The CFO and CIO: a vital partnership for success 2. Shift the IT operating model emphasis from Capex to Opex 4. Work as peers Until recently, IT expenditure involved large capital outlays for data storage, “Good CIOs are starting to move out from underneath the CFO,” says infrastructure and enterprise applications. This has changed with the transition Ryerkerk. “It becomes a more collaborative peer relationship, as opposed to a to the cloud, software as a service (SaaS), and more flexible IT architecture. reporting one. That’s because firms are starting to see IT as a driver of growth The result is a shift in the IT operating model from Capex to Opex. CFOs must as opposed to a cost center.” work with CIOs to evaluate the economics of each model and determine the More often than not, however, CIOs still report to the CFO. Among our global blend of “rent versus buy” that is appropriate. sample, 72% say that the CIO reports through finance. According to our Adopting these new technologies fundamentally alters the role of IT. survey, this model is most dominant in China, India and Australia. This development, explored in EY’s Born to be digital, changes the “The CIO has to be capable and willing to take over business-related CIO-CFO relationship. initiatives,” says Matthias Waehren, CFO of Givaudan. “Being an equal “The way it used to work was that firms would agree upon the high-level goals colleague on the executive committee is therefore important.” of the organization, lay out an operating model, and throw it over the fence Percentage of CIOs that report through finance: for IT to implement,” says Dave Ryerkerk, Global IT Advisory Leader, EY. “With digital technology, the big difference is that CIOs get much more involved with CFOs in designing the firm’s operating model.” 91% 87% 77% 3. Manage risk exposures of new digital technologies The rise of digital technologies has been a key driver of closer collaboration China India Australia between CFOs and CIOs. There are two main aspects to this: • First, the need to transform business models and customer-facing aspects For some executives, this reporting line is no longer fit for purpose. of the company through digital tools and channels. This includes leveraging new data created by digital technology. “It’s inherently flawed,” says David Whiteing, CIO of Commonwealth Bank of • Second, the need to reinvent the IT function and business operations Australia. “If you look at the pace of change in technology, and the problems through the adoption of new technologies, such as big data and cloud, that businesses will face in the future, they require a cost-effective, quality taking into account concerns about cybersecurity and data privacy. resolution. And that invariably involves technology. If a key person is one layer away from the C-suite then, in my view, you’re missing something.” Across both these dimensions, there is an urgent need to manage emerging risk, while continuing to maximize the return on IT investment and keep costs within budget. Partnering for performance Part 3: the CFO and the CIO 8