Five Steps To Improve Your IT Financial Management Maturity

Help mummy, that horrible man is talking about finance again. 

I jest, but I very nearly titled this blog “Warning: This Blog Is About IT Financial Management And ITIL.” Sorry, but this is how I feel sometimes when I talk about the financial side of IT management, IT service management, and ITIL adoption.

But remember, accountants are supposedly boring not scary. The really scary thing is that IT infrastructure and operations (I&O) organizations have survived for so long without really appreciating what it costs to deliver their IT services.

There is no denying that I&O organizations have always “done finance” in some shape or form. There is not a single business function, IT or otherwise, in any organization that can escape the need for some semblance of financial management and the scrutiny from the formal finance department. So my question to I&O execs is not “Are you doing IT financial management?” but rather “How mature is your IT financial management?”

The changing business and IT landscapes are bringing an end to a somewhat slapdash approach to managing I&O’s finances and investment and usher in the need to extend IT financial management to encapsulate the concept of value. Read on, Macduff.

Why haven’t I&O execs focused on maturing their IT financial management practices?

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Cover Your Assets; Use IT Asset Life-Cycle Management To Control IT Costs

The IT infrastructure and operations (I&O) organization is no different from any other business function. It employs a multitude of assets to create corporate value. Traditionally, however, I&O’s ability to manage its IT assets has been weak, from both a financial control and an IT asset life-cycle (ITALM) perspective.

Far too often, an I&O organization lacks the necessary controls to avoid IT wastage or remain compliant with software licensing or regulatory requirements. Thankfully (or unfortunately), to date most I&O organizations have been able to get by. But the-times-they-are-a-changing, as do-more-with-less efficiency mandates are prioritized, vendor software audits increase, and the business places greater focus on what IT costs and the value that internal IT delivers. Something has got to give and I&O leaders can step up their game and respond to these internal and external pressures by improving asset management processes to ensure that IT assets are leveraged to maximize the value generated for their parent business.

A recent Forrester Report – Updated Q4 2011: Cover Your Assets; Use IT Asset Life-Cycle Management To Control IT Costs – offers advice on where ITALM can help and what I&O leaders need to do.

Where Can ITALM Help?

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“Run IT As A Business?” Do You Really Know What This Means?

The IT Infrastructure & Operations (I&O) community has long been awash with management buzzwords and phrases such as "think outside the box," “bare metal,” “IT-to-business alignment,” “ivory tower,” “NextGen,” “people, process, and technology,” “innovation,” "what does good look like?" and “resonate.” More recently we have had to endure such gems as “cloudwashing,” “hash tag abuse,” “virtual sprawl,” and “cloudenomics” (please take a deep breath, don’t let them wind you up).

Another longstanding “buzzphrase” (no, I didn’t make this word up) is that I&O organizations need to “run IT as a business.” I imagine that most of us have used it (I plead “guilty” milord), at least in conversation, but do we really know what it means or what we need to do for I&O to achieve a business-like state?

Firstly, the “run IT as a business” mantra is wrong – well, partially. I&O organizations must indeed adopt practices to run as a business function, but not necessarily as a full business in itself.

One of the most prevalent areas in need of attention is that of the ITIL-espoused discipline of IT financial management. In that business-success not only stems from having a great product (or service) coupled with great customer service, there also needs to be an understanding of the cost of provision, the cost drivers, and the margins involved. Not having this understanding can only expose I&O’s lack of business acumen and capabilities, and make it difficult to compete in the new IT delivery landscape.

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