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Scrutinizing It Spending

Amid budget constraints, CFOs get choosy about technology projects

By Staff Writer | Updated on February 01, 2002

At Dole Food Co., finance and IT staffs have worked together for years to determine what type of technology various departments need and whether the benefits justify the costs. “It’s really a kind of a teamwork approach to justifying the project, where information technology and finance work together to come up with the basis for the project and the financial costs and returns,” says CFO Kenneth Kay. But in recent months, a second step has been added to the budgeting process: Finance and IT now go back to see if their original estimates were correct. “In most cases, they’re pretty close,” says Kay. And it’s a good thing, too. Needless to say, no company is spending on every new technological bell or whistle anymore, and CFOs more than ever need to be able to demonstrate that any capital spending has a respectable return on investment. “In all cases the CFO needs to ensure that ROIs can be proved and needs to understand the difference between nice-to-have and something that’s mission-critical,” says John Von Decker, the program director for application-delivery strategies at research and consulting firm Meta Group Inc. Meta is one of the few tech think tanks predicting a decline in U.S. IT spending this year.

What’s more, companies want “a fairly quick payback” on that investment, says Jordan Graham, managing director for financial services in Cisco Inc.’s Internet business solutions group. He believes that the new frugality will actually turn out to be a good thing even after the recession ends. “It really helps prioritize IT spending,” says Graham, who consults with Cisco’s big global customers on how to leverage network applications.

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