Why the CFO Needs to Mind the IT Disruption Gap
What is the disruption gap? How does technology and communication affect your end of year figures? How can you oversee all processes without a digital transformation? This week, Finance Monthly heard from Matt Fisher, VP of Marketing at Snow Software, who gives us all the answers and then some.
With digital transformation becoming ever more crucial to business success, the way organisations procure IT is changing. “In 2016, just 17% of IT spending is controlled outside of the IT organization. That represents a significant decline from 38% in 2012. By 2020, Gartner predicts that large enterprises with a strong digital business focus or aspiration will see business unit IT increase to 50% of enterprise IT spending.” [1] Technology budgets are moving away from a central technology department towards being the responsibility of the business unit using it. From HR procuring its own payroll software to business development choosing the best sales programme, a visibility gap is forming between what exists in the technology estate and what CIOs can measure. This gap is called the disruption gap.
However, the CIO is not the only C-suite member the disruption gap will affect. If not handled correctly, it could prove troublesome for the CFO too. The reasons for this are three-fold:
Digital transformation
Digital transformation is now key for any CFO tasked with ensuring their business is future proof. It is defined as the application of digital technologies to fundamentally change and update all aspects of business and society. The benefits of digital transformation include lower costs and improved accountability with the replacement of physical or analogue processes and interaction with digital equivalents to save time. By empowering business units to identify their own digital needs, organisations will be able to maintain agility and competitive advantage. Crucially for CFOs, this also means the ability to make one thing: profit.
Losing financial control
While the role of the CIO is changing with digital transformation, a key role of the CFO remains the same: to guard against over-spend. However, with IT budgets moving towards individual teams, a gap is forming between the knowledge of how much a budget is and what it is being spent on. Gartner [2] estimates that “by 2019, annual spending on enterprise software licenses will decrease by 30% as a result of software license optimization.”. This is with IT controlling 83 per cent of the spend. Imagine what it will be like when 50 per cent of IT spend rests not with a handful of budget holders, but potentially hundreds.
Lack of visibility
With software spend disseminated throughout an organisation, it will become increasingly difficult for IT teams to establish a clear view over what software is deployed where and how many licenses are needed compared to those held.
This loss of visibility will, in turn, increase the likelihood of unexpected and unbudgeted costs hitting the financial team, either through unplanned technology acquisitions or financial penalties issued by software and infrastructure providers for over-use of applications and cloud resources.
On the flip side, by empowering IT teams to achieve 100% visibility of all IT consumption across all platforms, the finance and IT teams can collaborate to identify significant cost and efficiency savings which can have a tangible impact on the organisation’s bottom line.
Either way, it’s in the CFO’s best interest to find a way to manage the disruption gap now and avoid unnecessary costs later.
Take action today
Bridging the disruption gap has to be a high priority for IT and finance leaders. As leading industry analyst firm Gartner[1] advises: “the focus of the software asset management discipline needs to shift from compliance to cost containment, as reduced customer bargaining power produces escalating prices at SaaS contract renewal.”
To achieve this visibility, IT teams need specialist solutions that provide full visibility of software and hardware assets (both on the network and in the cloud, physical and virtual) and how they are being used. Traditional IT Asset Management and Systems Management tools will not suffice. These teams need access to the latest breed of inventory and optimization technologies designed for organizations heavily invested in Digital Transformation.
