Financial Management - Value and benefits
The landscape of IT is changing as strategic business and delivery models evolve rapidly, product development cycles shrink, and disposable designer products become ubiquitous. These dynamics create what often appears to IT professionals as a dichotomy of priorities: increasing demands on performance and strategic business alignment, combined with greater demand for superior operational visibility and control. Much like their business counterparts, IT organizations are increasingly incorporating Financial Management in the pursuit of:
- Enhanced decision making
- Speed of change
- Service portfolio management
- Financial compliance and control
- Operational control
- Value capture and creation.
IT organizations are conceding they are quite similar to market-facing companies. They share the need to analyse, package, market and deliver services just as any other business. They also share a common and increasing need to understand and control factors of demand and supply, and to provision services as cost-effectively as possible while maximizing visibility into related cost structures. This commonality is of great value to the business as IT seeks to drive down cost while improving its service offerings. The framework below illustrates the commonality of interests and benefits between the business and IT
Service and strategy design both benefit greatly from the operational decisionmaking data that Financial Management aggregates, refines and distributes as part of the Financial Management process. Rigorously applied, Financial Management generates meaningful critical performance data used to answer important questions for an organization:
- Is our differentiation strategy resulting in higher profits or revenues, lower costs, or greater service adoption?
- Which services cost us the most, and why?
- What are our volumes and types of consumed services, and what is the correlating budget requirement?
- How efficient are our service provisioning models in relation to alternatives?
- Does our strategic approach to service design result in services that can be offered at a competitive ‘market price’, substantially reduce risk or offer superior value?
- Where are our greatest service inefficiencies?
- Which functional areas represent the highest priority opportunities for us to focus on as we generate a Continual Service Improvement strategy?
Without meaningful operational financial information, it is not possible to answer these questions correctly, and strategic decisions become little more than instinctive responses to flawed or limited observations and information, often from a single organizational unit. Such methods can often incorrectly steer strategy, service design, and tactical operational decisions.
Whereas Financial Management provides a common language in which to converse with the business, Service Valuation provides the storyline from which the business can comprehend what is actually delivered to them from IT. Combined with Service level management, Service Valuation is the means to a mutual agreement with the business regarding what a service is, what its components are, and its actual cost or worth.
Additionally, the application of Service Valuation discussed in this chapter transforms the discussion and interaction between IT and the business customer, and the way customers plan for and consume IT Services. The use of Financial Management to provide services with cost transparency (such as via a Service catalogue) that can then be clearly understood by the business and rolled into planning processes for demand modelling and funding, is a powerful benefit. Such maturity in an IT operation can generate enormous cost savings and Demand Management capabilities.
Other ITIL Processes
- Configuration Management
- Service Desk Management
- Incident & Problem Management
- Change Management
- Release Management