A CFO has many responsibilities, signing off on an investment in technology is one of them, this technology needs to add real business value and last a long time. CFOs want to make sure that they are using their budget efficiently and not adding any unwanted costs to technology investments.
A CFO will be looking to engage the expertise of key stakeholders, looking for a strong financial strategy to support the investment and make sure that the right decision is made for the desired future direction of the business. Significant investment decisions will always have an effect on business, whether these effects are positive or negative will be down to the judgement of the CFO when it comes to the investment. As a chief financial officer, asking the right questions and conducting sufficient research will be crucial when it comes to implementing a new technology.
In this article, we are going to examine some key questions that a CFO should be asking before making any significant investments in technology stacks for business needs.
Are tech investments cost efficient?
As a finance executive, one question a CFO should be asking themselves is if these tech investments are cost efficient. One instance in which the efficiency of investing in a more tech-based product can be seen is in the comparison between a cloud-based model, SaaS, and an on-premise model. By investing in a SaaS model, you are cutting out the added requirements of having this technology installed or maintained, as a cloud-based model does not come with day to day running costs and ongoing maintenance is the responsibility of the cloud provider. If you compare this with an on-premise model, which does require installation and maintenance, you can see how investing in a new technology such as a SaaS platform will save money in the long run- as there is no added cost of installation nor the maintenance costs that would likely be required if you are using an on-premise technology.
Outdated legacy technology should also be investigated when thinking about cost efficiency and technology maintenance. When it comes to legacy technology, the CFO should be asking themselves if this technology is costing us money in terms of maintenance, repairs and upgrades and is it time to move onto something more innovative and cost-effective? With the rapid technological advances of today's world, it is more likely that it is time to leave legacy technology behind, especially if it lacks flexibility or struggles to meet business needs.
Most legacy systems are no longer granted support or maintenance from their manufacturers and as employees come and go, sufficient knowledge of these systems can begin to decline. This then becomes an added responsibility to the upkeeping of your technology and would most likely add costs that could have been avoided if your business had invested in and implemented a more up to date technology.
Another factor to consider when thinking about maintenance costs, is if it is costing your business to have specialist IT staff around that run specific business applications. It might be time to ask if there is a better way. The answer may be yes, as updating and maintaining your software may not be necessary if you invest in a cloud-based system. When investing in a SaaS software, you get all the capabilities of a dedicated IT support team without the extra cost, and you get all the latest technology updates without any added upgrade fees. When it comes to financial management, these cost factors cannot be ignored.
Is the technology agile and flexible?
When considering investing in a new technology, you want to make sure that it is going to be agile and flexible. For example, when examining your business roadmap and it looks like your business needs to change its strategic course, the CFO should ask if this technology can adapt or will it mean being forced to spend big on something new. Such potential cost risks always need to be evaluated. Investing in a technology that is scalable and can fit in with your company needs, could be a valuable benefit to your business model. Likewise, if your investment turns out to be costly over the coming years, then it will have negative consequences in terms of cost to the business.
Any new technology that you are investing in needs to not only be scalable, but it also needs to be future proofed. Make sure that any investment that is made now will still be valid in five years’ time. With new technology, this might be a little bit difficult to determine. When conducting research, be sure to ask the manufacturers if their technology will be able to meet your requirements and perhaps take the time to seek the opinions and reviews of their existing customers. Also, seek out the views of the professionals within the company who will be using the new technology.
Furthermore, a CFO should ask themselves if the technology can handle significant increases in business volume and associated data volume. Will the technology be able to stand up to the pressure or will it become a burden instead of an ally? The last thing you want to do is invest in a new technology thinking it is going to be agile and powerful, only to realise that it is unable to keep pace with the expanding volume of your business and require you to come up with an expensive solution. Sufficient research should be carried out to determine the long-term suitability of any new technology investment.
Is my tech infrastructure fully secure?
As CFO, a vital question to consider when it comes to tech is if the infrastructure is secure. A data breach must always be avoided; therefore, a CFO and their financial team should be asking themselves how they can invest in something with the right level of security. Furthermore, asking if the key technology stacks within the business, which contain sensitive data, have the right levels of security is an important factor to consider.
Areas with connected data flows are also critical to look at - examples include tech stacks in human resources, payroll, and finance. If a data breach occurs within one of these areas, as a result of poor infrastructure security, then the integrity of all three is brought into doubt. A data breach will damage your company’s image and credibility and if the breach results in financial penalties, then those costs could be severe. As CFO, avoiding such costly issues is of crucial importance.
CFOs may also be keen to learn if the company is meeting all the necessary data security, GDPR, compliance and local country regulations with its technology stacks. These security risks could be a possibility with any legacy technology systems. Strong re-assurance on things like data security and information protection are important considerations for any chief financial officer looking to approve a technology investment.
Asking these questions may help steer CFOs in the right direction when it comes to making decisions and approving budget for technology investments. Taking the time to sufficiently evaluate any potential new technology for the business and getting clear on the business case for the spend may help CFOs to avoid any costly mistakes.
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