Facing An IT FutureFacing An IT Future

It will come as no surprise that being tech-savvy is mandatory for today's chief financial officers. "Everything we CFOs touch involves technology," says Chuck Warczak, senior VP, treasurer, and CFO at Sunburst Hospitality Corp. in Silver Springs, Md., a $175 million franchisee of 62 Comfort Inns, Clarion, and other hotel properties. "CFOs get involved in every department within the company."

What may be surprising is the growing number of companies where CFOs have gained significant influence--sometimes outright control--over IT. As companies weave information technology through every aspect of their businesses, and bottom-line concerns exert greater influence on those strategies, the CFO's controlling hand can be seen more and more in technology's deployment.

Equifax Inc., the nation's largest credit-reporting agency, is typical of many companies. "I'm involved in all strategic decisions, including how we use technology to get ourselves into new markets and improve efficiency, profitability, and shareholder value," says Phil Mazzilli, executive VP and CFO at the $2 billion Atlanta company. IT is seen as the virtual manufacturing plant for Equifax's credit-reporting products, so Mazzilli and his team get involved with IT initiatives from the start, working with the chief technology officer--Virgil Gardaya, Equifax's top IT executive--to build a business case for projects and provide return on investment scenarios. "I'll talk to the people who report to the CTO, since I need to understand the project from a business perspective," he says.

He's not alone. A survey conducted earlier this year by staffing services firm Robert Half International Inc., found that 44% of the 1,400 CFOs responding say technology know-how is the most important skill financial professionals must possess after financial expertise. More than eight out of 10 of the CFOs surveyed say their accounting departments have become immersed in IT initiatives as they become more dependent on technology to do their jobs, which require them to analyze and often cost-justify technology deployment throughout their companies.

The results confirm an earlier survey showing that nearly two of five CFOs see their involvement in IT initiatives growing in the next five years. "The CFO has been called upon to bridge the gap between technology and the business world," says Paul McDonald, executive director of RHI Management Resources, a Robert Half International unit that provides financial consulting.

That responsibility has made the future of the CFO position far from clear. Some observers say conflict is inevitable as CIOs and CFOs vie for the top IT post. Others envision a day when the CIO's responsibilities will be absorbed into the those of the CFO--or vice versa. Either way, the evolving role of the CFO exemplifies the intertwining of business strategy, finance, and IT.

Ever since the first textbook on debits and credits was published in 1492, financial professionals have built careers on the science of bean counting and disseminating the resulting information. "We've got 500 years' experience at measuring financial performance, and we're really good at that," says Julie Smith David, a former IS director who's now an associate professor at Arizona State University. But much of that work is now automated, and more of it will be soon.

Convinced that the sciences of accounting and IT are on convergent paths, Arizona State merged the two disciplines five years ago to create the School of Accounting and Information Management. "We've tried to blend the two from an educational standpoint in reaction to what's going on in the corporate world," David says. (For more on accounting programs, see "Changes In Accounting Education".)

The future for financial managers, says David, lies in understanding company information, then using it to direct the business. They must help drive employee satisfaction, customer satisfaction, and quality levels, and the emerging technologies designed to improve those metrics. They must become experts in business processes, IT, and performance management. "A person in a financial role must have a much broader understanding of an organization and its environment and be able to help operations succeed," David says.

A key goal of CRM software, for example, is to determine the value of individual customers and the profits they'll deliver to the company during their relationship with it. As the technology matures and companies become more dependent on it, financial professionals must have a deeper understanding of CRM apps--not only to approve the right software purchases, but to use the information in their own jobs every day. "If CFOs don't understand the software, what it's doing, and how it's set up, they can make some really inappropriate decisions," David says. "It may not be the CFO's job to collect the data, but the CFO has to be involved in the technology to make decisions about it."

The first job Al Wright held upon earning a bachelor's degree in economics from Cornell University in 1969 was as a systems analyst for Atlanta energy company Southern Co. Wright is now executive VP and chief financial and administrative officer at CMS Energy Inc., a $9 billion energy producer in Dearborn, Mich., and he credits his background in IT for his ability to scale back IT projects to make them more financially feasible. For instance, the utility is implementing a Web-based supply-chain system to link with the company's equipment suppliers. Company technologists initially sought to build the system themselves, but Wright nixed that idea. He estimated that the cost of a homegrown system--about $20 million--would be greater than the savings it would deliver in its first few years of operation. Instead, he suggested the company use shrink-wrapped solutions that will cut the cost of the system in half.

