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Achieving IT Financial Transparency

Sep 19, 2019 12:09:00 PM

by Charles Bystock

It’s no secret that IT has moved beyond just keeping the lights on. Today’s IT infrastructures require more than budget management and cost allocation. CIOs now need a transparent framework for managing multiyear projects aimed at digital transformation. CIOs must optimize costs by demonstrating the overarching business goals and value behind the IT infrastructure.

Here’s how the technology C-suite can move beyond operational overhead to financial transparency.

IT costing vs. cost transparency

Far from being behind the scenes, technology has moved to the forefront of business. IT infrastructures are now profit centers, which is exactly why today’s CIO must see and share the value of a long-range IT strategy that drives business growth. IT leaders must now work to turn IT into a competitive service provider aligned with every department in the business or run the risk of failing to deliver digital transformation.

IT financial transparency requires an understanding of the cost of delivering IT as a service (ITaaS), whether serving internal or external customers. While the idea is easy to grasp, the practice is very challenging. After years of consolidation and acquisition, many enterprise organizations have a patchwork of financial systems and costing methods. In this environment, attributing costs to an IT infrastructure can be problematic, yet the effort is always worth it, particularly in this era of digital transformation. Simply put, IT is now a significant part of most business models. It is no longer a black hole for capital overhead, but a revenue-generating engine requiring financial visibility just like any other arm of the business.

Before IT can be leveraged in this way, the infrastructure costs and benefits must be linked carefully with each service and business process provided to both internal and external end users. With the cost of these services quantified, business leadership can analyze the data to make more strategic use of their IT infrastructure. This level of transparency requires vigor and stakeholder buy-in, which is often facilitated by a trusted external partner. A neutral third party can provide a 360-view of how IT interacts with all areas of the business.

Greater transparency means higher accountability so that everyone on the IT services team has a vested interest in higher efficiency of service delivery. This helps ensure a more agile infrastructure focused on achieving automation and continuous deployment.

How can traditional IT infrastructures embrace financial transparency as part of their strategic growth?

One model: Gartner’s 6 pillars of IT financial transparency

Running IT like a business requires a consistent and disciplined approach. Gartner has a six-pillar financial transparency model that CIOs can leverage to make this transition. It includes:

  1. IT budgeting that extends beyond hardware and software to understand the overall cost and contribution to overall business strategies
  2. Investment planning to include accurate forecasting of the entire IT infrastructure life cycle to maximize value
  3. Chargeback and allocation that is department-specific and justifiable to business unit leadership
  4. Benchmarking of IT costs with the goal of proving that IT is a value-added service
  5. IT cost optimization to roadmap spending, track benefits, and identify innovation opportunities
  6. Demonstration of the business value of IT through benchmarking and performance monitoring

Shifting to a fully transparent IT financial model requires CIOs to do more than just manage a budget. Financial transparency requires CIOs to take a seat at the very helm of corporate strategies. It’s a necessary part of corporate digital transformation.

Business benefits of running IT like a business

The biggest benefit of transparency is a true alignment of strategic business goals with IT. Transparency will help teams make better IT investment decisions, create improved financial accounting, and ensure better allocation of IT resources. EMC lists some of the benefits of running IT like a business instead of a cost center. They include:

  • Understanding the actual costs of service delivery
  • Recognizing IT as a unique part of overall business performance
  • Transferring budgets from traditional IT to the business units they impact
  • Providing real-time clarity in business decisions
  • Reducing the over-allocation of resources
  • Improving the competitiveness of the business
  • Engaging IT teams in the success of the enterprise
  • Improving strategy and planning for the whole business

Today, the chances are high that your organization does not understand the business value associated with your IT infrastructure. Taking steps toward IT transparency will help your organization ensure the right IT investment decisions are being made.

Windsor Group helps IT teams meet the strategic business imperatives of the future. Contact us for the insights to transform your enterprise.

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