Selling technology internally to your CFO
Companies are spending more on technology than ever before. In 2023, Gartner predicts that worldwide IT spending will reach $4.3 trillion, with a significant portion of that budget allocated to digital transformation projects. However, in the current economic climate, the cost of capital has gone up along with interest rates, while typical pay-back periods have shrunk from five to three years. Therefore, the Internal Rate of Return (IRR) for new technology projects must meet a higher standard than in previous years.
As a result, finance leaders are now more involved in the technology decision-making process than ever before. They're looking to make sure that investment made in technology solutions aligns with business objectives, is cost-effective, and delivers measurable ROI. However, in a recent Accenture study, 67% of CFOs feel overwhelmed by the number and volume of decisions they need to make. So, it means that if you are going to submit an idea to them, you need to provide a clearly articulated argument for spending approval.
In this blog, we'll explore the types of solutions that are gaining traction in an uncertain economy, the type of data you should expect to deliver to your CFO, and tips for gaining buy-in from your finance team.
Making it easy for your CFO to say yes.
When searching for new technology, it's essential to identify the right type of solutions that will align with business objectives and deliver measurable ROI. Here are a few elements to look for when prioritizing technology investments:
- Multi-solution platforms: Purchasing separate systems in a “Best-of-breed” strategy may sound attractive, but usually results in duplicated costs. Worse, separate systems will require additional management overhead and integration. On the other hand, investing in a multi-solution platform can significantly improve efficiency and reduce maintenance costs.
- Scalable solutions: Solutions should be able to smoothly expand and adapt to a company's changing needs, from start-up to world-class enterprise levels. Beware of solutions that require large stepwise replacements or additional infrastructure when you hit capacity limits.
- Fast realization of measurable ROI: Projects that deliver quick returns will be prioritized over projects with longer payback periods. As a result, projects requiring minimal training and cutover adjustment will always be preferred over more disruptive projects. Likewise, project performance that can be measured using simple metrics are preferred over “soft benefits” when comparing projects.
What does your CFO need to know?
To make a strong case for your proposed IT project, it's essential to provide your CFO with critical information in a clear and concise format. Plan to:
- Align to key business objectives: The project should align with the company's strategic objectives. Therefore, you should identify the key business objectives, including measurable KPIs, that the technology investment aims to support.
- Detail the benefits of the investment: Quantify the potential benefits of the investment in terms of cost savings, improved efficiency, increased revenue, and other measurable Return on Investment (ROI) metrics.
- Calculate the total cost of the investment: It's essential to consider the upfront and ongoing costs of the investment, including hardware, software, and training costs.
- Estimate the payback period: Calculate the time it will take for the investment to pay for itself based on the estimated ROI.
- Identify potential risks: Where possible, define potential risks to the project and plans to mitigate them before the risks occur. For example, a complex cutover may require hiring a contractor or Service Provider who has successfully completed similar projects.
Pro Tip: The Business Value Assessment
Over time, most organizations develop standardized templates and approval processes to make investment decisions. These typically look at ROI and payback periods for a project, but those can vary widely. Therefore, Egnyte has created a process called the Business Value Assessment to assist customers in analyzing the investment that also reflects experience across a broad range of organizations and industries.
A Business Value Assessment (BVA) can help buyers understand the critical aspects of managing their data by measuring current maturity and identifying where it would be most beneficial to improve. A BVA includes cost, benefit, and risk factors that affect the investment decision by exploring scenarios for potential and expected impacts. Challenges are aligned to top business goals to establish clear expectations for business outcomes, beyond features and functionality. Business goals are then aligned to recommendations and outcomes, ensuring results return the desired business value. An established framework is used for value measurement to ensure clarity, resonance, and shared ownership that all stakeholders can rally around as an ongoing value realization program. The duration of a typical business value assessment is about three weeks and requires three one-hour meetings.
Egnyte has performed more than 300 BVAs for companies ranging from large, global enterprises to small and mid-sized regional firms. A few examples of Egnyte customers that have leveraged this complimentary service include engineering firms American Engineering Testing (AET) and Schnabel Engineering, and the advertising agency, Guided by Good.
Tips for working with your CFO
Proposing an IT project to your CFO requires a strategic approach that aligns with business objectives and delivers measurable ROI. To gain buy-in from your finance team, it's crucial to provide them with a well thought through assessment of business value that quantifies the potential benefits of the investment. Involving the finance team earlier in the process can help align the business, finance, and IT teams, ultimately leading to a successful outcome.
- Bolster your proposal with facts, not opinions. It’s important to narrow your focus to the project at hand, and avoid the temptation to discuss your department, long-term strategies, and vendors.
- Do your homework to capture all the relevant information the CFO may ask for. Know the types and sizes of projects that can get approved at various signature approval levels.
- Focus on cost savings and cost avoidance with defensible numbers and information. You don’t have to show all steps in your calculations but have them as backup if needed.
- Be concise. Present an executive-level summary, backed by detailed data. You need solid, quantifiable benefits and supporting analysis. Include a financial model so that the CFO can understand the assumptions surrounding the analysis.
- Be realistic. Don’t stretch numbers or make unfounded assumptions to support your case. If conservative assumptions strain the financial model, explain that. You may even want to introduce a model using “Best case/Worst Case/Most Likely Case”. The CFO may have experience in other areas to point out similar situations and can help narrow the uncertainty.
- Be objective. Clearly, the CFO expects you to propose a project that you believe in. However, if you can clearly articulate the risks and potential downsides before the CFO does, you can maintain your credibility. If necessary, bring in a consultant or contractor for another opinion.
- Provide a measurable plan. Not all the money will need to be spent up front. Your plan should include a schedule that shows financial outlays over time for the project. Sometimes, assigning costs to different quarters may simplify budgeting.
By following these tips, you can confidently propose your IT project to your finance team.
If you are interested in Egnyte’s complimentary Business Value Assessment, contact your Egnyte representative.
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