Why Is the CFO Still Boss of IT?

It's a battle IT leaders have been waging for years: At some companies, CEOs still think IT should report to the head bean counter. A debate among CIOs on this topic has created some valuable food for thought.

By Thomas Wailgum
Wed, April 21, 2010
Page 2

A few weeks back I interviewed Rudy Puryear, a partner at consultancy Bain and leader of its global IT practice, for a CIO.com article titled: From the CEO: 5 Questions CIOs Need to Answer. The answers to the questions aren't easy for IT, but critical during the economic recovery.

Puryear was, on the topic of CIO reporting relationships, adamant that CIOs should report to CEOs. "I'm still amazed at the number of organizations where they want to stick the CIO under the CFO because they don't think it's the same caliber of business professional that can work with the executive team," Puryear says. "The CIO ought to be a part of the executive team given the incredible impact IT can and does have, and how intertwined IT and business are today."

When he consults with executives that are looking to hire a CIO and are planning to have the CIO report to the CFO, Puryear will often ask them: "What major action can you take in this business that doesn't have IT implications in one form or fashion?"

To Whom Do CIOs Actually Report?

It's about time we bring in some data to this discussion. So just who are CIOs reporting to today? According to "2010 State of the CIO" survey data, 43 percent of CIOs report to the CEO, and just 19 percent report to the CFO. In addition, 70 percent of the surveyed IT execs claim to have a seat on the business executive management committee.

Looking back over the past five years of "State of the CIO" reporting data, the numbers have been consistent. While CIOs report to CEOs more than any other executive, CIOs have never been able to crack the 50 percent mark.

To Whom Do CIOs Report?

A look at CIOs' reporting relationships since 2005

EXECUTIVE 2005 2006 2007 2008 2009 2010
CEO 40% 42% 41% 41% 47% 43%
CFO 30% 23% 24% 23% 16% 19%
COO 13% 14% 14% 16% 16% 13%
SOURCE: "State of the CIO" data

The dip from 2009 to 2010 is evidence of the downstream effect of the global meltdown and the New Normal in IT: CEOs clamped down on spending and, in some instances, shifted CIO reporting relations to CFOs. Get a grip on that IT budget!

Right now, however, would be as good a time as any for CIOs to shine. Change won't come easy for those CIOs still pining to report to CEOs, to get the proverbial seat at the table by demonstrating IT value again and again.

But one sees glimpses of CIOs doing it here and there, and also can tap into sound strategies of how to change the conversation from "cost control" to "IT innovation."

You see it in business-first CIOs such as Stuart McGuigan at CVS Caremark (CVS) or in next-gen CIOs like Stephen Gillett at Starbucks (SBUX). You see it in CIOs who are answering the tough questions from CEOs, who are quantifying IT investment risk, who are removing antiquated IT barriers to enable business innovation and success.

In the end, there's no one-size-fits-all answer to Don Rekko's question. But the comments made in the CIO Forum demonstrate that CIOs feel they deserve to report to the CEO—and not the CFO anymore.

When asked if he thinks the CIO should report to the CFO or CEO, Rekko says: "A CIO is like a drummer in a rock band: He's seldom in the limelight, and the fans mostly notice him when he misses a beat. Nevertheless, he should be on stage. I personally believe the CIO needs to earn a seat at the table and should not report to the CFO. The best way of earning this status is practicing what you preach and being proactive."

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