(Podcast) Finance and the future of IT | Deloitte Insights

Effectively financing tech initiatives Insights In Depth: Tech Trends 2020

17 June 2020

IT and finance leaders are increasingly working together to operate at the speed of agile. Tanya talks with Scott Buchholz, Khalid Kark, and Brijesh Ammanath of Barclays about effectively financing tech initiatives.

Tanya Ott: Each year, Deloitte hosts the CFO Vision Conference, where CFO’s and executives at top companies gather to talk about the biggest issues they faced … and increasingly that means technology.

Now, chief financial officers and chief information officers are often cut from different cloth. Think nerds versus geeks, if you will. It’s a relationship that can be fraught with conflict.

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Khalid Kark: First off, it’s rare for me to get invited into a CFO conference.

Tanya: Khalid Kark is the research director for Deloitte’s CIO Program.

Khalid: It was interesting that we had prepared a presentation and we were ready to walk all the CFOs through our research on technology leaders and what they’re doing and what are some of their priorities, etcetera. And very quickly, as we went into the presentation, I realized that the CFOs were very interested and involved, not as much on where the CIO role is going, but really understanding where their tech spend was going. It felt like it was a black box to them, and they were asking questions around “why are we spending X% of our budget on this?” And, “I don’t understand. I don’t have any transparency.”

Tanya: The financial officers wanted to understand tech architecture, which surprised Khalid.

Khalid: So I had to kind of almost stop my presentation, go to the whiteboard, and draw out a technology architecture for them. A very simplistic one, obviously, but it just kind of showed that, one, tech budget has increased as an overall percentage of revenue and our data shows that, year over year. And the second thing was, they really wanted to go deep and understand what are some of the dimensions of that spend and how can they really ensure that the spending is done in a way that’s efficient [and] effective. Surprisingly for me, a lot of them were responsible for growth and they actually did want to spend a lot of money on growing the organization and growing the value of the tech investment.

Tanya: Growing the value of the company through tech … that’s what we’re talking about today on the Press Room.

Tanya I’m Tanya Ott. Khalid Kark is one [of] the guides for our conversation, and joining us are Scott Buchholz …

Scott Buchholz: I am the chief technology officer for Deloitte Government practice and I also am the Emerging Trends Research director, which means I get to lead our annual Technology Trends report.

Tanya: And Brijesh Ammanath.

Brijesh Ammanath: I’m the CIO for Trade and Working Capital technology team in Barclays. The Trade and Working Capital team works with clients to help them confidently trade both overseas and domestically by understanding the supply chain, mitigating risks, ensuring payment security, and maximizing working capital. What my team does for the business is primarily ensuring that we provide technology solutions for them, which allows them to ensure and provide services to their clients.

Tanya: I started by asking Khalid what it was like to be a CIO at a gathering of CFOs, because it’s kind of an odd pairing. They really do come at things a little bit differently.

Khalid: We did an exercise where we said, how would you describe your current tech leaders and what would be the ideal state? And (laughs) as you can imagine, there was a lot of interesting choice words being used. Out of the 25 or so people that were in the room, two or three had a positive word as a current state for how they viewed tech in general.

Again, it’s not because somebody is intentionally trying to hide things or whatever, but it’s because CIOs and CFOs come at it from very different perspectives on spend and very different understanding of how spend is allocated across different categories. So CIOs, when we ask them how much you’re spending and how you’re allocating, they roughly spend about 15% of their tech spending on innovation. For CFOs, sometimes that could be money that’s not really viewed as spend that’s done in a more efficient manner if it’s a high risk of failure and so on, so forth. So really, the conversations we have with both CIOs and CFOs is the translation of tech spend across different dimensions of risk and having a portfolio. And they understand financial language. They understand portfolio risk. They understand the view that you need to have across time horizons. And if we were able to hopefully translate it in the language of finance, think it’d be easier.

Again, tech is moving really fast. Finance really wants to understand and of course, all of these things are something that the CFO would want. And this is really the story around where the tech has shifted from currently our traditional model to more of an agile model. It’s important for us to think through and figure out how we’re going to translate tech language into something that CFOs can understand and can get behind. And I think a lot of it is lost in translation, often.

Tanya: Scott, when Khalid is talking about an agile model, he’s not talking about the agile software. Can you explain what he’s referencing when he says an agile model of tech and finance?

Scott: Traditionally what we do in software and in finance is we plan the plan, we work the plan, and then we put things out into the world. And that tends to be a very formal process. IT tends to know far in advance everything that we’re trying to do. What Khalid is talking about is really moving to a more agile model where we let our resources dictate what’s going to get done as opposed to dictating what’s going to get done and then trying to figure out our resources.

