CFOs and IT Spending: Best Practices for Cost-Cutting

To maintain a high level of security and innovation while also cutting costs, organizations have a lot to consider when it comes to IT spend.

Operational efficiency, profitability and productivity all factor into the multifaceted pressures facing business leaders anytime, but particularly during an economic downturn.

When IT spend is categorized and prioritized by business priority, the chief financial officer (CFO) can clearly determine where spend is disproportionate.

Bob Feller, CFO at Auvik Networks, says it’s important to regularly evaluate the appropriateness of key technologies — at least every one to two years.

“It is also important to have a control process to avoid application expansion,” he says. “With SaaS, it is very easy for individual departments to purchase a subscription without involving IT but later these groups usually look for integration and other IT service.”

Feller notes having a process and system to track and evaluate IT subscription spending is crucial in today’s application environment.

Bringing CFOs and CIOs Together

From a technology evaluation perspective, CFOs should leverage a partner that can provide technical expertise to maximize technology investments’ value.

Amy Lindenmeyer, CFO at Keeper Security, says the CFO and CIO each bring unique perspectives and skill sets to their roles, which is why fostering collaboration is key to optimizing IT effectiveness.

“For true optimization, both must bring their expertise to share,” she says. “The CIO with respect to new and emerging technologies and the unique company IT environment, and the CFO with business objectives and cost analysis.”

She suggests that while legacy IT solutions require heavy implementations, as well as dedicated on-premises infrastructure and staff that have a significant impact on budget, switching to a next-generation cloud solution could provide significant financial benefits.

Mike Voss, field CTO at SHI International, explains CIOs can better align themselves to the CFO by speaking the language of finance.

“When the CIOs understand how the CFOs wants to view and present financial data, they are able to optimize and prioritize IT spend,” he says. “We also find that CIOs who are skilled in speaking the language of finance get more IT budget.”

Financial Planning, Cost Discipline Key

“To achieve cost savings, it’s critical to drive urgency on cost discipline, maintain access to credit to preserve liquidity, and generally, incorporate worst-case scenarios into financial planning,” Voss says.

Financial leaders should also prioritize the reduction of employee-related costs, with layoffs considered only as a final option.

He adds tool sprawl is a real issue, especially in areas of security and DevOps where customers face pressure from software vendors.

“Offer posture reviews to baseline a customer’s portfolio and identify overlapping solutions, as well as gaps,” he advises. “We find this is an ideal way to approach security at a programmatic level, consolidate tools and reduce sprawl.”

He explains many organizations struggle with lifecycle management and technical debt–not only does technical debt drive up spending, but it also adds additional risks around security and system uptime.

“Older and outdated systems are prone to hardware failure and support costs increase as the system or asset ages,” Voss says. “Having a formal approach to managing technical debt is the most important thing.”

He adds most organizations suddenly realize their technical debt is ballooning and only then do they make it a priority.

“Having discipline around a standard process — identify and assess, reduce debt, and ongoing stewardship are the keys managing technical debt,” he says.

Collaboration, Not Slash-and-Burn

Auvik Networks’ Feller stressed it is important for CFOs not to come in and start slashing everything.

“There was a reason why IT applications and services were purchased in the first place and, in today’s corporate environment, many of these systems are integrated with each other and into employees’ work processes,” he says. “CIOs should have a good idea of what’s critical and sensitive.”

He says the way he tends to approach this is by working with the CIO to identify the applications that are main “sources of truth” for key corporate data.

These tend to be the financial and accounting systems or enterprise resource planning (ERP), customer relationship management (CRM), human resources information system (HRIS), and often a business intelligence (BI) system.

“For each of those key systems, we evaluate whether they are still the right choice for where the company has evolved and will they scale as the company grows,” he says. “Replacing one or more of those systems can be a big, complicated project but is often essential to a company’s success.”

Feller says if they don’t need to be replaced, then he works to find all the adjacent linked or integrated systems and figure out if they can be eliminated.

“Oftentimes, the main system or ERP has the necessary capabilities and is already paid for, but somebody decided they wanted a separate system,” he explains. “I tend to go after those right away.”

He notes the other class of applications that tends to create IT spending waste is communication and collaboration software — apps including Teams, Slack, Confluence, Jira, Zoom, Google Meet.

“They tend to do similar things but in a different way or have functionality that some people prefer but is not essential,” Feller says.

It also creates a problem if only some departments use Slack, for example, but still must communicate in Teams with other departments.

“It’s hard to take away favored applications but it can be essential for both efficiency and spending purposes,” he notes.

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