CFO Dive says worldwide IT spending is about to increase again — by more than 6% this year. If anything, the C-suite has accelerated its push toward digital transformation. Is this the right approach? Maybe, but there are mistakes CFOs should take care to avoid in the coming year.
Failing to manage vendor spend
Third-party vendors have a tendency to proliferate across departments, spiraling spending out of control. The use of third-party vendors is increasing even as companies move to cut costs in other areas. But these aren’t static expenses. What can your company do to manage contractors effectively?
In a good year, the 30% wasted spend on IT isn’t a concern, but as COVID-19 infections increase again, fear of additional supply chain disruptions — harmful to everyone in a demand economy — have businesses looking to limit vendor spending amid new economic red flags. Recovery may yet be a bumpy ride.
To manage vendor spending, contract management is an obvious first step. The fast shift to remote work dramatically increased the volume of vendors during the operational pinch of crisis mode. Many CFOs reclassified capital expenditures as operating expenses to allow for departmental autonomy during 2020’s scramble to the cloud. Giving departments more leeway on spending allowed them enough flexibility to keep the lights on. Vendor choices — made quickly in response to the emergency — may prove redundant and wasteful upon further review.
Failing to manage change
Change management is hard enough during volatile times, but it grows more complex when the necessary response shifts half, or more, of your workforce off site. CFO Dive says, “A financial executive needs a plan for informing and rallying every group.”
This may prompt an eye roll from managers who barely had time to set up remote teams — let alone secure the necessary buy-in to adapt to COVID-19 restrictions. Now, CFOs must find time to engage crucial teams in transparent efforts to understand the whys of corporate decision-making. It’s a good way to encourage teams struggling with burnout inflicted by market upheavals. The entire C-suite must discuss the needs, wants, and priorities of the various stakeholders their decisions will affect. This is particularly true during digital transformation.
Failing to keep moving toward digital transformation
Business needs digital transformation now more than ever, but CIOs must develop plans based on business strategy and metrics — and work with CFOs to meet best practices. Most companies can’t afford much risk, especially when numbers show 70% of digital transformation initiatives fail. This doesn’t mean shutting transformation down. Instead, your company should connect every investment back to business strategy, and work to engage internal resources to ensure the success of digital initiatives. As the Harvard Business Review reports, “Often new technologies can fail to improve organizational productivity not because of fundamental flaws in the technology but because intimate insider knowledge has been overlooked.”
With this in mind, CFOs should continue to be budget hawks while also allowing for strategic digital transformation initiatives. Efforts must begin with a well-defined roadmap and established milestones for justifying strategic efforts. If your business is considering replacing legacy technologies, determine how the older platform accrues costs versus prospective new tools. Understand the skills employees require for the successful deployment of new tools to mitigate end-user reluctance. From an IT perspective, it’s not feasible to halt digital transformation, but managing costs effectively will ultimately streamline modernization and ensure your new technology suits your company’s needs.
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