Tanya: Tech is changing a lot. You alluded to this. There’s a fundamental shift going on in tech budgets right now. Tell us a little bit more about that. Scott, what do we see happening?

Scott: There are a number of things that we’re seeing happen. Part of it is people are trying to figure out how they can go about funding innovation. And we have to remember this was research done in a pre-COVID world, but a lot of what we were seeing was people trying to figure out, how do we fund innovation? Innovation is fundamentally difficult to do. The likelihood of failure is much higher than traditional projects and the potential upside is more squishy. It’s harder to know exactly what you’re going to get for the effort you’re out again. That was causing a number of organizations challenges, because when they were accustomed to our traditional, “We know what we’re going to do, we anticipate what we’re going to get, we do it and then we measure” process. In this case, people were trying to say, “Let’s do an experiment with an unknown outcome and an unknown likelihood of success”—there was a lot more challenge in terms of people wrapping their heads around how that was going to work.

Tanya: And when we’re talking about these experiments, especially with the case of, say, technologies that will be disruptive, potentially the risk of failure can be pretty high. So how should CIOs and CFOs be thinking about that? What does that mean, for instance, for what the CFOs have to be able to communicate with shareholders, with analysts, investors, things like that?

Scott: The interesting thing is that we have devised methods for actually solving this problem in different spheres. We sometimes just forget we can reuse them inside the space of technology. If you look, we have venture capital companies that have portfolios of risky assets and the portfolio is actually the thing that takes care of the relative risk. We have option theory in financial trading. That’s the idea that you put a little money down and if you are correct, then you can make a lot of money. There are different ways of evaluating these things, of talking about them and thinking about them. That’s what leading organizations are starting to do. It’s place to focus differently, measure things differently, and, a little bit to Khalid’s point, try to move the relationship between the IT organization and the finance and accounting organization from one that’s more adversarial—or at least one that’s perhaps characterized by more incomprehension of one another—to one where people actually have a better understanding and appreciation of the other’s job, what they’re doing and how it works.

Tanya: Brijesh, I want to bring you into the conversation because Barclays is a company that’s more than 300 years old. So it has obviously seen a lot of change over the years. The company has been on a journey from being project-based to product-based. Talk to us a little bit about that journey. What prompted it?

Brijesh Ammanath: Barclays started the agile transformation enterprisewide journey somewhere in 2015. Prior to that, we had agile islands where teams were doing agile on their own, but it was not an enterprisewide initiative. It was primarily an IT initiative or development teams that started on that journey because they were championing it within their particular team.

When we started this journey in 2015, roughly 4% of our spend on change was delivered using agile principles and practices. When we started the journey, the idea was that we would bring it to all areas of our business. It was not just an IT initiative. And when I say the whole business, I mean HR, audit, legal, compliance, information security, fraud, anti-money laundering, governance, everything would be part of this transformation journey. What helped us was in 2017, Barclays also reorganized itself. We organized all our operations, technology, and general services into what we call transaction cycles. You could look at it as a business unit. Our transaction cycle represents a front-to-back process and solutions which are standardized and streamlined and which operate horizontally across the firm. This helped accelerate and deepen our focus on our customers with higher specialization, supporting greater business agility and reducing the time to market.

One of the biggest challenges an organization will face when trying to move from the project to product mindset is trying to elevate the thinking and culture from a project level to a product level: Broad thinking, rather than being focused on the output, is focused on the outcome. This is a significant shift from the mindset of project thinking, where you think about annual planning and milestones rather than the outcome. The transaction cycle model really helped us speed up on this journey. And right now, we are close to 100% of our change spend being delivered through the agile principles and practices.

Tanya: What was the biggest challenge the company faced in going through this process?

Brijesh: The biggest challenge was getting everybody onto the same page. Getting them to understand what the product mindset means, how do you adopt it, and how to move away from milestone-based delivery to an outcome-based delivery. Delivering value streams and building long-lived product teams takes time. It can’t be speeded up. It needs to allow people to understand the underlying drivers behind it, see the benefits, change their attitudes, and be part of the journey.

Scott: Barclays has been one of the leaders in trying to move to agile ways of working. What that means is not just agile software development within IT, but actually trying to use the ideas and principles of agile more broadly across their firm. And it’s really interesting to see the journey they’ve been on, the progress they’ve made, and, in a number of cases, the creative solutions they’ve come up with. They’ve been facing a number of the challenges, of trying to work with finance and accounting and other groups that have really important roles and looked at the world very differently, traditionally not in ways that are particularly compatible with agile. And they had to come up with a number of solutions for doing things that are important and that others can learn from.

