5 ms·

Finance is an excellent place to start. It's very common for IT directors to report to the CFO - not the CIO or CTO, but the chief financial officer. CFO's are

Finance is an excellent place to start. It's very common for IT directors to report to the CFO - not the CIO or CTO, but the chief financial officer. CFO's are (ideally) great at saving money, and it's likely they will begin to do so by pinching pennies within IT. Think about that - someone who has an entire career around a specific discipline(finance) directly governing another discipline(IT). They cannot hope to make informed decisions based on the current state of the industry unless they are neglecting their primary responsibility of finance. tldr; yes, "starting with finance" is a good way to transform IT.

jjeaff 5y ago
That doesn't make any sense at all. What is the thought process behind putting IT under finance? Seems like if you don't have a cto or cio then reporting to a coo or even ceo makes more sense than cfo.
- austincheney 5y ago
  IT is a cost center and very expensive.
  - xxpor 5y ago
    This is fundamentally what Europe especially and some non-tech large US firms don't get. Repeat after me: software development *is not* IT. IT is the department that hands out laptops and buys office licenses from MS. Software Engineering is a product development group. They're two entirely different functions. IT can make sense to have under the CFO, but product development almost never does.
    - walshemj 5y ago
      Not everyone makes that hard distinction
      - xxpor 5y ago
        And that's the problem!
    - 908B64B197 5y ago
      > IT can make sense to have under the CFO, but product development almost never does. Just get a CTO. But seriously, it's always hilarious to listen to non-tech companies pitch how they can pivot to becoming a "tech company just like Google" while following none of the practices in SV. Developers still working for "IT", cost cutting and penny pinching. No free food of course...
      - fallingknife 5y ago
        C_O's are expensive.
    - austincheney 5y ago
      This is only true if you are a software company that makes money selling or servicing software. I work at a mega bank and we produce tons of software. It’s still a cost center, a means to an end. The only distinction I see is that software developers want to believe they are somehow more special than everybody else.
      - xxpor 5y ago
        I mean, everything is a means to an end to make money. Google isn't selling ad tech software, they're selling space on websites to advertise. The tech is just a means to an end for that. The companies that recognize this are the successful ones, and the ones who don't fail eventually. Even John Deere sees the light here. Why do you think they have all of the DRM BS? The value comes from the software.
    - PeterisP 5y ago
      Most software engineers are employed in companies whose product is not software but something else; and their "software products" - which may consume many developers - is not a product, but workflow support for the people making/selling the actual product of the company.
  - orev 5y ago
    That’s only if you take a naive view of IT (which most people do because it’s the lazy approach). Laptops, servers, networks, email boxes, etc. should all be charged back to the departments those are actually being provided to. When you do that, suddenly IT is making a lot of (internal) money, and the business can see where the costs actually are. IT is also not nearly as expensive as other types of businesses that require huge capital investment, like farming equipment, factory assembly lines, biotech reactors, etc.
    - mason55 5y ago
      IMO, if you're going to charge everything back to the business units then you also need to provide some kind of consulting-style services, or best practices, or guidebooks, or something. Otherwise you lose a lot of your economies of scale because each business unit is trying to figure out the best way to do things. Or you end up with shadow IT all over the place because the BUs come up with cheaper but unsanctioned/unsupported ways to do things. You also need a way to objectively evaluate how IT is performing. If the business units are going to third parties because IT is unresponsive or overly "expensive" then the exec team needs a way to see that. When IT is responsible for the IT budget then they have incentive to minimize costs and it's easy to do budget reviews. When the business units have to pay that budget then IT acts as a monopoly with little incentive to improve service or reduce prices and it's much harder to find the shadow IT that's being implemented to get around bad internal IT. There's no one perfect answer.
      - orev 5y ago
        You make very good points. This kind of system only works with strong support from the CEO, where everyone is firmly “on the same team” and has designated positions to play (e.g. IT has to provide the IT stuff). Once you allow shopping around within the company or externally, you end up in a shitshow. It’s still better than the typical approach, where everyone is just angry at IT all the time “because they are such a drag with so many expenses”. Outside of the extremely dysfunctional cases, charging everything back to business units is at least the more honest approach.
    - tomnipotent 5y ago
- papandada 5y ago
  This is just a guess, but for some companies at some point in their lifespan, finance and IT were the people who sat at computers all day.
- Spooky23 5y ago
  Cash is ultimately truth in the business. You can bullshit people night and day, but the bank account doesn’t lie. In my experience as an IT person, IT people are almost always full of shit when they talk money or roi. Usually when you think the tech team has their money story together, it’s because they are growing and you can hide mistakes in growth. Once growth slows, you realize there’s some dude making $250k and nobody knows what he does. Or that you’re paying $1M/month for AWS charges that you cannot track back to revenue. Or that you’re running a data center that full of end of life equipment that isn’t used or brand new equipment that was never commissioned. So the CEO brings in the bean counters to rein in the nonsense.
