The New CFO Financial Leadership Manual, Second Edition

Chapter 4. Information Technology Strategy

The CFO is sometimes assigned to supervise the information technology (IT) function. Even if she is not, the CFO should have a strong interest in this area, since it can require a great deal of capital investment. Companies tend to invest too much money in IT, or at least spend it on the wrong projects, because they do not invest the time up-front to determine how IT can most effectively dovetail into the overall business strategy. In this chapter, we will look at why IT strategy is important to the CFO, how to properly develop an IT strategy, and what specific IT projects are likely to be of value, depending on the general type of business strategy that a company intends to follow.

Reasons for Devising an Information Technology Strategy

The standard corporate approach to the development of an IT strategy is to continue the funding of existing projects, and to approve funding for additional projects as presented by the IT manager until a predetermined cap on expenditures is reached. This approach completely avoids any linkage of IT investments to a company’s overall business strategy, likely resulting in lost opportunities to improve the business. However, there are several IT decision points at which a CFO could insert the need for a complete evaluation of the IT strategy, thereby creating a closer fit between IT projects and the general business direction. They are:

• When merging entities. When a company acquires another company, there will ...