Many CFOs don't have a firm grasp on how to budget for technology costs in a rapidly advancing ecosystem since, traditionally, finance and technology have operated in silos. This has got to change if CFOs are going to be able to budget for the true costs of technology.
To glean some insights on how this can be accomplished in the retail industry, I spoke with David Speights, a 20-year retail industry veteran as the chief data scientist for The Retail Equation and Appriss Retail, and currently vice president of analytics with Berkshire Hathaway.
Here are some takeaways from our conversation on how CFOs and CTOs can work together to understand the true costs of technology.
AI Isn't Just for Techies
While generative artificial intelligence is the buzzword of the day, Speights has been using AI and machine learning in his data work since the beginning.
“Both technology and finance need to understand that AI is a way to protect profits as well as enhance the customer experience,” Speights said. “AI replaces repetitive, individual tasks. Instead of having 10 people perform the same analysis day in and day out, AI can deliver answers immediately for each end user specific to his or her job with no human required. Not only is this far more efficient, but it ensures consistency across the retailer’s stores. ChatGPT and other tools are just allowing expansion of these ideas into new areas.”
AI can also be used by finance folks, Speights noted, to find underperforming stores and determine what steps to take to improve their profitability and reduce losses resulting from error, faulty processes, and intentional fraud.
Consider Future Costs
In my work at Fortified, a database consulting and managed services provider, I talk to clients all the time about the total cost of ownership (TCO) of their technology today and over the next five years to 10 years. It’s not just the cost of servers, data, staffing, licensing, etc., that need to be taken into account. It’s also the future costs resulting from the compounding growth of data and transactions. Similarly, Speights has some thoughts on how to decrease your “future costs.”
“If you invest in a major software or hardware that ultimately you have to get rid of, that’s going to cost you even more money down the road,” he said. “My experience has proven that if you put in some funds to test early before putting something new into production, this can save you a ton of money later on if you have to replace the system altogether. Retailers should consider labor costs to manage, use, train and operationalize the solution as well as optimization on any new investment, especially if your business should suddenly grow exponentially with the addition of a new client.”
Encourage Workforce Transparency
Speights' last piece of advice is important for the CHRO as well as the CFO.
“Don’t be afraid to fail fast and own up to failure,” advised Speights. “Sometimes, people have too much pride, feeling like I made this decision, I fought for this thing with my bosses and don’t want a black mark on my record indicating a mistake. I don’t think people should be afraid of that. The best managers, the most efficient, are going to recognize that you tried something and it didn't work. And then you go on to the next thing. You have to be able to own up and walk away, even with the small things, in the name of efficiency and creating an environment that promotes cost reduction, but also innovation.”
Once again, Speights' thinking mirrors my own when it comes to technology spending. More, bigger, better isn't always the answer, especially from the CFO’s view if it will cost more to fix later, or worse, compound costs that go unnoticed each year. When you consider most applications are in production for 10 years to 20 years, that’s a lot for the CFO — and CTO — to consider.
For all businesses, the true costs of technology are hidden when inefficient code is promoted to production, running up costs on the back end that could have been saved. If you go out with something too quickly in the name of getting things done, it could cost you dearly later on. Taking the time to get it right (whether by testing a solution, optimizing code, or realizing when it’s time to move on) will save you more in the long run, as well as ensure smoother operations and a collaborative workforce.
A productive and transparent relationship between the CTO and CFO is critical in all industries, but when it comes to the rapid-fire pace and shifting dynamics in retail today, it could very well be the glue that holds your retail business together.
Ben DeBow is the founder and CEO of Fortified, a next-generation database consultancy twice named to the Inc. 5000 list of fastest-growing private companies.
Ben DeBow (bendebow.com) is a business leader, author, and innovator on a mission to move the technology industry from the era of abundance to the era of efficiency. As the founder and CEO of Fortified, a next-generation database consultancy twice named to the Inc. 5000 list of fastest-growing private companies, DeBow has been implementing mission-critical data platforms around the globe for the past two decades. He is the author of End of Abundance in Tech: How IT Leaders Can Find Efficiencies to Drive Business Value and a sought-after speaker, podcaster, and contributor to technology publications and media, He earned his degree in information systems and accounting from the University of Cincinnati.