  - tomnipotent 5y ago
    > Usually when you think the tech team has their money story together, it’s because they are growing and you can hide mistakes in growth. Great insight, and mirrors my own experience a lot. > you realize there’s some dude making $250k and nobody knows what he does I've been through this situation several times as a CTO. CEO's can come off as Jekyll and Hyde, one day shouting at you to hire, hire, hire and then giving you flak about those same hires when things don't go as planned.
  - rodgerd 5y ago
    > roi ROI and it's cousin TCO should be useful terms, but it's been so twisted and bastardised that it's basically a useless metric. Everyone has some bullshit story that shows that if you give them millions now they'll deliver a lower ROI or TCO.
  - walshemj 5y ago
    So just because you know how to count the $ does not mean you know or are competent to decide how it is deployed or see the bigger picture.
    - Spooky23 5y ago
      Agreed, and actually many times the money people are complete idiots. But if you’re not growing, the obvious way to make more money is to spend less. Many companies get away with this for decades.
- SimianSci 5y ago
  IT can be a money sink for finance, under the wrong direction. I joined a firm recovering from this very problem. The previous IT director spent wildly and justified every purchase to finance who trusted their judgement. When the bills finally came due it almost put the firm under and the IT director left.
- andrewlgood 5y ago
  When I have seen this done, it is because the CEO does not want to get into the details of IT. At that point IT needs to report to someone. There may or may not be a COO. Sometimes see it reporting to a Chief Administrative Officer (CAO), but as landryraccoon points out above, this is not the case when technology is the core product of the company.
shoto_io 5y ago
In my experience it’s a bit more nuanced than that. My experience is that IT and finance people simply have a very difficult time communicating with each other properly. They are different type of people and speak different languages. A CFO will be very open to invest if he’s convinced that there is a clear return on invest. Many IT folks don’t want to bothered thinking from that perspective. If you want to have an easy life learn how to speak with your board, especially the CFO. PS: that’s one of the core reasons some IT guys get management consultants to do the translation job.
- mistrial9 5y ago
  security; worker health & safety; responsible waste disposal, etc... are inevitably costs through the lens of a quarterly financial summary.
  - andrewlgood 5y ago
    They are, as are salaries. Let me propose it this way, how much do you think the company should spend on responsible waste disposal? 10 dollars? 10 thousand dollars? 10 million dollars? 10 billion dollars? Why do you pick the number you did? What is the benefit to the company of making the investment? Those answers should be the start of the conversation on whether to make the investment.
ajsnigrutin 5y ago
IT is just a cost... it doesn't create anything, doesn't produce anything, ROI is zero... ...but without IT, everything else stops, and usually people think about that only when IT departments get so "skinny", that things fail... and then they get blamed for that too.
EvanAnderson 5y ago
IT reporting to a CFO or a comptroller has been common in my experience. Understanding the language and process of basic bookkeeping and simple accounting has given me me immense traction with finance people. When I demonstrate even a rudimentary understanding of the metrics and reports finance uses (understanding what financial statements communicate, tax ramifications of CapEx vs OpEx, cost of money, etc) the trust level and willingness to listen goes up tremendously. Stand-offish and distant relationships became more concrete and productive when finance people realize I'm not spouting techno-bullshit for bullshit's (or techno's) sake. Anybody with serious IT management aspirations in the private sector really should have a reasonable amount of business knowledge. An IT operation, both the in-house and contracted services components, should be considered an internal business unit. It should be evaluated on the expenses it charges-back to the revenue-generating business units, and on the gains in revenue it creates by driving efficiency. Knowing the metrics that finance will use to evaluate an IT operation allows you to make a case for improving those metrics.
markus_zhang 5y ago
I think it's usually the other way around. Bean counters drive IT professionals around.
landryraccoon 5y ago
No company where the core product is technology should have an engineering team that reports to the CFO. At a bank or in retail sure, it may make sense for IT to report to the CFO. At a healthcare proivder or insurance company, ok sure that makes sense. In that case, IT is really just another part of the plumbing because the core product isn't really technology anyway. The blog post is moot because the technology itself will have a minimal impact on the value added by the company, which is elsewhere, and nobody in IT is likely to have a seat at the product discussion table anyway. But at a technology company? One where the core value add is software products or services or hardware? I don't believe it. I simply don't think that any company that places management of technology based core value added products under the CFO can succeed. If there happens to be some company out there that has this structure, I'd treat them as having a big target on their back - they're ripe for disruption by a company where technology leads.

