driver of business performance; 8% view IT as a key contributor to the enterprise competitive position; and 4% see it as transformational (see Figure 13).



Figure 13. IT Expectations


Fundamentals of Project Management Still Key for Achieving IT Investment Success

In the survey, we asked senior financial executives how to ensure that the relationship between the business and IT is successful and effective. The responses point to clear ownership of the project (38%), the business case for the project (37%) and the project management (36%). Business partnering and sound project management continue to have more of an impact on IT investment success than technology prowess (see Figure 14).



Figure 14. Key to IT Investment Success


XBRL and IFRS Projects Lag

Consistent with the 2010 study, firms are lagging with XBRL projects. Few see the benefits of using XBRL for internal reporting or benchmarking, with the main focus being on external reporting. Of those firms concerned about XBRL, 30% will purchase a disclosure management solution with embedded XBRL reporting, 12% will buy a tagging solution only, 20% will use Microsoft Office, and 24% will outsource the tagging to their publisher (see Figure 15).



Figure 15. XBRL Strategy


Gartner and FEI believe that 42% of organizations may be surprised by IFRS, particularly if the U.S. Securities and Exchange Commission (SEC) requires IFRS adherence in 2014/2015, as expected. IFRS are principles-based standards, interpretations and the framework adopted by the International Accounting Standards Based Board (IASB; see Figure 16).



Figure 16. IFRS Strategy


Bottom Line

Year after year, this study shows that CFO expectations of technology do not align with the IT organization's perception of company priorities. In terms of enterprise technology, organizations need to focus on better enabling business processes, led by technology initiatives. Given some of this dissatisfaction, CFOs are taking a more-active role in controlling a greater share of the organization's IT investments. In many cases, CFOs are moving toward having the IT organization report to them directly. Due to the increased involvement of CFOs and senior financial executives, organizations must make it a priority to better educate decision makers.

The major point, however, is to develop a more-effective partnership, regardless of how the reporting is structured. IT organizations must understand the CFO's views of technology investment decisions, and must work toward developing a relationship with the CFO that resembles a business partnership. This will enable the business to become more agile. Furthermore, this flexibility will help firms select best practices that could make business processes work better, thereby providing better business insight.

This research is part of a set of related research pieces. See "CFOs' Priorities for Technology Identified in the 2011 Gartner FEI Technology Study" for an overview.



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