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17.07.19 | Azure | TechFree | Blog

Why 60% of CFOs are NOT involved in technological decision making for their organization

According to our recent survey of CTOs, CFOs and business developers in Norwegian companies ranging in size from 350 to 1000 employees, 60% of CFOs are not involved in decision making on cloud technology in their organization. This statement in itself would not be a big surprise since strategic choices about technology are usually led by CTOs. However, the statistic becomes more interesting when looking at cloud technology specifically. It should be pointed out that, on a global scale, it’s the financial directors who are increasingly driving the shift to cloud computing. Therefore, two big questions remain:

1) why should CFOs care about cloud technology decision making, and...

2) why are they not more involved already?

Why CFOs should care about the cloud

It makes sense that busy CFOs, who have their hands full controlling budgets and ensuring financial stability for their company, are less inclined to take a deep look at the technical specifications of new solutions. After all, CTOs have a much stronger technological background that allow them to better understand new innovations and products and make decision more efficiently. However, when a technology offers incredible value to financial directors and their management of finances, a strong case can be made for them to get involved in the decision making, at least at minimum level.

As it stands, cloud technology fits this criteria since it has the disruptive power to deliver several advantages for CFOs, as can be seen in this graphic:atlas_V1Oi5iwF@2x.png

Source: https://www.theatlas.com/charts/V1Oi5iwF

The 3 biggest benefits for financial directors stemming from the application of cloud technology come down to flexibility, costs savings and speed. The cloud offers CFOs more flexibility to easily scale up or down depending on storage and usage needs without facing any lock-in effects. Moreover, it also helps finance reduce and manage costs since cloud services are usually cheaper and fall under operating expenditure, rather than capital expenditures since they don’t require any physical infrastructure like server rooms. Finally, the cloud makes companies more productive as it connects the workforce, provides them with the latest technologies and limits disruptions and IT problems.

Why CFOs are not involved in cloud technology decisions

cfo analyzing financial report

With all this cloud technology benefits for finance being so evident, why are financial directors not playing a bigger role in decision making? There are several explanations for this:

They care about strategy, not tech specs

The main focus of CFOs might be on shifting more data and services to the cloud. Thus, as long as the strategic decision to go for cloud solutions is made, they might not feel the need to be involved in any details about which specific cloud providers are selected. Costs will be cut either way and productivity should also improve, so they might prefer to let CTOs and other decision makers with technical backgrounds choose which solutions are best for the company.

Competitive markets force fair prices

A Lumagate research reveals that 90% of CFO’s think there is enough information about cloud technology today and that the cloud services industry has become a more mature market. That could indicate that financial directors believe that prices are already at a fair equilibrium. These facts might also explain why CFOs don’t list costs as their main priority when selecting a cloud technology and why they may be less involved in the decision making process.

They trust their CTOs

Our research has found that 80% of financial directors get information about cloud services from their CTO or IT department while only 20% search for information about cloud technology themselves. By and large, this might be a sign that CFOs hold their technical counterparts in high esteem and are confident that they can make the best choices.

By the way: It’s NOT all about price for CFOs!

Even if CFOs get involved in cloud decisions, their goals might not be what you would expect. According to our research, only 30% of financial managers list price as one of their top priorities when choosing cloud services as security (70%) and stability (40%) take the top spots.

financial charts analyzed by a CFO

Conclusion

CFOs have a hectic life as it is. While they are usually in favour of transition towards cloud solutions and understand their benefits, they currently don’t seem to have a compelling enough reason to be involved in the decision making progress. However, with the cloud computing market growing at a 19% CAGR and set to reach $162M by 2020, this may change in the near future. Let’s not forget, 40% of finance managers are already part of the decision making process for cloud solutions in their respective businesses. With more and more business functions being delivered through the cloud, this figure will increase too.

As you can see from this post, cloud services affects several parts of an organization. We have made a framework of how to successfully design, implement and utilize cloud services in your organization which concerns all aspects that must be in place for a successful cloud journey. 

Download the Cloud Journey here

 

Jakob Li

Service Delivery Manager with focus on Agile Business Processes and DevOps at Lumagate in Sweden.

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