PBD Worldwide Fulfillment Services in Alpharetta, Ga., has no CIO. The company's CFO, Dave Ferguson, is the person most responsible for finding ways to use IT to benefit the business, which does $40 million in annual sales. "The role I try to fulfill is one of a liaison between the business people and the technology people," he says. PBD Worldwide provides warehouse space and product fulfillment services. Several years ago, its clients started clamoring for the company to automate its fulfillment services on the Web. Ferguson realized that PBD Worldwide could cut administrative costs by having customers place orders online.

PBD Worldwide's first effort at a Web storefront failed, and Ferguson says that he and other company executives learned lessons about IT the hard way. The Web storefront didn't integrate well with the company's J.D. Edwards-based enterprise resource planning system, so they went back to the drawing board and built a new storefront using IBM's Net.commerce and Websphere software that provided the technical links to the ERP system. The company has had the $500,000 system in place for about 15 months and anticipates a return on its investment within two years.

Ferguson has led the storefront project and serves as the main contact at the company for IBM, but he doesn't have a tech background. He was an accounting major at the University of Georgia, where he earned a bachelor's degree in business administration. He became a certified public accountant and worked as a financial consultant at Arthur Andersen before joining PBD Worldwide in 1994. The company promoted him from VP of finance three years ago into the newly created position of CFO.

Signing off on big investments is part of Ferguson's job, but a host of other IT-related responsibilities were associated with the E-commerce investment: ensuring the software would integrate well with existing systems, that the IT infrastructure didn't get too fragmented, and that the system could scale with company growth. The IT director reports to Ferguson and is responsible for helping him address those responsibilities, but the director's job is also to run the IT organization.

To many, Ferguson's role would seem to be the exception. After all, many CIOs have moved into the role of key business strategist, someone who helps operations people use information to meet key business goals. If the job of today's CIO involves much more than implementing and managing IT systems and extends into understanding, manipulating, and using data to address current and future business issues, where does that leave the future CFO?

In an ideal world, the CIO and CFO work as partners, one shoring up the other's weaknesses, says Arizona State's David. But in some cases, conflicts and power struggles arise. "If CFOs are to survive, they must be more well-rounded," says David. "They'll see some competition from CIOs. Someone in the organization has to be the business partner and make strategic decisions. It's up for grabs who that will be. CIOs have the head start, but this role could end up with either one."

Conflicts will arise if the CFO views the CIO as someone intent on splurging, rather than someone who has a deep respect for the relationship between IT and the bottom line. "My experience with IT folks is they want the latest and greatest and most expensive things they can get," says John Southern, acting CFO at CareSouth Home Health Services Inc. in Augusta, Ga. "CFOs need to be a lot more knowledgeable about IT or make sure they've got the right folks on the ground within the company." CareSouth employs a CIO who works on a contract basis.

In his role as an IBM marketing executive for global customer solutions, Jack Wagner works regularly with CFOs to develop E-business solutions to facilitate collaboration among business partners. "CFOs are asking a whole different set of questions than they did years ago," he says. "Then, they asked, 'How much does it cost?' IT was an investment in plumbing. Now, the CFOs on the leading edge of the curve ask, 'How is this IT investment going to change my business?' They're decision creators vs. expense approvers."

Wagner sees an alignment among CFOs, CIOs, and the line-of-business executive whose division is most affected by the IT system being implemented. Among the three executives, he says, "the one setting the direction of the discussion is the CFO. These enterprise applications aren't trivial back-room IT products; they run your business. That's why decisions are elevated to the CFO level."

Constantine Konstans, a professor of management at the University of Texas at Dallas, imagines a day when all employees are tech-savvy. When that occurs, the oversight of IT within a company could likely change. "I envision a time when the CFO assumes the CIO job, especially as IT becomes a basic--not separate--component of business," Konstans says. "The CFO should be the primary provider of information to management at all levels of the business. To keep the overall information-system structure efficient, effective, and consistent, there needs to be at some point a merging of those talents."

