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CFO Says IT Not a Cost Center

Southern Company is a model of stability. As the dominant utility holding company in the Southeast, Southern has paid a ...

By Richard Pastore

July 01, 2005 — CIO —

Southern Company is a model of stability. As the dominant utility holding company in the Southeast, Southern has paid a dividend to shareholders every year since 1948. It’s made Fortune’s list of America’s most admired companies for the past three years, with high satisfaction ratings on reliable service from its 4 million electric customers. Meanwhile, the company’s retail rates are 15 percent below the national average.

To maintain this low-cost, high-level service, and to keep those dividends coming, Southern leverages IT to drive efficiency and reduce risk across its five major utility companies and cross-enterprise business functions. At the same time, Southern needs IT to be a responsive growth enabler for its more aggressive, competitive businesses—such as wholesalers Southern Power, Southern Company Gas and Southern Telecom.

Tom Fanning became executive vice president and CFO at Atlanta-based Southern in 2003. Fanning, 48, joined the fold in 1980. Although he most recently served as president and CEO of subsidiary Gulf Power, much of his Southern career has been as a CFO for its subsidiaries. (His master’s degree from Georgia Tech is in finance.) However, he also did a stint in the mid-1990s as Southern’s CIO, initiating wholesale restructuring of the IT function, centralizing authority for IT, and launching a chargeback program to build transparency and financial discipline (see "Seeing Is Believing").

An exultant Boston Red Sox fan, Fanning eagerly shows off his Sox memorabilia to a Massachusetts-based visitor and points out the friendly war he wages with office rival Mary Weaver, executive assistant to the chief marketing officer, a flagrant Yankees fan whose prominently displayed team ball Fanning must pass by daily. Fanning spoke with former CIO Editor Richard Pastore about how IT reduces risk, why CIOs should not report to CFOs and how IT governance works at Southern.

CIO: Most CIOs bristle when people label IT a utility—something that mainly keeps the lights on. But one could assume the one place that label would be accurate and appropriate would be at a utility company. Do you see IT’s role that way at Southern?

Tom Fanning: No. For us, IT is a differentiator. It is absolutely in Southern Company’s interest to keep prices as low as they can be. Our success is driven in part by running the most efficient systems we can and, therefore, relying less and less on rate increases. So from a financial perspective, the differentiator is how we create an efficient infrastructure.

What’s a good example of how IT has made a competitively efficient infrastructure?

 

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