jjeaff 5y ago

That doesn't make any sense at all. What is the thought process behind putting IT under finance? Seems like if you don't have a cto or cio then reporting to a coo or even ceo makes more sense than cfo.

austincheney 5y ago
IT is a cost center and very expensive.
- xxpor 5y ago
  This is fundamentally what Europe especially and some non-tech large US firms don't get. Repeat after me: software development *is not* IT. IT is the department that hands out laptops and buys office licenses from MS. Software Engineering is a product development group. They're two entirely different functions. IT can make sense to have under the CFO, but product development almost never does.
  - walshemj 5y ago
    Not everyone makes that hard distinction
    - xxpor 5y ago
      And that's the problem!
  - 908B64B197 5y ago
    > IT can make sense to have under the CFO, but product development almost never does. Just get a CTO. But seriously, it's always hilarious to listen to non-tech companies pitch how they can pivot to becoming a "tech company just like Google" while following none of the practices in SV. Developers still working for "IT", cost cutting and penny pinching. No free food of course...
    - fallingknife 5y ago
      C_O's are expensive.
  - austincheney 5y ago
    This is only true if you are a software company that makes money selling or servicing software. I work at a mega bank and we produce tons of software. It’s still a cost center, a means to an end. The only distinction I see is that software developers want to believe they are somehow more special than everybody else.
    - xxpor 5y ago
      I mean, everything is a means to an end to make money. Google isn't selling ad tech software, they're selling space on websites to advertise. The tech is just a means to an end for that. The companies that recognize this are the successful ones, and the ones who don't fail eventually. Even John Deere sees the light here. Why do you think they have all of the DRM BS? The value comes from the software.
  - PeterisP 5y ago
    Most software engineers are employed in companies whose product is not software but something else; and their "software products" - which may consume many developers - is not a product, but workflow support for the people making/selling the actual product of the company.
- orev 5y ago
  That’s only if you take a naive view of IT (which most people do because it’s the lazy approach). Laptops, servers, networks, email boxes, etc. should all be charged back to the departments those are actually being provided to. When you do that, suddenly IT is making a lot of (internal) money, and the business can see where the costs actually are. IT is also not nearly as expensive as other types of businesses that require huge capital investment, like farming equipment, factory assembly lines, biotech reactors, etc.
  - mason55 5y ago
    IMO, if you're going to charge everything back to the business units then you also need to provide some kind of consulting-style services, or best practices, or guidebooks, or something. Otherwise you lose a lot of your economies of scale because each business unit is trying to figure out the best way to do things. Or you end up with shadow IT all over the place because the BUs come up with cheaper but unsanctioned/unsupported ways to do things. You also need a way to objectively evaluate how IT is performing. If the business units are going to third parties because IT is unresponsive or overly "expensive" then the exec team needs a way to see that. When IT is responsible for the IT budget then they have incentive to minimize costs and it's easy to do budget reviews. When the business units have to pay that budget then IT acts as a monopoly with little incentive to improve service or reduce prices and it's much harder to find the shadow IT that's being implemented to get around bad internal IT. There's no one perfect answer.
    - orev 5y ago
      You make very good points. This kind of system only works with strong support from the CEO, where everyone is firmly “on the same team” and has designated positions to play (e.g. IT has to provide the IT stuff). Once you allow shopping around within the company or externally, you end up in a shitshow. It’s still better than the typical approach, where everyone is just angry at IT all the time “because they are such a drag with so many expenses”. Outside of the extremely dysfunctional cases, charging everything back to business units is at least the more honest approach.
  - tomnipotent 5y ago
papandada 5y ago
This is just a guess, but for some companies at some point in their lifespan, finance and IT were the people who sat at computers all day.
Spooky23 5y ago
Cash is ultimately truth in the business. You can bullshit people night and day, but the bank account doesn’t lie. In my experience as an IT person, IT people are almost always full of shit when they talk money or roi. Usually when you think the tech team has their money story together, it’s because they are growing and you can hide mistakes in growth. Once growth slows, you realize there’s some dude making $250k and nobody knows what he does. Or that you’re paying $1M/month for AWS charges that you cannot track back to revenue. Or that you’re running a data center that full of end of life equipment that isn’t used or brand new equipment that was never commissioned. So the CEO brings in the bean counters to rein in the nonsense.
- tomnipotent 5y ago
  > Usually when you think the tech team has their money story together, it’s because they are growing and you can hide mistakes in growth. Great insight, and mirrors my own experience a lot. > you realize there’s some dude making $250k and nobody knows what he does I've been through this situation several times as a CTO. CEO's can come off as Jekyll and Hyde, one day shouting at you to hire, hire, hire and then giving you flak about those same hires when things don't go as planned.
- rodgerd 5y ago
  > roi ROI and it's cousin TCO should be useful terms, but it's been so twisted and bastardised that it's basically a useless metric. Everyone has some bullshit story that shows that if you give them millions now they'll deliver a lower ROI or TCO.
- walshemj 5y ago
  So just because you know how to count the $ does not mean you know or are competent to decide how it is deployed or see the bigger picture.
  - Spooky23 5y ago
    Agreed, and actually many times the money people are complete idiots. But if you’re not growing, the obvious way to make more money is to spend less. Many companies get away with this for decades.
SimianSci 5y ago
IT can be a money sink for finance, under the wrong direction. I joined a firm recovering from this very problem. The previous IT director spent wildly and justified every purchase to finance who trusted their judgement. When the bills finally came due it almost put the firm under and the IT director left.
andrewlgood 5y ago
When I have seen this done, it is because the CEO does not want to get into the details of IT. At that point IT needs to report to someone. There may or may not be a COO. Sometimes see it reporting to a Chief Administrative Officer (CAO), but as landryraccoon points out above, this is not the case when technology is the core product of the company.

