Financial Executive Survey: Most Businesses Lack IT Plan

Businesses that align their IT strategies with their business strategies are more likely to achieve a high return on IT investment, according to a survey of senior financial officers conducted by CSC and Financial Executives International (FEI) — but the report also indicates that most businesses still lack an IT plan.

The annual survey report, Technology Issues for Financial Executives, identifies the IT trends most critical for CFOs and other senior finance executives. The report surveyed 607 members of FEI, an industry group for CFOs and other financial executives. Almost all respondents are from the United States and Canada, and 84 percent of them are the senior financial executives in their organizations.

IT, with or without plans

The survey indicates that 10 percent of respondents' companies achieve a high rate of return on investment for IT projects. Among those companies with a business-aligned IT plan, however, that percentage more than doubles to 24 percent. Respondents with a business-aligned plan are also more likely than average to see a medium return and less likely to see a low rate of return. "If businesses create an IT plan and link it to the business strategy they're more likely to get their IT initiatives right," says Adam Hartung, a marketing partner at CSC's Consulting Group who oversaw the survey. A plan helps businesses focus on the most important initiatives and not simply jump from one IT emergency to another.

Few organizations, however, have such close alignment. The survey shows that only seven percent of respondents have an IT plan fully aligned with their corporate strategy. Roughly 30 percent of respondents report at least some form of alignment between business and IT strategies, but 60 percent of respondents lack any IT plan.

Eugene Lukac, a CSC Consulting Group partner who participated in the report, finds the IT plan figure "shocking" but says it improves on last year's survey, where 65 percent of the executives surveyed said they had no plan. Lukac attributes the lack of IT plans to spending pressure. "When money is tight, that's when you need a plan the most, but that's when you can least afford to create one," he says.

According to Lukac, many of the organizations that report no plan actually may have one, but the IT department may not have communicated it to the financial executive responding to the survey. But a plan isn't likely to be effective if the finance department, which authorizes spending, isn't aware of it. "The perception of no plan is the same as having no plan," Lukac says.

Prioritizing IT spending

The financial executives in the survey were asked about the information technology issues most critical to them, and the most pressing concerns named are those directly related to the CFO's capital rationing function. Nearly 60 percent of respondents are concerned about prioritizing technology investments — determining which efforts merit IT spending — while 55 percent are concerned about identifying the appropriate level of IT investment, or setting the overall IT budget. According to the report, "CSC's perspective is that this [focus on capital rationing] may be fueled by the CFOs' perceptions that they're not getting a very good return from their technology investments."

Technology Issues for Financial Executives asked its respondents what they spend on IT as a percentage of revenue. The survey notes that there is a wide range of spending even within a single industry. In the financial services industry, which reports average IT spending as seven percent of revenue, some companies are spending nearly 16 percent while others are spending almost nothing. That makes the mean, or average, ineffective as a benchmark for CFOs. "The mean is not a meaningful measure of IT spending," Lukac says. Rather than CFOs spending according to what they think their rivals are spending, he says, they should spend according to an IT plan.

Security in the spotlight

Security emerges in the report as the most important technological concern for financial executives. More than half of respondents say that identifying the appropriate level of security for information and electronic applications is very critical to their organization. The report shows, however, that "many CFOs remain reluctant to expand the scope of traditional information security programs to manage all of the risks facing the enterprise."

When asked to rate their levels of concern in various facets of information security, nearly all respondents say that growing dependence on — and risk of — computerized and automated systems is a critical or important concern. Almost two thirds are concerned about industry standards and cost of compliance, and half are concerned about growing IT security expenditures. Just a third of respondents find terrorism against their companies a critical or important concern.

Satisfaction with IT initiatives

The respondents also describe their experiences regarding their enterprise resource planning (ERP) implementations. ERP projects took longer than expected for more than 40 percent of respondents, and cost more than expected for 55 percent of respondents. While ERP implementations are difficult, they also appear to be worth it for many respondents: three out of four of those who completed an ERP implementation rate it a success. "We usually hear about ERP projects that have gone awry. The projects that get the plug pulled get all of the publicity," Hartung says. "But those executives who stuck with the implementation are pleased with the results."

Those respondents who have outsourced IT activities were asked if they are happy with outsourcing. More than 90 percent of the executives with outsourcing arrangements consider the arrangements successful. The main reason for outsourcing success, they say, is higher service levels, followed by lower cost. Of the respondents who have outsourced projects offshore, about 70 percent are satisfied with their outsourcing arrangements.

Information for CFOs and CIOs

According to the report, the CFO has a unique perspective on IT issues. "He typically has both the technology organization reporting to him and primary responsibility for ensuring that all expenditures are in the best interest of the shareholders," it says. Because the survey encompasses senior financial executives from all major industries and organization sizes, it serves as a useful benchmark for CFOs, who are able to see how their colleagues are handling IT matters. FEI will distribute the report to the respondents and make it available to its membership.

Technology Issues for Financial Executives will also benefit CIOs, since the survey shows that more than half of IT organizations report directly to the CFO. The CIO often is dependent upon the CFO for approval of IT initiatives, and the report will give the CIO a glimpse into the CFO's thinking. "An understanding of how CFOs view IT is important to CIOs for IT spending and project management," Hartung says.