IT Financial Management: What vs #internet #businesses
IT Financial Management: What vs. How
If you don t know where you are going, then any road will get you there.
Lewis Carroll, Alice in Wonderland
Most enterprises understand the benefits that can be derived from increasing IT cost transparency, managing IT like a business, and improving the interaction between IT and business units. Yet, despite the inherent understanding behind these admirable goals, many IT financial management initiatives and implementation projects fail to live up to expectations. They either miss their expected goals, or worse, completely fail.
Industry analysts have substantiated this claim for years, indicating that on an IT management maturity scale of 1 to 5 (with 5 being highest maturity), the average U.S. large or mid-market enterprise hovers around a dismal 2 on this scale. Clearly, there is a gap between desired goals and operational execution; expectations are not met.
Applying discipline to the IT financial management
So let s start by discussing the difference between the what and the how. Many times enterprises believe that what they are implementing is an IT financial management software application tool. This perception is incorrect and seriously flawed. What they are implementing is a set of IT financial management processes. The software application or tool is how this process will be delivered. Simply stated, the what is the process or set of processes that are being implementing, and the how is merely the tool that will be used to facilitate and support the processes.
Next, let s discuss the order in which the what and the how need to be addressed. In most aspects of life, a person decides on what they want to do before they determine how they will do it. Stated another way, we define what our goals are, and then we plan how to achieve those goals. Normally, we decide where we want to travel before we decide if we want to take a car, a plane, a train, or simply walk. It is a simple, logical flow. Implementing an ITFM process is simply an aspect of an enterprise s life. It should follow the same logic what before how. The single most important factor in having a successful ITFM implementation is having a thorough understanding of what needs to be implemented before deciding on how to implement it.
Figure 1 depicts the range of stages of an ITFM maturity model. It is important to understand that a company must fit its goals to the appropriate level of maturity. In other words, a stage 3 level Manage Cost may be desired over a Stage 4 level Competitive Advantage since the incremental efforts and cost to achieve stage 4 may not, for a specific organization, justify the benefits achieved in order to achieve this stage.
Let s briefly mention some of the considerations that need to go into determining the what :
Senior leadership must lead an ITFM project. There must be a good understanding of who is sponsoring the project IT, the business units, finance. ITFM maturity is a top-down initiative.
What are the current ITFM-related processes? Mapping existing processes will help determine gaps and areas for improvement.
How readily available are current cost and usage drivers?
How are business and IT performance currently being measured?
Who will be the winners and the losers with a change of ITFM processes? Can the losers also be turned into winners?
The answer to these questions will differ by enterprise. That means the what will be different for each enterprise.
We started this discussion by asking why so many IT financial management projects fail to meet expectations. One primary reason is the lack of a full understanding of the difference between what process or processes are being implemented versus how a change in process will be implemented.
We have begun the presentation of a course of action and related framework and if followed, the chance of meeting expectations and realizing the business benefits of ITFM will be greatly enhanced.
In Part 2 of this series of articles, we will describe how you determine the what, which is a rather extensive subject in itself. In Part 3 we will describe the how. Similar to uncovering the what, deciding the how is a detailed process.
Mike Stiglianese is a managing partner of TMO Partners . where he advises Fortune 500 companies on management of their strategic technology, financial, risk, and shared services initiatives. He is a chief IT risk and financial executive with extensive experience in leading financial and risk management solutions for global organizations. His career includes 25 years in Citigroup s financial control function, where he held a leadership role in identifying, developing and implementing global, cross-business expense reduction efforts and was recognized as a key contributor to capturing $3 billion in savings at Citigroup.
Lawrence Maisel is president of DecisionVu Group Inc. . a management consultancy specializing in corporate performance management, financial management and IT value management. He has successfully demonstrated abilities to provide leadership in strategy and financial management, and information technology with numerous experiences in financial services, insurance, communications and media, and pharmaceuticals industries. He has developed business strategies, managed and improved business performance, implemented business systems, and designed solutions to increase operating performance and shareholder value. Recently, he co-authored (with Gary Cokins)Predictive Business Analytics Forward-looking Capabilities to Improve Business Performance(2014, John Wiley Sons), and authored IFAC s International Good Practices Guidance on Predictive Business Analytics.