Why CFOs Can’t Rely on Spreadsheets to Manage Technology Spend
Spreadsheets have to be the biggest viral invention. They are everywhere, and without even realising it, most businesses have a complete dependency on them. Dependency on the technology, as well as (and more importantly) a dependency on a small set of people with the skills to manually manage impressive complexity.
Finance Monthly hears from Colin Rowland from Apptio who asks the question: “Is this a trustworthy way to manage spend that is often billions of dollars across thousands of vendors and contracts, hundreds of employees, and more?”
Since the spreadsheet was popularised in the 80s, it has become the tool of choice for CFOs managing data and tracking costs across businesses. But in today’s digital age, spreadsheets are too cumbersome, slow, complex and constantly changing, to provide truly comprehensive oversight of costs and data in business.
Nowhere is this more evident than in managing technology spend, and it is abundantly clear that the IT department needs to upgrade its approach in order to properly provide CFOs with the monetary direction necessary to make smart, informed and strategic budgeting and investment decisions.
CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department. With Gartner predicting that by 2022 businesses will be spending more than $3.9 trillion on IT, there is a huge level of pressure on finance professionals who need to track and manage these outgoings.
CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department.
Kickstarting the culture change
To kickstart a move away from managing spend in static spreadsheets, organisations need to implement a culture change when it comes to technology, tracking spend, and understanding value of investments. Once viewed as simply a running cost of the business, technology is now a key deliverer of business value and revenue generation. That means the way investments are tracked, managed and communicated needs to be clear, open and transparent between IT and the business in a way that was previously unnecessary.
One method some organisations are adopting is the discipline of Technology Business Management (TBM). It focuses on providing a practical framework for finance and IT leaders seeking to manage and communicate the value of technology spend. It encourages translating IT usage and cost data from a list of bills into a source of business intelligence that can drive digital innovation. This allows the CFO to make more informed decisions when it comes to IT spending.
However, legacy tools simply don’t provide the added value needed to enable the communication and discussion needed around technology costs. It’s effective for data input and manipulation, but that’s no longer enough when complex technology costs need to be given to finance leaders in a digestible manner. Where this budgeting data is stored in various spreadsheets that are all siloed from one another, it can be nearly impossible to settle upon a single source of truth for the overall figures.
Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.
Managing technology costs using… technology
This is where custom tools come in. They can provide additional capabilities and processes that enable businesses to not only accurately track their IT costs, but analyse them quickly and effectively, providing insights which are intelligible for those not well-versed in technology. And the more advanced technology solutions will be able to leverage machine learning to make this automated and free up employee time and resources for more value-additive work.
IT and finance leaders can then work together to drive forward business strategy based upon this knowledge. Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.
Take the complex nature of public cloud spend, for example. A pay-as-you-go costing structure generates masses of data in by-the-minute billings that need to be tracked; meaning there is no guaranteed regular monthly spend to budget against. Even the most finely-tuned spreadsheet would struggle to track the thousands of lines on a cloud bill from separate business units, especially when many businesses are now embracing cloud services from multiple vendors.
The agility that disciplines such as multi-cloud bring also means that businesses must be prepared to adapt their cloud strategy quickly to suit their needs. Approaches that work now may be obsolete in three months’ time, and it is necessary to have a solid framework and the right tools to allow such changes to progress smoothly. For example, using Apptio’s TBM solutions, Unilever was able to move away from legacy infrastructure to cloud and increase the company’s digital innovation budget by more than 20% to provide consumers with an ‘intelligent’ buying experience online and in-store.
When it comes to technology, using spreadsheets to track and manage spend is holding businesses back.
Another complicating factor is the staffing cost associated with manning spreadsheets. Consolidating various spreadsheets to get a transparent view of IT spend can be a painstaking task, taking many hours and potentially resulting in human error. Custom tools can work to streamline and speed up these processes, while ensuring that errors do not occur. This allows IT teams to spend their time more effectively elsewhere, improving the overall efficiency of the department.
When it comes to technology, using spreadsheets to track and manage spend is holding businesses back. While custom tools may necessitate an upfront investment, they are undoubtedly worthwhile as a flexible long-term solution, providing agility, speed and clarity where spreadsheets cannot. By using such tools in conjunction with the principles of TBM, CFOs and the IT department can move away from spreadsheets and work towards a partnership in which insights into technology spend form a key part of the business’s ongoing strategy.