Artificial intelligence is all the rage these days. Given that the technology can lead to potential business benefits such as greater efficiencies, advanced data analytics and enhanced customer experiences, the rising use of AI is not surprising.
Rushing into AI too quickly and without a cohesive plan can lead to bad investments in tools and services as well as other problems, however, and CFOs need to be just as involved in decision-making as CIOs and other business and technology executives — if not more so.
“CFOs play a pivotal role in guiding their organizations’ AI strategies and investments,” said Alexander Bant, chief of research for CFOs at research firm Gartner. “They possess a deep understanding of the true costs associated with AI investments, which often exceed initial estimates by 500% or more.”
This knowledge empowers CFOs to make informed decisions and effectively communicate the financial implications of AI initiatives to stakeholders, Bant said.
Recent research shows companies are spending a lot on the technology. For example, a February 2024 report by Gartner, based on a survey of 302 CFOs and other senior finance leaders, shows that 90% of the respondents are projecting higher AI budgets in 2024. None are planning a reduction.
Seventy-one percent of the finance leaders surveyed plan to boost spending on AI by 10 percent or more compared with last year. Generative AI plays a big role in this increase, Gartner said, with 81% of CFOs projecting to spend more in this area.
How can CFOs best help guide their organizations’ AI strategies and investments to ensure success? Here are some suggestions.
Make AI a team effort
AI can impact virtually every aspect of a business, and CFOs should work with others in the C-suite to establish an organization’s vision for the technology, Bant said.
This means deciding whether the organization will use the technology to improve the existing business and operating models or go even further and create new ones. It also means determining whether AI will be used internally to improve operations, as something to enhance services to external customers — or both.
Recognizing the cross-functional nature of AI initiatives, CFOs need to leverage their relationships with other C-suite executives, such as the CIO, chief human resources officer (CHRO), and chief data officer (CDO), Bant said.
“These collaborations are vital in driving successful AI implementation,” Bant said. “CFOs understand that AI initiatives require a holistic approach, involving finance, technology, human resources, and data governance. By fostering strong partnerships with these executives, CFOs ensure that AI initiatives are integrated seamlessly into the organization’s overall strategy.”
Emphasize data governance
If data isn’t accurate, secure and handled according to the requirements of privacy regulations, AI initiatives can run into problems. That’s why data governance is so important.
“Data governance, led by the [CDO], is a critical aspect of AI adoption,” Bant said. “CFOs recognize the importance of data quality, integrity, and accessibility for AI to function effectively.”
As such, they need to collaborate closely with the CDO to establish robust data governance practices, ensuring compliance with regulatory requirements and promoting data quality and integrity, Bant said. “This collaboration also involves assessing data readiness for AI adoption, identifying any gaps or limitations in the organization’s data infrastructure and implementing necessary improvements.”
Have a data backbone in place to support AI
To be successful with AI, companies need to have several data-related elements in place, said Anthony Lam, CFO at healthcare technology company Healwell AI.
One is access to an abundant steady stream of data. “The continued usefulness of AI is dependent on the ongoing access to a steady stream of relevant data,” Lam said. Another is to use high-quality data, which falls under the data governance area. “Accurate data underpins the results that AI will yield,” he said.
And perhaps most central to the data strategy, companies need to have a robust IT Infrastructure in place to process data. “Larger volumes of data will require a larger investment in computing power to process the volume on an ongoing basis,” Lam said.
CFOs should work closely with CIOs and other technology leaders to ensure that IT infrastructure supports the use of AI now and into the future.
Be vigilant about AI spending and ROI
Whether it’s because of AI hype or a perceived need to keep up with change, companies are spending a lot on AI. CFOs need to keep close tabs on investments and their returns.
CFOs need to manage the significant capital investments required for AI implementation while effectively communicating the rationale and expected returns to investors, Bant said. “By striking the right balance, CFOs ensure that AI initiatives contribute to the organization’s financial health and long-term sustainability.”
There are common mistakes CFOs make within the finance function when it comes to AI adoption, Bant said. One is dramatically underestimating AI costs. “CFOs often underestimate the true costs of AI implementation, with estimates being off by 500% to 1000%,” he said.
Another mistake is rushing into long-term contracts with the wrong vendors. “Lack of experience in AI leads to hasty decisions,” Bant said. A large majority of CFOs have less than two years of AI experience, according to Gartner research, and this results in potentially unfavorable vendor contracts.
Find business tasks that can be automated with AI
Business processes include many repetitive tasks that AI could enhance through automation, and this can save companies time and money.
“It’s likely that you can think of common use cases in your support [or] IT, finance, and sales and marketing organizations that come up almost daily,” said Kevin Rhodes, CFO at Extreme Networks, a provider of network technology.
“For instance, opening a trouble ticket, responding to simple customer questions about products [or] even forecasting future bookings and revenue; these are all things that AI can automate and can free up human employees to do things that add more value to the organization,” Rhodes said.
The ROI CFOs should be looking for with automation include increased speed and efficiency in completing these tasks and reducing the manpower necessary to complete them, and allowing employees to spend time on more important matters, Rhodes said.