Still, most CFOs interviewed for this story don't see the job of the CIO disappearing. Today's CFOs devote themselves to a wide range of strategic tasks, including oversight of cash management, financing purchases, managing capital, mergers and acquisitions, joint ventures, investor relations, and forecasting. Even tech-savvy CFOs don't have the time to devote to the intricacies of IT, and they must rely on the CIO for nitty-gritty technical expertise.

"It's a different level of involvement," says Jim Parke, CFO and vice chairman at General Electric Capital Corp., the $66.2 billion financial arm of General Electric Co. Parke strongly believes in IT's ability to reduce costs, boost productivity, and improve efficiency. In recent months, the company has implemented software that automates the collection of customer-service data, a job that previously took 65 people. An application recently implemented by GE's Fleet Services unit has reduced automobile-order-completion time from eight days to two minutes and cut the error rate on car orders from 45% to nearly zero.

Parke doesn't see the CIO and CFO roles merging, because CFOs will need a CIO "unless they want to go stark-raving mad. I can't and don't want to be a technology expert," he says. "Technology changes so rapidly, I need to rely on someone who breathes it every day."

Obtaining such guidance isn't difficult for Equifax CFO Mazzilli, thanks to the layout of the executive floor at the credit-reporting agency. Top executives, including CEO Tom Chapman, work in an open area on the headquarters' top floor, where an open-door policy is taken literally: None of the offices have doors. Diagonal to Mazzilli's office is the workspace of CTO Gardaya, and Mazzilli often strolls over to the CTO's office to chat about IT. "As a company, we're moving at warp speed, and I need to consult with someone who has technical expertise," Mazzilli says. Bob Verheecke, CFO at CacheFlow Inc., a $29 million content-distribution company in Sunnyvale, Calif., says it would be a mistake for companies to combine the CFO and CIO positions. "An organization needs to have a combination of senior executives who can complement each other," he says. One of Verheecke's first missions at CacheFlow, which he joined May 1, is to work with CIO Tanya Dins to aggregate company information and deliver it to decision makers. Data warehouses and data marts of financial and customer information are key projects, as are Web-based technologies for delivering information to managers. The increasing importance of the CFO over the past two decades parallels the enormous impact IT has had throughout business. The CFO's job has always been about information, such as maintaining financial accounts. As IT has matured, collecting data from throughout the business and allowing for sophisticated financial analysis, the CFO has evolved from a top-ranked accountant to a top-ranked strategist. Analytical applications, CRM systems, and data warehouses are among the technologies CFOs must be versed in. "It's the ability to turn data into real information, collecting it and distributing it to users so they can make decisions," Verheecke says. "In my role as CFO, I'm stepping further into that role of information architect." When CIO Rory MacDowell was charged with implementing a $120 million Baan ERP system at Flowserve Corp., he worked closely with the company's CFO, Renee Hornbaker, to bring costs into line. Then a new CEO, Scott Greer, came on board--and the Baan plan was turned upside down. Greer wanted to grow Flowserve through acquisitions, and because any merged companies might be using different ERP systems, replacing them with a single platform could prove costly for the $1.5 billion maker of mechanical pumps, seals, and valves. So Hornbaker, who sees her job as an intermediary between the CEO and CIO, helped the chief executive settle on a strategy, then briefed MacDowell on the financial impact of the new approach and worked with him to develop a cost-efficient alternative. In the end, the Irving, Texas, company approved the use of three ERP systems--from Baan, Frontstep, and Oracle--most likely to be used by companies in the flow-management and services industry. By not moving to a single platform, Hornbaker says, Flowserve achieved 80% of the promised single-platform ERP functionality at half the cost of the $120 million Baan system. "My job is to think strategically and work as a confidant to the CEO and an adviser and to the other senior managers," Hornbaker says. "One of the key things a CFO does is help provide information that can be used for business decision making."

