Budget planning and approval can get tense when goals and strategies are misaligned — which is business as usual between IT and finance executives. CIOs are wary of CFO pushback, and CFOs are skeptical about the value of IT initiatives. When finance views IT as a cost center, as opposed to a revenue generator, IT departments are left frustrated and underfunded. CIOs have two choices for 2022. They can fuel further antagonism and acrimony, or do what innovators do best. Try something new.
Define — and defend — your vision
IT versus finance struggles often arise when CFOs fail to grasp technology’s potential impact on the bottom line. Combine this with the challenges of planning ahead for innovation in a rapidly evolving tech space, and the stage is set for the same old battle of wills. To change the dynamic, start by giving your IT vision more definition. Budgets are meant to be strategic and linked to specific business goals.
Blanket requests for a percentage increase over last year’s allotment do not fit well with a by-the-numbers finance approach. From a finance perspective, a request for 10% more must be justified. How and why is IT 10% more important than it was last year?
According to the data, most CIOs fail to communicate a strategic vision to the rest of the C-suite — particularly CFOs. How can IT leadership clearly communicate their vision for a smoother budget approval process?
Tie your vision to a business goal
"Why?” is a powerful question. Budget requests aren’t shopping lists, and CFOs are under too much scrutiny to rubber stamp IT wants and needs without question. Finance departments want details to justify the expenses that feature on IT’s bottom line, but the questions they have are ultimately less to do with the bottom line and more about how IT investments will improve organizational efficiency, the customer experience, cybersecurity, and/or redundancy. So, the question you need to answer isn’t “What?” but “Why?”
As CIO says, “What CFOs want to hear are budget figures related to an IT strategy that shows ongoing, predictable IT costs and new investments that will push the strategy forward while meshing with the overall business goals.” A better process requires the CIO to break their digital transformation vision into actionable goals tied to business strategy. How will new software contribute to higher sales? Why does the e-commerce platform need a feature build-out to improve the customer experience? Anticipate these questions, and answer them with specifics regarding return on investment.
Provide ROI
In the corporate world, the days of adopting the latest cool technology tool for the sake of innovation alone are over. A review of last year’s budget should track what your company received in return for the money it spent, and this year’s budget request should include a clear plan for tracking ROI on IT initiatives. Demonstrating improvements for productivity, customer retention, or business growth with clear links to IT infrastructure or innovations may be a challenge. The financial returns on IT projects aren’t always clear cut or tangible. For new projects, provide cost and savings estimates, and look beyond quantifiable ROI for qualitative improvements to productivity and customer communication. Compare findings with competitive intelligence to share the potential consequences of not funding IT initiatives.
Design your IT budgetary pitch to show your CFO both the why and the ROI behind your budget request, but don’t drown them in fiscal or technical details. CFOs don’t necessarily need to know how IT works to understand how they benefit your business.
Visit windzr.com to learn more about strategic budget planning for 2022 and beyond.