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The CFO’s Role In Avoiding Cloud Sprawl

CIO oversight and CFO collaboration on cost management and transparency is vital

2Feb

Cloud computing delivers countless advantages, but the simplicity of implementation, maintenance and operation may have the negative side-effect of 'cloud sprawl' – marked by the runaway introduction of new technologies and uncontrolled cloud implementations.

Not surprisingly, with too many 'clouds,' a company’s technology landscape is soon cast into 'shadow.' Shadow IT is what happens when IT leaders and the CFO aren’t collaborating and the business is left to its own technological devices –resulting in increased IT spending, duplicated efforts, and an inability to measure and justify future IT investments. 

The relationship between IT and Finance is changing as technology moves out of the back room to become the digital backbone of the entire enterprise. Today, more than any other part of the business, IT’s role has an outsized impact on every department, every process and every decision throughout the entire company. Making the most of the IT investment, and ensuring that adequate dollars are going towards innovation, requires closer collaboration with the CFO.

Opening Up the IT Black Box

A perfect storm, or, if you will, a brimming spaghetti bowl of innovation, cloud computing, and automation has changed how we view IT. It wasn’t that long ago that the IT department was a mystery to the rest of the business, but the curtain has been pulled back and its mysteries can now be understood by those outside of the walls of the IT department.

This new openness, driven largely by new cloud-based innovations that make technology more available to non-programmers, delivers countless advantages, but the result is that the new enterprise – without the controls of Technology Business Management (TBM) and a close alliance between IT and the CFO – is a little bit like an Italian chef who ignores the recipe book and throws 'a little bit of this, a little bit of that' into the sauce. The result may be great, but nobody knows how it got there or how much it costs.

The result of this new digital transformation is cloud sprawl and shadow IT – but this is easily overcome with a greater focus on automation, and a greater role for the CFO in managing IT spending and IT cost transparency.

The CFO of IT

As cloud innovations have driven IT into the light, the CFO and Finance organization are emerging from their closed world of spreadsheets and number-crunching. The success of IT-driven innovation is dependent on a greater role for the CFO, a shift I call the 'CFO of IT.' This requires ongoing communication about IT expenditures among the Finance team, IT, and other stakeholders throughout the enterprise.

I was recently a panelist on the CFO Webcast, 'The CFO Playbook on Strategy: How CFOs Can Enable Growth with Technology,' where I joined other thought leaders to discuss the importance of collaboration between IT and the CFO. If you didn’t have a chance to participate in the original webcast, you can log in any time to access the playback.

During that webcast, participants were asked how they would characterize their finance team’s role in making decisions about IT investments. While 15.2% responded that Finance takes direction from IT – an approach that allows for little oversight – 52.2% reported that Finance partners with IT.

As part of that collaboration, the CFO’s growing role must now include not only answering questions about funding IT, but becoming more closely involved in distinguishing between tech investments that keep the business running, and investments that support growth. The latter, more innovation-driven play requires a higher degree of CFO-CIO collaboration, and at the end of the day, it is this IT innovation that will drive the company’s growth and success.

The Federal government serves as an example – the Federal IT spend for 2017 is $81.6 billion; $55.9 billion of which is devoted to operations and maintenance and only $18.7 billion, or about 20%, of which is devoted to development, modernization and enhancements. Fortunately, the ship of state is slowly turning on this front, with FITARA now requiring Federal CIOs to report on IT cost transparency in adherence with TBM practices, better align the CFO and CIO functions, and shift technical debt to innovation.

Without CIO oversight and CFO collaboration on cost management and transparency, IT spending will continue to increase, and investments will be difficult to track as shadow IT darkens a company’s technology landscape and turns what could be an efficient cloud-driven innovation ecosystem into uncontrolled cloud sprawl. 

Alex-Paul Manders is a pioneer in the technology business management (TBM) space. As ISG’s TBM Practice Lead for the Americas, he advises ISG’s clients on TBM strategy and how to use this methodology to drive value in their organizations. ISG’s TBM approach begins with fact-based, analytical strategies, supported by transformational IT initiatives that optimize the IT enterprise by running IT like a business. 

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