MacDowell, who's on equal footing with Hornbaker in Flowserve's executive hierarchy, says the shift in ERP strategy wasn't a repudiation of his earlier efforts, but a continuation of the goal to standardize systems. "These acquired companies have workable ERP systems, so it makes no sense to replace them with Baan," MacDowell says, adding that IT and finance are closely integrated at Flowserve. "Renee and I spend a lot of time together talking about our business, what she's trying to accomplish, and how IT can support her," he says. "She's the most knowledgeable person in the company about IT. That helps me talk to her about our business goals, and how IT and finance can support the business." A lot has changed since Dennis Bandish first became a CFO. "Twenty years ago, IT was nothing more than a back-office transactional-processing system," he says. "IT decisions were based on ROI and cost benefit. I see IT now as more of a critical operation of a company." In 1997, an old friend of Bandish's took over the top spot at Michigan Millers Mutual Insurance, a $100 million company in East Lansing, Mich.; he brought in Brandish a year later. In 1999, the company launched a major initiative to modernize its IT infrastructure. Bandish says previous management was always looking to cut business costs by delaying a strategic plan for technology. "When times became difficult, IT was always cut back," he says. "Now a lot of catching up has to be done." Bandish says CFOs must embrace technology or risk losing influence on the executive team. "CFOs have to ramp up knowledge of technology so they can explain it to other executives," he says. "They also have to be aware of the leverage that can be obtained through technology, which is a constantly changing situation." To help drive that point home, Bandish is chairing a technology conference for CFOs in September.

Increasingly, top financial officers come from a technical background. Sunburst's Warczak, once a VP of IS at another hospitality company, was VP of finance and systems when he was promoted to CFO last September. Hornbaker, once the VP of IS at convenience store operator Circle K Corp., briefly headed IT at Flowserve before her elevation to CFO in late 1997. And Equifax's Mazzilli spent his first 18 years after graduating from Cornell at IBM in a variety of financial positions, including a stint as a divisional VP of finance in which the unit's IT department reported to him. CacheFlow's Verheecke has taken his IT involvement a step further--he's made application development a part of his job. While holding CFO positions at various Silicon Valley companies, Verheecke has written simple prototype applications for decision support and other business needs, using HTML and drag-and-drop development tools. Then he presents the prototype to the IT department, which develops a custom version and handles the networking and security. "It's a way for me to get my ideas across to IT and other business users," Verheecke says. Verheecke has worked at technology companies through much of his 25-year career. "As an undergrad, I took engineering courses and always had an interest in technology and how things work," he says. "At companies where I was CFO, I developed a strong technical background, understanding the uses of technology and how to apply them." Verheecke doesn't think most CFOs need a background like his. But more than ever, he says, CFOs must understand both technology and the factors that drive the business. "As business becomes more complex, people want information," he says. A CFO who can define business factors can direct IT to capture the data related to them, and present it to the right people. Dewey Norton, CFO at Avista Laboratories in Seattle, says a smart CIO will make the CFO an ally. Norton developed an interest in computers in the 1960s, when he attended the University of Pennsylvania, home of the post-World War II computer, Eniac. "As I went through school, I heard stories about all this interesting stuff," he says. "I wanted to be a part of that." Norton has served as vice chairman of the committee on finance and IT for Financial Executives International, an organization for financial professionals, and he makes it his goal to get less-technical CFOs looped into the world of IT. "I've always had faith in IT, that it can support decision making and improve productivity," he says. With millions of dollars at stake in IT expenditures, a little skepticism may not be a bad thing. "Through my career, we've blindly gone out and spent dollars on technology based on recommendations from people who say they know what they're doing," says Sunburst's Warczak. "When senior management isn't tech-savvy, there's nobody to validate that." For companies that deem IT a core competency, it's incumbent on the CFO to understand the risks, point them out, and suggest ways to deal with them. "If you screw up, it's extra difficult to get out of the mess you've created," Avista's Norton says. Wright says his IT experience taught him that options always exist. "There's never a single solution," he says. "There's rarely a problem that someone else hasn't solved before and addressed in some form." Regardless of the tack they take, there's no doubt that CFOs play a greater role in determining how IT is deployed as their job and technology become intertwined. "Financial managers have to respect the power of technology and align themselves with that to enhance shareholder values," says University of Texas' Konstans. "That's ultimately what it's all about." --with Marianne Kolbasuk McGee Photo of Warczak by Scott Robinson
Photo of Mazzilli by Tova Baruch