CIOs enter CFO territory

The modern business world has much in common with a Middle Ages monarchy: one person rules, pressure to expand the empire and during times of strife heads will roll.

A significant difference between the two, however, is in the line of succession. Once it was a simple matter of who was born first. Today the issue is much more murky in part due to the rise of the chief information officer (CIO). You could forgive chief financial officers (CFOs) if they feel there is a usurper in their midst.

CFOs were at the height of their powers about five years ago according to Nigel Rayner, a research director at Gartner Inc. At that time, he says, it wasn’t unusual for the CIO to report to the CFO, who was responsible for the business side of the operation as well as a lot of the administrative infrastructure. Thanks to the rise of e-business, this has changed.

“All of a sudden the CIO role has become very strategic again in many organizations,” says Rayner, “Deciding how you’re going to approach the world of e-business is not something the CFO is well positioned for.”

Most, if not all, companies, whether they are in the high-tech industry or not, are becoming IT companies. PCs, Internet access and enterprise software packages like customer relationship and supply chain management are all part of the workplace. As these elements moved from luxuries to necessities the importance of the CIO grew.

“The CIO is certainly now more involved in the strategies of the business, whereas in the past the CFO would setup strategies and the CIO would basically execute tactics in order to get those particular strategies done,” says Grant Schwartz, the director of IT for Markham, Ont.-based Drug Trading Company Ltd.

“The other key thing within companies today is that IT is now viewed more as an enabler and we’re not investing in technology for the sake of technology, whereas before we’d be buying technology because it was cool.”

The rise of the CIO doesn’t seem to have ruffled any executive feathers. According to all sources, the addition to the inner circle is quite welcome despite blurring of responsibilities.

“What you have seen is probably more of an overlapping of mandates,” says David King, regional manager for Western Canada, RHI Management Resources. “I think that those two profiles probably are talking a lot more they’ve ever done in the past. The CFOs, who primarily are coming from more of a financial/accounting background, are probably becoming much more versed in the technology world.”

The flip side is also true. King says CIOs are learning more about day-to-day business practices, profit and loss, budgets, and other financial matters.

Former CFO of Waterloo, Ont.-based PixStream Inc. Tim Jackson agrees. Now a partner at Tech Capital Partners Inc., a Waterloo, Ont.-based venture capital company, he says CFOs need to understand the technology they’re spending so much money on, while CIOs need to grasp the financial implications. The end result, he says, is “the CIO/CFO are connected at the hip these days.”

Connected to the point where CIOs are at the table during merger talks. Rayner says the CEO would most likely turn to the CIO for a cost saving analysis for technology infrastructure. Schwartz adds he’s brought in during merger discussions to determine how quickly and cost effectively a company’s technology can be integrated.

What has emerged is a partnership and not a competition. Schwartz says he has worked with two CFOs in the past 11 years and describes the relationships as very good. Rayner says he hasn’t seen any signs to indicate there are any problems between the parties.

Part of the reason the relationship is so harmonious could be attributed to the lack of impact on CIOS have on the line of succession to CEO. King says they are viewed as partners to help the business get to the next level, but the general consensus seems to be money talks and technology walks.

“You’re seeing a lot more collaboration between those two parties in the goals of the company. As for who the potential successor would be,” says King, “I would have to say we’re still seeing a preference to the CFO/financial route or some other capacity in the organization.”

Jackson agrees, reasoning CFOs are responsible of keeping the crown jewels valuable.

“Your CFO is still typically doing all your external reporting, responsible for your fund raising, responsible for your sources of capital whether that’s debt or equity. Certianly CIOs aren’t moving into that space,” Jackson says.

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