“What we’ve got here is a failure to communicate.” The line from a 1967 film, “Cool Hand Luke,” starring Paul Newman, still resonates after so many years because it highlights a common problem:
People working within an organization usually don’t view the path to success in the same way.
When considering the outsourcing of IT responsibilities, Chief Information Officers (CIOs) often suffer communication disconnects when communicating with their Chief Financial Officers (CFOs).
What makes sense to a CIO often appears misguided to a CFO.
CIOs must convince their CFOs regarding the financial benefits of outsourcing IT services. Unfortunately, the information CIOs and CFOs convey simply goes past one another. It’s like they’re speaking two different languages.
The following are nine points that CIOs should consider when promoting IT outsourcing to their CFOs:
- Calculate the costs. Prepare to give detailed comparisons of in-house IT costs vs. outsourced IT costs. The comparison should include the CFO’s objections, and consider the impact of potential inflation, deflation, demand management and anticipated growth or contraction. This discussion my give your CFO pause. So prepare to make your case.
- Think like a CFO. Try to understand your CFO’s objectives so you can compile data from financial statements that proves your point. You might also consider adding financial staff to your IT department so they can help develop the statistics to support your argument
- Consider the what-ifs. CFOs worry about risk management; how will the outsourcing plan work if the business doubles in size; or if it sells one of its units? Be ready to explain how your IT plan will work under a variety of situations.
- Explain the non-financial values. List the cost-savings that would result from outsourcing IT, including how your company could meet compliance and security risks, and avoid potential penalties.
- Look at IT outsourcing from a different perspective. Outsourcing might save your IT department money, but it could also add costs in other areas, such as the cost of audits, travel, security or communications. Your CFO will look closely at these issues. Be ready to defend your case.
- Consider portfolio-management principles. CFOs consider business decisions as portfolio management. They’ll want to ensure outsourcing is a cost-saving methodology. Back this argument with statistics.
- Get the CFO to sign off on the terms. If you outsource IT, this may mean that you have to take on costs for updated infrastructure and remediation. Be sure to analyze the pricing schedules, necessary asset sales, and buyback provisions, as well as other aspects. Put your plan on paper before presenting this to your CFO.
- Why you want to keep some things in-house. Your plan may mean that some services remain in-house; explain why doing this is a good idea.
- Measuring success or failure. You’ll need to evaluate the success of outsourcing IT. Metrics are important for evaluating the impact on your business in the future, and your CFO will demand a method for evaluating the success of outsourcing IT. Do your homework!
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