Cloud and the Finance-IT Effectiveness Gap

IT leaders today tend to be much better aligned with business and operational leaders and business goals than they were just five years ago. Unfortunately, they are still not often well-synchronized, meaning that IT and business leaders may have the same vision of goals and priorities, but not the same view regarding what can be done with existing or planned IT. Also, significant asynchronicity bodes ill for IT investment and for relations between IT and business and operational units in the enterprise.

A good method for surfacing both alignment and asynchronicity is what we refer to as the “Effectiveness Gap” methodology. At its core, the Effectiveness Gap is a simplistic means of comparing business goals and priorities against the ability of existing systems, solutions, and services to accomplish them. Relative measures of alignment and synchronicity emerge when comparing how business leadership perceives their own priorities and gaps, versus how IT leadership sees those same things.

Enterprise Finance organizations provide sound examples of how IT and business leaders can be aligned yet remain unsynchronized. This is the first of a two-part series looking at core issues of alignment between IT and Finance, and how these affect enterprise finance capabilities and cloud strategy – along with the success of enterprise digital business transformation initiatives.

First, both sides seem to understand one another better than ever. Figure 1 summarizes an aggregate of five years of research data that show how well-aligned Finance and IT can be.

Figure 1: How CFOs and CIOs See Finance Management Priorities, 2015 – 2020

Percentages = participants agreeing completely on Finance management and operational priorities.

Source: Multiple sources; aggregated by Addressable Markets LLC

From top to bottom, year after year, organization’s IT and Finance leaders see the same sets of priorities with the same levels of importance within Finance operations. Compared to research from the previous decade, this indicates tremendous improvement in IT-Finance alignment.

But behind the alignment, we see how the two parties remain out of synch. Especially when we look at the aggregate data regarding actual Finance system effectiveness – i.e., how well a Finance team’s IT can accomplish the organization needs within existing systems.

Figure 2: How CFOs and CIOs See Finance Management System Effectiveness, 2015 – 2020

Percentages = participants agreeing completely that existing systems enable Finance priorities to be satisfied. Source: Multiple sources; aggregated by Addressable Markets LLC

The different IT and Finance bar lengths, especially in the lower two-thirds of the figure, illustrate that IT leaders have a much higher opinion of how well existing systems enable Finance to accomplish its goals. In other words: The two camps are still well-aligned, but they are not in synch. That significant asynchronicity, however, is hidden by the seemingly close alignment on business needs and goals. The two sets of leaders still see themselves as closely aligned, while the operating mechanisms below are failing or falling short.

Many reasons exist for these differences. IT leaders tend to see technology differently, and often have more faith in their tech – which may be misplaced. Finance leaders are more likely to see how the tech is used, but that usage may not be the most efficient for the tech involved. In any case, the costs of IT, and frustration with the IT organization, will increase, while leadership believes that they are in agreement.

The outcome of such situations is usually increased acquisition by Finance teams of non-sanctioned IT, especially cloud-based OT. This has been happening since IT entered the Workplace, of course, and has been vastly expanded since the advent of cloud-based SaaS and IaaS. But when Finance does it, the repercussions spread throughout the enterprise and beyond, especially as digital transformation initiatives become strategically important.

It is unlikely that CIOs and CFOs will ever be completely in synch. This can be a good thing, as their different viewpoints can balance needs and outcomes, when they are communicated effectively.

But when it comes to tech, and especially cloud, CIOs and CFOs tend to use the same words but apply and assume different definitions based on their relative spheres of influence and experience. How they define and then see things is what sets their expectations, and what de-synchronizes their joint, cloud-enabled digital business efforts.

The solution is simple, but not easy. Identification of actual system capabilities versus process shortfalls is a critical step, and one that too often is ignored – in large part because quick-fix, cloud-based solutions are widely available. After so many years, it is still arresting to see how many firms of all sizes lack basic IT inventory and asset management programs, let alone comprehensive programs that help align and synchronize IT with the business strategy, leaders, and operations.

But wait, there’s more. Part two will examine how well (or poorly) IT and Finance leadership align on where, and how, cloud-based solutions will improve what Finance can do.

By Bruce Guptill