CIO reporting to the CFO: IT as cost center
In many cases, we see that the CIO reports to the CFO. What this usually means is that the CFO perceives the IT department as a cost center and will focus on cost cutting.
CFOs have an eye on improving the bottom line, so if the CIO is reporting to finance, the CIO typically needs to focus on reducing IT spend.
CFOs tend to discourage enterprise technology investments and otherwise instruct CIOs to keep IT costs low. In response, CIOs need to defer maintenance on IT systems and keep legacy systems running instead of turning to new, more modern technology. CFOs begrudgingly renew contracts and defer maintenance. Three- to four-year lifecycles turn into much longer lifecycles.
In the CIO-reporting-to-the-CFO structure, the CIO rarely has budget approval. If the CIO does have some budget approval, it tends to be at a low threshold, around $10,000 to $40,000. IT leadership autonomy tends to exist only for tactical Opex. The CFO tends to require approval for most IT costs, although the CEO will need to approve the largest expenditures.
The CIO-reporting-to-the-CFO structure works well only where commoditized, nonstrategic IT is adequate to support business goals. Some industries where this might make sense include smaller manufacturing companies, smaller community banks and companies where most IT functions are mostly outsourced. This CIO reporting structure only makes sense if the business fundamentally relies on cost savings and cost avoidance more than innovation.