Khalid: What Brijesh said, which was really important, is it’s not as much a process shift as it is a cultural shift within an organization. So oftentimes we find it hard for companies to make the move if that whole initiative starts and stays primarily technology- or IT-focused. So it’s really important to ensure as you go through that journey to have the right partnership, have the right collaboration across the organization. And that’s where the CFO comes in, really to provide that support and that executive sponsorship across the organization. And CIOs and CFOs can work together to really drive that into the culture of the organization and not just make it a technology-led initiative.

Tanya: How can we help these two branches communicate more clearly as they’re trying to work together toward these ends?

Khalid: A lot of it is translation, but we have opportunities today where the biggest issue that the CFO would have is if you’re going to spend the money, having the right amount of transparency around it. And today, there are multiple shifts going on that have a huge impact on finance. For example, the shift from capital expense to operational expense in moving to the cloud has shifted a lot of the spend patterns within technology. There are large transformations going on which require significant funding over years across multiple dimensions and so on. Then there is this agile kind of effort which requires iterative funding, iterative stage gates, etc. All of those changes are relatively new for the CFO, and many are, rightly so, concerned about how are you going to fund all this? And, yes, there are obviously internal mechanisms to fund it, but you can be a little bit more creative as well around funding. There are vendors, especially cloud vendors, that could offer vendor subsidies. You can look across industry consortia to see where you can get that funding. You can look across your ecosystem. For example, we work with a CIO who, because they didn’t have funding for innovation, they engaged with a local university and used researchers there to process through an innovation that they were looking at. And then there’s obviously the ability to think through carve-outs and thinking through how you can creatively take out funding by carving out a portion of your tech function and allocating funding through that.

There are multiple ways to fund, multiple ways to measure, multiple ways to think through the issues that may be contentious for CIOs and CFOs. It’s just a matter of understanding that both of them have the goal to grow the organization. Both of them have the goal to ensure that it’s done in a fashion that’s responsible. And both these functions have the role to do it in a fashion, especially today, that makes the organization a lot more resilient.

Scott: I think there are a number of lessons that people can take away. The spirit of a lot of them are really about partnership. So what you heard Brijesh talk about is there’s now more of a partnership between the business, between finance, between IT, within Barclays. They’re all the same team, all pulling forward together. He also talked about partnership across the ecosystem. Actually working with the vendors and the product vendors and others to align things so that everybody is aligning timelines and delivery and other things so that it continues to generate value for the business in a way that’s consistent across all of the activity that’s going on. The spirit of that is really important because when you look at it, the spirit of the chapter and the trend is really all about, how do we make sure that everybody’s working together? How do we make sure that people are communicating in ways that one another can understand? In some cases, how do we make sure that we’re helping educate one another on what it is that’s important to us? And Brijesh is doing a really nice job of helping all of us understand and reminding us how important that collaboration and partnership really is to our collective success.

Tanya: And Khalid, we started with you and your story about talking with the CFOs at the conference. I’d like to come back to you now at the end and just have you riff a little bit on this idea of what’s coming next.

Khalid: I feel fundamentally that that technology function is at an inflection point, where there’s a lot of change going on and, especially with current circumstances, there is going to be reallocation of funds. There is going to be reallocation of looking across the horizon with different risk lens and so on. And companies where CIOs and CFOs work together are really bound to go forward on the journey that Scott talked about, that Brijesh is talking about, which is that collaboration across the organization that’s needed. And guess what? There are companies that are starting to do this and they’re your competition. And there’s almost this notion of people who understand this shift and are able to navigate their organizations through this shift are going to be much more successful at making the right investments, making the right collaboration choices, and moving forward. I want to take a positive spin on going forward. I feel that this is an area that’s ripe for really great collaboration across the board for CIOs and CFOs.

Brijesh: The leadership team will make it or break it. It’s very important to have the senior most leadership team to be supportive of this transformation because it involves all areas of their firm.

Scott: This is a really important journey, and to Brijesh’s point, leadership is very important. It’s the time when CIOs can take the initiative and walk over to build a better partnership with the CFO in their organization, if they haven’t already done it, and encourage the people who work for them on both sides to do so as well.

Tanya: Brijesh, Khalid, Scott ... thank you so much for the conversation today.

Brijesh, Khalid, Scott: Thank you.

Tanya: Brijesh Ammanath is the CIO for the Trade and Working Capital technology team at Barclays. He’s based in Mumbai, India.

Khalid Kark is the research director for Deloitte’s CIO Program.

And Scott Buchholz is the chief technology officer for Deloitte Government practice. He leads the annual Technology Trends report—which you can find at our website Deloitte.com/insights.

You can also connect with us on Twitter at @DeloitteInsight. I’m on Twitter at @tanyaott1. We’ll have another podcast in two weeks, so stay tuned … and just a reminder, if you subscribe to the podcast you won’t miss it! I’m Tanya Ott. Be well.

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