CFOs, CIOs & IT SPENDING.

Economic cycles touch the budgets in every corner of the corporation. Requests that fly through approval in good times face the gauntlet when times turn sour. And although trumpeted as the savior of corporations, the growth of information technology has created an additional challenge for financial executives. How do you manage the IT budget in good times and bad?

Evidence indicates that Corporate America hasn't found the answer yet, and this deficiency has created significant discomfort among management teams about how well IT budgets can be controlled, regardless of the macroeconomic environment. According to a recent article in CIO magazine, just 14 percent of CFOs participating in a recent survey by Comdisco believe IT budgets are under control, and only 36 percent believe chief information officers can control IT spending.

Citing this tension, Financial Executive asked the following question of companies in a variety of industries: Does the CI (or equivalent) in your company report to the CFO? If so, what are the benefits of such an arrangement? If not, are you comfortable with the the firm's ability to oversee technology spending?

The following answers represent some portion of the challenges management teams face in allocating responsibilities and setting up reporting structures. Several organizations that were given the opportunity to participate in this article declined, citing fears of disclosing internal processes.

Buffets Inc.

Mike Andrews, CFO

Eagan, Minn. -based Buffets operates more than 400 buffet restaurants and two different steakhouse restaurants in 37 states. Taken private by Caxton-Iseman Capital in 2000, the company has made several major IT-related expenditures in the past year.

"Here, the vice president of IT does report to the CFO. The benefit is that the CFO has much better track of where the business is going, so he can drive information services in a direction that will deliver much more bang for the buck.

"That said, the limitation is that I have a much larger threshold for investing capital. Therefore, we have an IT steering committee that sets up strategy decisions, so it's not me collaring investments that other people might see as prudent. I do make all the infrastructure decisions [data center, store pipeline, a Wide Area Network next year]. The strategic information services investments are what go to the steering committee. For example, we just purchased a customer satisfaction monitoring tool that will be installed in 2002."

Buffet's IT steering committee consists of Andrews, the CEO, COO and EVP of Marketing.

Eastman Chemical Al Wargo, Treasurer

Eastman, a leading international chemical company with headquarters in Kingsport, Tenn., produces more than 400 chemicals, fibers and plastics. The company is the world's largest supplier of polyester plastics for packaging; a leading supplier of coatings raw materials, specialty chemicals and plastics; and a major supplier of cellulose acetate fibers and basic chemicals.

"The CIO does not report to the CFO at Eastman. In fact, there isn't a lot of involvement of the CFO in CIO responsibilities, other than the CFO being part of the team on venture capital investments in the IT area," Wargo says.

"The CIO is treated almost like any other business unit manager. They come in and make their case on why they should be given money. The executive team listens to each case, prioritizes and makes the decisions accordingly."

Wargo adds that IT investment decisions are based in two parts; keeping the existing business running and new projects. The new projects area includes venture capital investments, while investments that enhance efficiencies and the basic infrastructure fall under keeping the business running. "Those [decisions] are maintenance capital and are treated like any other business [at Eastman]."

George B. Moriarty is a senior editor with FEI's Research Foundation.