By Larry Foster
Last week, I attended the 31st annual “Financial World of Information Technology Conference” in Orlando, Fla., which is hosted by the IT Financial Management Association (ITFMA). The overarching purpose of this annual conference is to facilitate information sharing across industry experts related to financial planning, acquisition, management, evaluation of IT assets and expenditures. As always, the conference offers an abundance of use-case examples from organizations that are at various stages of maturity with their financial management programs. In addition to learning from IT financial colleagues at various organizations, the ITFMA conference includes several industry SMEs, consultants and solution providers that share their best practice recommendations related to IT Financial Management (ITFM).
Interestingly enough, the conference focused on best practices surrounding the integration of ITFM with IT Service Delivery systems. In our last two blog posts, we’ve defined and outlined how ITFM and ITEM (IT Expense Management) can work together to create a more cohesive consumption model. In our last blog post on this subject, I’ll explain the chasm between the different sides that encompass IT Financial Management.
ITFM encompasses a specialized branch of finance since it involves breaking down financial expenditures into various technology-based services that provide value to client organizations. The chasm between IT Service Delivery versus IT Financial Management primarily centers on the inability to visualize an accurate and sustainable working model of the services provided by IT. The term “service” can be an ambiguous statement due to varying levels that embody different types of services and can cause IT organizations to be buried in overwhelming details and at times, find themselves “stuck on start.” There were examples discussed between two similar institutions – one had a Service Catalog consisting of ~40 Service Offerings where an almost mirror institution was managing ~400 Service Offerings.
On the engineering-side of ITFM is a group of service delivery SMEs who often focus on defining the granular technology components and configuration items which comprise the services consumed by clients. Engineering and Service Delivery often fall victim to trying to build a Service Catalog offering that includes the details of every permutation and combination of how a particular service may be configured. To this end, you will see organizations with over a dozen different types of laptop service offerings, where deviations could be a few GB of memory or a VPN software component. Pretty confusing wouldn’t you agree?
Meanwhile, the business-side of the ITFM chasm focuses on defining cost-allocation, macro-based capitalization models centered on defining the services based on value outcomes. Both business and engineering sides strive to account for all the detailed components. The primary difference is what elements comprise the cost-allocation model and what level of details and options are offered to clients in the Service Catalog.
During the conference, I hosted a session that overviewed how cloud services are the latest entry to generate additional disruption and confusion into ITFM practices. Cloud-based services are offered as “Pay-GO” on-demand consumption-based models. As organizations adopt cloud services, they will need to transition to near real-time assessment of usage metrics. In some ways, the growing-spectrum of cloud services will help simplify and make the ITFM cost allocation models more accurate since they do not involve complex capitalization models, but rather simply allocating usage and subscription charges. However, to achieve this level of simplicity requires continually processing usage data records and making decisions on a daily basis to help organizations avoid unwanted charges, rather than just allocating expenses.
Over the next few years, the gap between the “business-side” and the “engineering-side” of ITFM will be much smaller since the subjectivity of what and how elements get capitalized will be progressively replaced with operational-based near-real-time cost allocation models. Organizations will have a strong dependency on making timely decisions based on insight into actual real-time usage.
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