Bulletproofing the IT Budget

As the recession rolls on, there’s no question that budgets will be further scrutinized. As a CIO it’s time—if you haven’t done so already—to get your hands dirty.

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Translation: CIOs need to look harder than ever at the IT budget before it hits the CFO’s desk. But they also need to get involved in shaping an organization’s financial decisions. “CIOs have to use their past experience while realizing the rules of the game are changed and will change more,” says Bart Snell, who was CFO of IBM’s semiconductor operations in the early 1990s. Snell and other CFOs share their advice for how you can accomplish both goals.

With the IT budget, says Snell, CIOs should examine core needs (bandwidth, Internet, phone and staff) and plan to manage them on a minimal investment. To do that, explore reducing excess capacity in the server room, renegotiate vendor contracts and rethink software licenses, he says.

Timberland CFO John Crimmins suggests shortening the payback time on IT projects to less than a year before you even think about showing them to the CFO. Snell agrees: CIOs need to focus more on ROI and choose which projects to pursue and which to push back. Crimmins also suggests looking at hardware replacement time lines. Timberland’s IT department found instances where it could extend the life of a system or device to save money. “It doesn’t hurt to revisit those assumptions,” he says.

One reason CFOs struggle with IT budgets is that CIOs tend to “collect” specific, niche tools when times are good, says ex-CFO David Walter, now a product manager at Archer Technologies, which supplies GRC solutions. Now is not the time to have an overabundance of tools that IT isn’t fully utilizing, he adds. Consolidating them is a key task for the CIO because while saving money is important, the company also needs to have the proper technology to maintain business objectives, he says. At HSBC, Walter completed a project where the CIO and CFO worked together to consolidate five financial and audit tools into one, which cut costs and enhanced communication between departments.

CIOs also need to join the financial decision-making process and put their ideas on the table for how technology will drive the changes, says Snell. This can be a “great opportunity to challenge the IT staff to use their creativity,” he says. For instance, have them work with finance on a project such as processing client payments. “Pulling cash into the company is important,” he says. “The CIO can make sure this happens in the most effective and efficient way.”

IT can also help customers do business more easily with your company, says Crimmins. At Timberland, IT helped streamline the online ordering process for wholesale customers, making it easier for Crimmins to track that revenue flow. “CFOs love to hear about improvements that help the customer experience and save money,” he says.

Both CFOs and CIOs need to remember to maintain a healthy balance between staying on strategy and managing financial performance, says Crimmins. Not investing in things that could be important when the economy turns around can come back to bite you, he says.

Jarina D’Auria is a Boston-based freelance writer.