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How does a government organization transparently demonstrate the value of its IT spending? How can CIOs and CFOs foster a strong relationship to achieve IT Financial Management (ITFM) maturity?
The advent of technology innovation and the move to modern hybrid cloud IT solutions is challenging public sector organizations to be more agile, efficient and effective in delivering digital solutions – at pace – to meet service delivery and transformation objectives. But as reliance on technology and IT spending grows, so does the perceived challenge of managing the traditional stereotype of “IT black holes.”
Synergy’s ITFM specialists, Liesel Meinecke and Adam Jansen, explain the value of assessing an organization’s ITFM capability to ensure IT cost transparency, IT service delivery of intended value, and IT portfolio value optimization.
Government investment in IT
The government’s national IT spending is significant, with billions of taxpayer dollars invested annually. IT is the fourth largest category of public procurement across the Commonwealth (based on ANAO report). However, there have been significant IT spending failures over the years. The current economic and government climate continues to put pressure on IT departments to deliver more for less while justifying every decision.
Since the IT team is the engine that drives business results and service delivery transformation, a clear ROI analysis is needed. “To get the results they want, CIOs need to be better at demonstrating value for what they’re spending and being transparent about how and where their IT budget is being invested,” says Liesel.
“Accounting and IT professionals tend to speak different languages, so finding a common language to communicate with each other is essential. ITFM’s robust functionality helps bridge this communication gap as well as return every dollar spent on IT.”
Bridging the gap in IT and finance
It’s hard to find people who understand both IT and finance. This can make it difficult to manage the IT business effectively. There is a general underappreciation of all the different skills that need to be juggled in order to effectively manage, measure and justify IT’s financial performance.
“Traditionally, IT was seen as a back-office function – now it’s a business!” says Liesel. “Yet many organizations lack the appropriate level of IT financial management capability to effectively manage their IT spend and drive value.”
An effective ITFM function aims to effectively manage the supply and demand of technology assets and resources by maximizing the value of IT services, drive value-based investment conversations with business partners and optimize operational spend. ITFM tools and practices provide transparency that can help the entire organization understand how IT money is being spent. Transparency enables logical accounting or reporting of costs across relevant cost centers through evidence-based data modeling.
“Sophisticated approaches to ITFM require mastery of a range of different capabilities such as IT strategy and governance, planning and forecasting, costing and service portfolio management, investment portfolio management and contract and vendor management,” says Adam. “It’s more than doing an IT cost center variance analysis every month.
“Organizations also need a solid foundation across people, process, technology and data. Without these basic building blocks, the ability to maximize the benefits that effective ITFM features bring will be limited.”
Done well, ITFM can create a common language, a shared approach and create value-based partnerships between IT and the business with clear accountability for driving better business outcomes. Importantly, the relationship between the CFO and CIO becomes a strategic business partnership based on effective collaboration and communication – with specialized skills that complement each other.
“ITFM can create a shared approach and create value-driven partnerships between IT and business with clear accountability for better business outcomes.”
How to bring ITFM to a mature state
For those government organizations looking to improve their ITFM capabilities, the starting point is to develop an existing level of ITFM maturity.
“At Synergy, we have developed a comprehensive ITFM maturity assessment framework that enables an organization to objectively assess their ITFM capabilities and implement a targeted plan to develop and improve their ITFM capabilities based on this,” explains Adam.
This assessment encourages teams to think about each of their capabilities – such as service costing, forecasting, supplier management and monitoring.
“We compare the results of the assessment against targets or a benchmark against other organizations,” says Liesel. “It highlights processes that are unclear or need to be optimized and improves technical understanding across both disciplines – finance and IT.”
Ultimately, as the ITFM function matures, it becomes the system for performing analytics, justifying IT investments, and driving efficiencies and improvements across the organization.
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