The practice of IT Financial Management (ITFM) is not a one size fits all proposition.
The goal is to bring optimum value to the organization, by aligning the IT department’s goals to those of the organization. Since organizational goals differ from one company to the next, each organization will define their growth, transformation and even day to day operational running of the business differently.
Despite operational differences, The ITFM journey is similar in every organization.
No organization can begin to understand their transformational costs and needs without first understanding all the base costs of IT.
The journey begins by understanding what data is available and how the data interrelates. Since most, if not all, organizations have a general ledger (G/L) from which expenses and revenues are recorded, the G/L is a common starting place. Breaking the G/L into cost pools and IT towers or functions is a common first step. These first steps help the IT department to understand their costs and to come into alignment with the Corporate Finance department. Where missing information is found, this is an excellent opportunity to improve the data and fix problems.
As the ITFM journey progresses, the team further maps costs for applications, business services and ultimately provides a show back or chargeback to the business units for services which are consumed. Reconciliations and metrics are built to help with these steps. As the model improves, so does the allocation process and the understanding of the interrelatedness of the various tower, application and business services costs. These are necessary and valuable steps in the ITFM process.
The true value of ITFM, though, comes from going beyond the simple metrics and ratios of costing and transparency.
The goal is to understand the organization’s values and build powerful key performance indicators (KPI’s) to help IT make alignment changes adeptly. Knowing the number of full-time employees versus contractors is keeping score. Moving to a value KPI that shows where the IT department has specific skillsets and budget dollars available to meet the demands of the company is strategic.
For instance, the CEO has identified a market need that isn’t currently being met, but that is closely aligned with the organization’s goals. The board meets in the morning to discuss the possibility of adding a programmatic change to application Beta. The CIO is armed with the KPI of knowing what skillsets are available and that he has money available to meet this need. By that afternoon, the changes have been implemented to meet the CEO’s request. The ITFM department has successfully moved from scorekeeper to strategist.