shoto_io 5y ago

In my experience it’s a bit more nuanced than that. My experience is that IT and finance people simply have a very difficult time communicating with each other properly. They are different type of people and speak different languages. A CFO will be very open to invest if he’s convinced that there is a clear return on invest. Many IT folks don’t want to bothered thinking from that perspective. If you want to have an easy life learn how to speak with your board, especially the CFO. PS: that’s one of the core reasons some IT guys get management consultants to do the translation job.

mistrial9 5y ago
security; worker health & safety; responsible waste disposal, etc... are inevitably costs through the lens of a quarterly financial summary.
- andrewlgood 5y ago
  They are, as are salaries. Let me propose it this way, how much do you think the company should spend on responsible waste disposal? 10 dollars? 10 thousand dollars? 10 million dollars? 10 billion dollars? Why do you pick the number you did? What is the benefit to the company of making the investment? Those answers should be the start of the conversation on whether to make the investment.

ajsnigrutin 5y ago

IT is just a cost... it doesn't create anything, doesn't produce anything, ROI is zero... ...but without IT, everything else stops, and usually people think about that only when IT departments get so "skinny", that things fail... and then they get blamed for that too.

EvanAnderson 5y ago

IT reporting to a CFO or a comptroller has been common in my experience. Understanding the language and process of basic bookkeeping and simple accounting has given me me immense traction with finance people. When I demonstrate even a rudimentary understanding of the metrics and reports finance uses (understanding what financial statements communicate, tax ramifications of CapEx vs OpEx, cost of money, etc) the trust level and willingness to listen goes up tremendously. Stand-offish and distant relationships became more concrete and productive when finance people realize I'm not spouting techno-bullshit for bullshit's (or techno's) sake. Anybody with serious IT management aspirations in the private sector really should have a reasonable amount of business knowledge. An IT operation, both the in-house and contracted services components, should be considered an internal business unit. It should be evaluated on the expenses it charges-back to the revenue-generating business units, and on the gains in revenue it creates by driving efficiency. Knowing the metrics that finance will use to evaluate an IT operation allows you to make a case for improving those metrics.

markus_zhang 5y ago

I think it's usually the other way around. Bean counters drive IT professionals around.

landryraccoon 5y ago

No company where the core product is technology should have an engineering team that reports to the CFO. At a bank or in retail sure, it may make sense for IT to report to the CFO. At a healthcare proivder or insurance company, ok sure that makes sense. In that case, IT is really just another part of the plumbing because the core product isn't really technology anyway. The blog post is moot because the technology itself will have a minimal impact on the value added by the company, which is elsewhere, and nobody in IT is likely to have a seat at the product discussion table anyway. But at a technology company? One where the core value add is software products or services or hardware? I don't believe it. I simply don't think that any company that places management of technology based core value added products under the CFO can succeed. If there happens to be some company out there that has this structure, I'd treat them as having a big target on their back - they're ripe for disruption by a company where technology leads.