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With technology playing such a significant role in business operations — and IT projects in some cases costing millions of dollars — it makes sense for the finance department to have a big role in deciding which IT investments will be approved. In fact, IT and finance have long had a working relationship, and in lots of organizations the top IT executive reports to the CFO.

But in recent years it has become even more imperative that the two disciplines work closely together to meet corporate goals. One reason for the trend is the emergence of government regulations such as the Sarbanes-Oxley Act. Another is the increasing reliance on IT governance programs, which help organizations decide where to invest their IT dollars, track the progress of those investments over time, and prioritize IT initiatives based on strategic business goals.

And given the high stakes of technology deployments from an economic standpoint, it’s a good risk management practice to have finance involved in the planning of IT initiatives.

“Major IT projects have a considerable economic impact on corporations and nonprofit organizations,” says Ruben Melendez, president and CEO of Glomark-Governan , a consulting firm that helps organizations forecast and track the value of technology investments. “If the potential impact on cash flow is not carefully forecast and assessed prior to implementation, the project [might] fail.”

While IT professionals are experts in technology and its implementation, they often lack the skills necessary to perform detailed financial assessments, Melendez says. “Conversely, finance professionals are skilled in performing cost-benefit and cash-flow analyses, but often overlook or don’t understand the technology and operational effects of an IT project,” he says. For this reason, IT managers should invite internal — and in some cases external — financial analysts to participate in and review their business cases before launching a project, Melendez says.

In fact, many IT undertakings fail because of economic reasons. “CIOs and CFOs pull the plug on IT projects when they see that the project is incurring considerably higher costs than expected” and the benefits are not realized within the expected time frame, Melendez says.

Finance executives such as the CFO should play a significant role in helping to create an IT governance program. Governance provides the guidelines and accountability to hold managers and their staff responsible for following internal rules set by finance and accounting, Melendez says. “This method of management ensures that employees (e.g., IT staff) maintain their projects, assets and budgets with the best interest of the shareholders in mind,” he says.

Clearly, the threat of fines from lack of compliance with government and industry regulations has been a huge driver of tighter controls and closer ties between IT and finance. But governance isn’t just about being compliant. “IT governance must go beyond Sarbanes-Oxley,” Melendez says. “It should include guidelines and processes that ensure IT projects and assets produce the greatest ROI [return on investment]” and a positive impact on a company's profitability, he says.

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