We often see that CFOs look inward at organizations when making decisions.
decision-making regarding investment in a new technology. However, we know that not
This is always the best way to make decisions when it comes to technology.
We've listed the 4 most important questions all CFOs should ask before making investment decisions in a new technology.
1.) Does this investment decision meet a current or future need?
Despite everything that has happened since the beginning of the COVID-19 pandemic, certain investment decisions have remained relatively constant. After all, companies' mission statements don't change with the arrival of the pandemic.
The basis for technology investment decisions hasn't changed; however, we've noticed that investment priorities are different. Therefore, when making a technology investment decision, it's crucial to analyze whether the decision will only meet a current need or also a future one.
2.) What metrics should CFOs consider when investing in technology?
It may not be a surprise, but return on investment (ROI) should always be the primary determining factor for the CFO when making decisions about investing in new technology.
ROI, however, can take different forms depending on the company's priorities.
There are value metrics that are easier to measure, such as the impact on revenue. Other elements of ROI are more complex to measure, such as process efficiency, reduction in the time spent on certain manual tasks, or even employee satisfaction.
Regardless of the metrics used to obtain a holistic view of ROI, CFOs should have a macro perspective regarding their technology investment decisions.
Leaders should focus more on analyzing the total cost of ownership (TCO) over a 3- to 5-year period, and not just on the initial implementation costs of a project.
3.) How should CFOs think about cloud solutions in the context of their technology strategy?
There has been a growing trend towards the cloud in recent years.
Some companies planned to migrate to the cloud; however, other companies, during this pandemic, had to become physically separated from their on-premise systems and had no choice but to switch over the past year.
Regardless of the reason, CFOs should embrace the cloud and assess its potential.
Business leaders tend to think of the cloud as an application strategy, but we know that a cloud strategy is much more comprehensive than that.
The CFO's role is to understand and communicate to the entire organization what decisions are being made, as they are part of broader process value chains.
A connected cloud experience, whether hybrid or hosted, captures all the interactions a company has with its stakeholders, both internal and external.
4.) Should CFOs still pursue larger transformations or make incremental investments? If so, what is the CFO's role in managing this change?
As discussed earlier, investment decisions often take ROI into account solely. Again, it's important to analyze an investment over a longer time horizon – understanding the total cost of ownership over 3 to 5 years.
CFOs are the point of connection between company executives and are best prepared to make changes if necessary. They can justify the financial impact of an investment and drive alignment between different areas of the company.
Conclusion
There are some key themes that encompass many issues that benefit all CFOs when it comes to analyzing technology investments:
– Don't operate in silos. Teams work more efficiently if all decisions are made collectively, that is, with everyone's collaboration.
– To disseminate your knowledge throughout the organization and connect all departments of the company.
– Develop a holistic approach to your technology decisions. Seek competitive advantage whenever possible and think long-term.
– Consider a technology investment on a 5-year timescale, for both resource and capital requirements.
