Posted: Wed Nov 22, 2006 4:03 am Post subject: Papleux.com: When To Implement Financial Management
Here is a new article I posted on Papleux.com today. I thought it may be of some value to you guys. Don't hesitate to give me your feedback.
When to implement Financial Management
Written by Fabien Papleux
Tuesday, 21 November 2006
The question: “Where to start” is not the right question. ITIL was developed to be a framework based on best practices and it is common that organizations need or want to implement some parts and leave others. It all depends on the objectives, the needs and the readiness of the company.
I believe there is a more interesting question: “Under what circumstances should I look into implementing Financial Management for IT Services?”
Based on that question, you can develop a plan that will concentrate your efforts where they are needed, thus maximizing your opportunity for driving real results.
The indications, or symptoms, that a Financial Management process is needed can be grouped under two categories, based on business findings, or IT findings.
- The business does not seem satisfied with the Value For Money that IT provides
- The business wants more influence over and visibility into how IT budgets are spent
- The IT department seems to run out of money before the end of the Fiscal Year
- IT Projects consistently run over budget
- The IT department seems to have difficulties backing up investments requests
- The IT department seems to be under-spending or over-spending on different areas
- The IT department is looking for ways to influence usage of its services
- The organization as a whole is introducing budget and accounting guidelines that IT will have to follow
First of all, introducing the Financial Management for IT Services process is not a decision that IT can usually make on its own. Furthermore, the introduction of activities like internal charging for services generally need to be coordinated with other departments as they may need to implement a similar process to keep a balance in their books.
The fact that the business does not seem satisfied with the value of the services they receive, or that they seem to want to know more detail about how IT spends their budget usually indicates that there is a perception problem from the business that may or may not be justified, or a reality that IT is not aware of.
In any case, in order to demonstrate value for money, IT needs to account for the money it spends, and allocate those costs to the services it provides, thus allowing to create a direct relationship between cost and performance. The implementation of a budgeting and accounting process is essential for that purpose.
But also, experience shows that in general, IT always tries to provide for the best possible service. Therefore, if there is such a disconnect between a service, and its perceived value, it is very likely that some level of Service Level Management will be needed as well. In particular, IT should understand what the business is requiring and provide just that, in the most cost effective, and efficient way.
Finally, charging for services, even on a notional basis, is in many cases the best solution for IT to provide transparency into its costs, document value for money, and influence usage of its services. _________________ BR,
Technology Consulting | Service Excellence
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