Three ITFM best practices for 2023
Technology is a key factor for the success and growth of businesses. However, overseeing IT costs can be challenging, particularly for big businesses with numerous technological resources and projects.
IT financial management (ITFM) is the practice of managing IT financial resources to ensure optimisation of an organisation’s IT investment and the alignment with business goals. By adopting best practices for ITFM, organisations can gain greater visibility into their IT costs, improve budgeting and forecasting and make informed decisions about technology investments. Here are three critical ITFM best practices to take advantage of.
Get your data together
It's critical to have a thorough awareness of your IT expenses in order to make informed decisions about IT investment. Although general ledgers (GLs) are used as the source of truth for financial transactions and are two-dimensional (cost centres and accounts), often the structure of GLs cannot handle the complexity of the IT cost base. IT cost data includes additional specific transaction data, such as the hardware and software activity usage data, which cannot be captured within the traditional cost centre and account structure. Furthermore, IT costs may be dispersed over numerous GL accounts, making it even more complex to determine the total amount spent on IT.
Gartner advises using four different types of views for your GL to address these issues: an asset view, a technology perspective, a business services view and an investment view. Depending on how many views your organisation requires, accommodating these additional dimensions is complicated and cumbersome with a traditional GL. This is where an ITFM tool comes into play.
ITFM technologies are created expressly to deliver precise, quick and scalable views of IT cost. They can manage specific consumption data, including server host names or desktop serial numbers, which aids in providing transparency and an understanding of the consumption activities of IT services. ITFM tools act as a sub-ledger of the GL, housing all the views, transparency, consumption, service data, unit rate calculations, showback and chargeback data, and reporting on all of them. While the GL is best for financial reporting, ITFM tools are ideal for multiple views on spend, providing distinct focus and strengths.
The foundations of an ITFM discipline
To achieve the benefits of an effective ITFM solution, there are some foundational steps to consider:
- Assessing the landscape: Determine the key stakeholders, their reporting needs and the data sources required to support the ITFM procedure. Engage with business partners, IT teams and finance departments to understand their needs and expectations, as well as offer unconsidered solutions.
- Define the objectives: Establish the parameters, objectives and metrics that will be used to gauge success. Setting goals that are in line with the organisation's overarching business plan is essential.
- Creating a roadmap: Build a roadmap that explains the steps necessary to accomplish the ITFM objectives. A timetable, milestones and the resources needed to complete each task should all be included in this plan. To make sure that the roadmap stays in line with the organisation's strategy, it should be evaluated and updated on a regular basis.
- Create a minimal viable product (MVP): An MVP should be created with feedback from stakeholders. The MVP is a basic version of the ITFM tool that is designed to demonstrate the value of the process and to help refine the objectives and metrics. This is one of the many areas in which MagicOrange can assist, by collecting and analysing IT spend data to provide insights for better decision-making. By using MagicOrange to create an MVP, organisations can validate their decisions with basic reports and dashboards while minimising investment.
Stakeholder is key
To take a project forward, stakeholder engagement is crucial. Create an environment of trust and collaboration by showing willingness to align IT with business goals, listen to the stakeholder's needs and collaboratively find solutions, support ad hoc requests and set up a regular slot in the diary or calendar where stakeholders can drop in to ask questions.
Moreover, be proactive by setting a meeting with business partners to find out what they are planning for the next quarter or milestone. Be open to opportunities to turn day-to-day funds into allocations that could grow the business or beat previous targets. Then work together to prioritise them. This way, IT planning becomes more collaborative with ownership, going beyond IT and financial departments, and prevents IT from being seen as a ‘black box’.
Why MagicOrange is your trusted ITFM partner
MagicOrange is recognised by Gartner, Forrester Research and OMDIA as an established and leading IT financial management tool. The tool has a very flexible approach and can easily accommodate any taxonomy. Flexibility is giving MagicOrange a real edge when it comes to expanding beyond IT and including other divisions across the enterprise. Many of the ITFM platforms on the market do not support businesses after implementation. Clients are expected to pay more for any additional consultation or support. With MagicOrange, consultancy services are provided as part of the initial cost once the tool is implemented, to make sure implementation is successful and the benefits are realised.
At MagicOrange, customers will be assisted through their IT financial management/TBM and cost transparency journey to drive profitability and unlock value. If your organisation requires a business partner to support you on your ITFM journey, the first step is to contact MagicOrange and speak with our team of experts.