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Where CFOs/COOs and CTOs agree and disagree on outsourcing

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By Mary Beth Hamilton (pictured), Vice President, Eze Castle Integration – It’s inevitable for C-level execs at hedge funds and private equity firms to have differing opinions from time to time, and outsourced IT can sometimes be an area that breeds tension at the management level. On one hand, Chief technology officers (CTOs) are engrossed in every level of technology, from application management to security to disaster recovery, and they have a vested interest in concerns from user experience to business continuity and beyond. 

On the other hand, you have chief financial officers (CFOs) focused on the bottom line, factoring in the cost-benefit of new technologies and projects and the chief operating officer (COO) looking at opportunity costs and wondering if the CTO is managing and troubleshooting day-to-day IT, which strategic projects are falling off the list?

The cloud point-counterpoint

In today’s environment, cloud services are a no brainer, providing alternative investment firms with a cost-efficient and effective way to improve security and manage day-to-day IT demands. So what is fuelling the dissonance between CFOs/COOs and CTOs?

Total control comes with risks

One reason for the conflict is that CTOs want to retain control, and understandably so. The reality is that most CTOs are so tasked for time and money that they cannot maintain complete control over their environments. The burden of ensuring continuous, reliable and secure operations is difficult even for large enterprises that have vast time and budgets, and it is potentially unsurmountable for smaller teams. Often only the largest firms can adequately invest in and manage the layers of protection necessary to defend against growing cybersecurity threats.

Embracing the idea of cloud-based services expands the CTO’s team, provides greater redundancies and enables more cost efficiencies. Most importantly, it lets the CTO focus on priority IT projects that enhance and improve the company’s bottom line. 

CTO’s role is evolving

Today’s progressive CTOs are increasingly drawing on cloud technology to create agile firms that can quickly deliver the applications users require. CFOs/COOs must recognise the valuable business knowledge and insights the CTO can insert into functions including risk management, product development, operations and innovation.  As the CTO’s role evolves, so does the entire IT team. Too often in-house IT teams are allocating valuable time to reacting to IT issues and troubleshooting rather than proactively solving user issues or addressing regulatory mandates.

Outsourcing has a track record

CFOs and COOs have the advantage of positive experiences with outsourcing. Many have used third-party providers for functions like payroll, accounting or even hiring, so it’s not surprising that they tend to be more comfortable with bringing in managed service providers to deliver more efficiencies and dedicate focus to revenue-producing activities.

Finding common ground in the C-suite

Despite having differing opinions on IT operations, outsourcing and the cloud, CFOs/COOs and CTOs still have common ground and ultimately want what’s best for investors and the firm. Even though CFOs/COOs and CTOs may not always see eye to eye, there are far more areas where they agree than where they differ when it comes to outsourcing IT. For example:

• Risk mitigation. The outdated due diligence argument against going to the cloud has been turned on its head in the current regulatory environment. CTOs may feel they’re doing the appropriate due diligence to manage all the risks themselves. However, assessing your own risk is incredibly challenging. Evaluating risk requires CTOs to devote enormous amounts of time on a regular basis.

• Technology innovation. Investors expect the latest and greatest technologies, especially when it comes to security. Not only does outdated technology affect the IT department and how it does its job, it can be a red flag for wary investors. Cloud providers have the benefit of economies of scale and pass the cost savings along to end users, making enterprise-level features affordable for even small to medium-sized investment firms.  

• Strategic opportunities. Outsourcing allows IT leaders to focus on more than reactive troubleshooting. With basic-level desktop engineering off their plates, CTOs can focus on more strategic initiatives to drive the firm and its investors into the future.

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