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CFOs wield greater influence as ICT acquisition strategies change

In his blog on the Enterprise CIO Forum, Myles Suer, a senior manager of solutions marketing at Informatica Corporation, refers to the emergence of a “strategic CFO,” who considers information as an asset and IT as a means of creating business value. A CIO quoted by Mr. Suer describes a “controlling CFO’s” vision of IT as that of a cost center.

Technology is now being perceived as a significant contributor to business results, leading to higher direct involvement by CFOs in procurement decisions. The 2013 Gartner Financial Executives International CFO Technology Study of 255 CFOs confirms the growing influence of CFOs over IT, with 44% of respondents admitting to an increase of CFO’s influence over IT investments between 2010 and 2011.

“We have seen in the study that a large percentage of CFOs own IT functions. This year's responses showed that 39% of IT organizations currently report to the CFO,” writes John van Decker, Gartner research vice president, while summarizing the conclusions.

The rapid proliferation of new technology is driving a change in the way decisions about procuring ICT (Information and Communications Technology) equipment are made. More than 60% of respondents in a survey conducted by Forrester Consulting for Cisco Capital (Financing in the Current Macro Economic Environment, 2012), across Australia, China, and India, expressed a high level of concern with the pace of change and its impact on business. And that higher level of concern is leading many organizations to utilize financing as a means to ensure that their IT equipment is continuously upgraded.

In the same Forrester survey, 40% of the respondent organizations rated the proliferation of end-user devices as the biggest trend that will drive their need for financing. This is accompanied by a marked preference for financing to invest in the equipment—servers, storage, and network equipment—required to modernize data centers.

To keep pace with technology, stay ahead of competitors, and support the evolving needs of employees and customers, organizations are exploring a variety of funding options. While organizations continue to procure some ICT equipment outright with cash, external financing, especially vendor financing, is becoming more commonplace.

Among the factors CFOs consider when evaluating potential financiers for their IT equipment are: the ability to finance the total solution, competitive interest rates, flexible repayment schedules, and diverse end-of-lease options. Captive financiers (generally, divisions of IT equipment manufacturers) often compare favorably with pure-play financial solution providers through their deeper understanding of the customer’s technology and business needs, the ability to provide earlier ROI through structuring, and their simplified documentation procedures.

The Forrester survey also found that funding options were usually evaluated by customers during the first three stages of the sales cycle: RFP/proposal, solution evaluation, and pricing/quoting. Increasingly, CFOs are now involved at an early stage in the process, often contributing their insight during the very initial evaluation of a potential vendor.