CFO Urged to Ensure AI Investments Deliver Financial Returns
Indonesia’s ambition to adopt artificial intelligence (AI) amid the growth of the digital economy is creating new challenges for corporate financial leaders, particularly regarding technology funding and IT cost control. Chief Financial Officers (CFOs) are being urged to ensure AI investments not only spur innovation but also deliver measurable financial returns.
The CFO of Rimini Street, Michael L. Pireca, believes the trend is pushing financial leaders worldwide, including in Indonesia, to be more assertive in negotiations with technology vendors and in decisions to upgrade systems.
“Yes,” Michael said when asked whether financial leaders are now tougher in vendor negotiations. He said the change is a positive development because CFOs must understand the total cost of ownership (TCO) of technology investments in full.
He explained that large software vendors often use approaches that limit negotiating room. “Vendors frequently adopt a”take it or leave it” approach,” he said.
Michael also shared his experience when he was CFO and had to face vendor pressure in the system upgrade process. “They said, ‘You will not have support, go without support, shut down your business.’ That’s what they told me,” he recalled.
That experience, according to Michael, strengthens his view that CFOs must understand the long-term commitment behind every technology decision, including the risk of vendor lock-in, the situation where a company becomes highly dependent on a single technology provider, thereby losing flexibility in managing the system.
“Our financial professionals must be proficient in understanding total cost of ownership, not just the costs of next year,” he emphasised.
According to Michael, a company’s technology investments, including AI and enterprise resource planning (ERP) systems, are major financial commitments that must be analysed from the company’s overall strategic perspective, not merely from the viewpoint of the finance or information technology departments.
He also highlighted global concerns about AI expenditure not necessarily delivering returns as expected. Many companies, in his view, jump into AI too quickly without readiness of systems and business processes.
“For those investing for the first time and only on the surface, ‘okay, AI, just plug in, it will work its magic’ without going through evaluation of their AI business systems, structure, and readiness, that is a flawed strategy,” he explained.
Michael believes the first step companies should take is to evaluate organisational readiness, including business processes, data quality, and employee training to utilise the technology.
He also stressed that AI should not be seen as a tool to replace labour, but to enhance efficiency and output.
“The ‘smart-path’ approach is to support existing systems, optimise them with current offerings, and then place you in a position to innovate,” he said.
According to Michael, companies that place AI only as a tool to reduce IT costs risk missing greater business value opportunities.
‘In my view, if all you want is technology, lower costs, that may be the outcome you get, but I truly don’t think you will place yourself at the forefront with that approach,’ he said.
He regards close collaboration between the finance and IT departments as the key to ensuring AI investments can be implemented effectively while delivering long-term business value.