Five steps to improve your IT financial management maturity

Help mummy, that horrible man is talking aboutfinanceagain.

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, andITIL 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 ofvalue. Read on, Macduff.

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

So what’s gone wrong? In conversations with I&O execs and their direct reports, Forrester finds that there is a combination of reasons (and excuses) as to why the I&O organization hasn’t embraced IT financial management. Do any of the following excuses resonate with your I&O organization?

• "We always come in on budget."
• “IT financial management is finance’s responsibility.”
• “We don’t have time for IT financial management.”
• “We don’t understand finance.”
• “IT’s getting cheaper right?”
• “We don’t have the necessary skills and tools.”

Five steps to improve the IT financial management maturity of your I&O organization

Whether you have a legitimate reason — or an excuse — for not maturing your I&O organization’s IT financial management practice, it is time to make things right. Because if you don’t, the consequences could be dire: The business will continue to experience (unwittingly) examples of poor financial investment such as over-provided hardware or software, “redundant” applications that continue to consume I&O resources, investment in the “wrong” IT services (often where decisions are made on volumes rather than value), or IT services that are ceased or cut back based on ill-informed I&O decisions — decisions that may ultimately harm the business’s ongoing operations.

In a recent Forrester report —Five Steps To Improve The IT Financial Management Maturity Of Your I&O Organization— Forrester recommends that I&O execs take the following steps:

1. Get the basics of IT financial management right.
2. Leverage IT financial management principles espoused by IT management frameworks such asITIL,COBIT, andVal IT.
3. Service costing is a “must do” for I&O, even if done at a high level.
4. I&O execs must realize that traditional IT funding models might need to change.
5. I&O needs to go beyond traditional disciplines to add in the dimension of delivered value.

Building on the fifth point: In an ideal world, IT would be viewed as a “positive enabler of value,” with the business using it as an “agent of change.” In the real world, however, IT is often seen as a necessary evil — a must-have in doing business nowadays. One of the main reasons behind this is the disassociation between IT costs and delivered business value. Although business stakeholders know that IT is needed, it is up to I&O to start to express the value that I&O and its IT services deliver. I&O execs need to fill the “void” between the IT organization being viewed as a cost center and it being viewed as a strategic business partner and to ensure that I&O moves from a supply-driven to a demand-driven provider of IT services that are fully aligned to business needs.

Here is the real warning: Stories about CIOs and I&O execs fired because they couldn’t articulate the value their IT team delivered to the business will not be uncommon in the next one to three years. Make sure that you aren’t one of them.

If you’re an IT Infrastructure & Operations professional wanting to discuss these challenges and potential solutions with your I&O peers, IT vendors, and Forrester I&O analysts, I encourage you to join us at the upcoming Forrester's Infrastructure & Operations Forum, "Build The Extended Enterprise: Differentiate With Customer-Centric I&O" on November 9-10 in Miami, Florida.