I was recently invited to speak at the 28th annual meeting of the IT Financial Management Association in Pittsburgh. The ITFMA is a group of practitioners
in the art and science of understanding, calculating and communicating the cost
of IT in their organizations (my words).
Their ranks include IT CFOs, asset managers, chargeback / showback, budget
and forecasting, and other folks that work in the business management of IT
(BMIT) function.
The conference attracted about 160 souls seeking knowledge,
best practices and moral support in the challenging goal of following the money
in IT. Many of the attendees were new to the role and were there to learn,
network and commiserate. It’s possible that the number of newbies is due to
growth of the profession, but our field research shows that many of them are in
this role for only a few years. There
were a handful of vendor sponsors that offered software and consulting in this
specialized sector.
My presentation was entitled TCO is so 1990s: Welcome to
Total Cost of Services (TCS). It was a Gartneresque scenario projecting the
future of IT organizations and posing questions (Key Issues) on how to get
there. The key issues were:
- How should IT Financial Management Evolve to Address Fundamental Platform Changes?
- How Can the Annual IT Budget Process Evolve to a Value Quest?
- What Role will IT Finance Play in the IT Service Brokerage?
I will address each of these issues in future blogs, as each
question requires a comprehensive set up, analysis and conclusion.
The speech was well received and generated further questions
and discussion by the full room of attendees. The questions included:
Q: What is the role of ITIL in establishing a service
delivery system?
A: My answer was that ITIL is a useful framework to work
with, but a highly disciplined “black belt” approach may be too rigid to adapt
to the unique nature of IT department wants and needs. (See my comment below in
observations.)
Q: I can’t get my CIO or CFO to budget for lifecycle assets.
Any ideas?
A: The primary effect of short term budgeting is that the
obsolescence factor creates large budget fluctuations going forward. This means
“going to the well” for large capital appropriations to catch up on refreshing
a failing fleet of servers, printers and end user devices. If the overall
economy or the specific corporate finances are in a pinch, it can be a recipe
for calamity. There is a hard cost to old stuff in terms of security, down
time, compatibility, vendor support and break/fix. There are also indirect
costs like employee hiring and retention and IT credibility. Quantify these costs in a TCO model (TCO is
still an integral part of TCS). Support it with real instances where it cost
the enterprise real money because it was short sighted in the budget and
procurement policies.
Q: I don’t seem to have the clout or credibility to get over
the hurdles of politics and culture in implementing ITFM , ITSM, or ITBM. Is
this a dead end?
A: Often an outside voice can influence the decision makers
or arbitrate the conflicting parties. There are a number of consultancies that
have expertise in getting to the next level. The application vendors have
accrued a lot of expertise as a result of trying to sell this stuff. If you are a customer or prospect they can
bring a lot to the table at little or no cost. In the higher price bracket, the
usual suspects in advisory and consulting services can help. The International Institute of IT Economics,
whom I represent, also can help with business case justifications and arbitration. Of course, for those of you that are reading
this, the ITFMA is a gold mine of content, networking opportunities and
support.
Other presentations that I sat in on focused on case
studies, best practices and other very practical aspects of the challenging job
of an IT financial management professional.
So here are a few observations:
Almost all attendees agreed that a consumption based,
defined services model is the future of IT organizations. However, there was
limited success in realizing this goal. While a few enterprises were in the
final phases of evolution to this model, and some of them were presenting, most
of them were stuck at various points along the road.
The challenges are not technical. Projects like a CMDB, service definitions, frameworks
and software for chargeback/showback, while tricky to implement were fairly
well understood and under way. The real issues were cultural and political and
these were torpedoing the implementation.
IT internally is well positioned to run itself like a business but the
business is often not ready for IT to do so.
Issues ranged from the perpetual resistance from business units that
were happy to get IT for “free” to the unexpected hurdle of CFOs that refused
to cooperate, old financial management policies that conflicted, and other
shared services departments that did not play well with IT. These can be and are the most frustrating
impediments to change.
Those that I talked to felt that their IT functions were
unique and that one size fits all solutions would not work for them. This reflects back to the ITIL question
above. It also indicates that a real “system” approach to ITFM may be difficult
for the unique shops to implement. More adaptable organizations seem to have
better success with implementing packaged application software from vendors
like VMware, Apptio and others.
This leads to a discussion about best practices. For many of
the reasons identified above, there seems to be a lack of best practices in
this area. Perhaps this is appropriate based on situational uniqueness. Or
perhaps it is due to the lack of maturity in this discipline. We suggest that
“appropriate practices” may a better track for successful implementations of
ITFM.
The attendees of this conference do not represent the norm
in that they work for companies or agencies that actually have an ITFM
function, job description and headcount. These are also likely to be large
organizations. I don’t have the numbers, but I have to believe this is more
rare than it should be., Given the pressures that IT departments are facing
with justification, credibility and market value, I would think that they
would, as a whole, be further along the path to ITFM, ITSM or ITBM.
All in all, it was an interesting conference. In addition to
the presentations and vendor events, the conference offers in depth workshops
that offer certification in ITFM disciplines. I recommend going to their site
at www.ITFMA.com and checking it out.
For more info on our work at the International Institute of IT Economics visit www.iiievalue.com
