Artificial intelligence (AI) is rapidly gaining momentum across industries, promising benefits like increased efficiency, advanced data analytics, and improved customer experiences. However, similar to other breakthrough technology innovations, rushing into AI without a solid plan can lead to poor investments and other costly missteps. That’s why chief financial officers (CFOs) must play a key role in AI decision-making, alongside chief information officers (CIOs) and other executives.
“CFOs are crucial in shaping AI strategies and investments,” says Alexander Bant, chief of research for CFOs at Gartner. “They have a deep understanding of the true costs, which can often exceed initial estimates by 500 percent or more.” This insight enables CFOs to make informed decisions and communicate the financial implications of AI initiatives.
Companies are already making significant AI investments. According to a February 2024 Gartner survey of 302 CFOs and finance leaders, 90 percent expect to increase their AI budgets this year, with 71 percent planning boosts of 10 percent or more. Generative AI is driving much of this growth, with 81 percent of CFOs forecasting higher spending in this area.
To guide AI strategies effectively, CFOs should collaborate with other C-suite leaders to define the organization’s AI vision. This includes deciding whether AI will enhance existing business models, create new ones, or be used internally, externally, or both. By making AI a team effort, CFOs can help ensure strategic and financially sound investments.
Given the cross-functional nature of AI initiatives, CFOs must collaborate closely with other C-suite leaders, such as the CIO, chief human resources officer (CHRO), and chief data officer (CDO), according to Alexander Bant, chief of research for CFOs at Gartner.
“These partnerships are essential for successful AI implementation,” Bant explains. “CFOs recognize that AI requires a unified approach, involving finance, technology, human resources, and data governance. By building strong relationships with these leaders, CFOs ensure AI initiatives align with the company’s overall strategy.”
Accurate, secure, and compliant data is the backbone of any AI initiative. If these aspects are lacking, AI efforts may falter.
“Data governance, led by the CDO, is critical to AI adoption,” Bant notes. “CFOs understand the need for high data quality, integrity, and accessibility to drive AI success.”
Thus, CFOs should work closely with the CDO to implement robust data governance practices that meet regulatory standards and ensure data readiness. This includes identifying gaps in the organization’s data infrastructure and making necessary improvements to support AI initiatives.
For AI to succeed, companies must have solid data infrastructure in place, says Anthony Lam, CFO of healthcare technology firm Healwell AI. This data foundation is key to unlocking the full potential of AI across the business.
With the growing hype around AI and the perceived pressure to stay ahead, companies are investing heavily in the technology. CFOs must closely monitor these investments and ensure they deliver returns.
Managing the large capital outlays for AI implementation is essential, and CFOs play a key role in explaining these investments and their expected benefits to stakeholders. “CFOs must strike the right balance to ensure AI initiatives contribute to financial health and long-term sustainability,” says Alexander Bant of Gartner.
One common misstep is underestimating AI costs. Bant notes that the true expenses are often underestimated by 500 to 1,000 percent. Another issue is entering long-term contracts with unsuitable vendors due to limited AI experience.
˙Many routine tasks across departments like IT, finance, and sales are ripe for AI automation, potentially saving time and money.
Kevin Rhodes, CFO of Extreme Networks, points out common use cases such as automating customer support, handling trouble tickets, or forecasting revenue. These tasks, if automated, can increase efficiency and free up employees to focus on higher-value work.
The ROI CFOs should focus on includes faster task completion, reduced labor costs, and allowing employees to spend more time on strategic initiatives, Rhodes emphasizes.
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