Organizations often lack a clear understanding of the value of IT. They may have visibility of overall IT spend, or operational data about IT usage. But how do you demonstrate the value IT provides? And how do you align IT investments to business strategy?
Many CIOs treat budgeting as a necessary annual function. But this approach leaves room for improvement. When IT budgeting is not just an annual goal, but rather a process to enable the strategic plan, it delivers a competitive advantage. IT Leadership has the opportunity to take the business strategy and build their IT finance plan to support it
IT Finance Planning in 4 Steps
IT and Finance professionals need to make informed budgeting decisions based on accurate cost allocations that improve efficiencies, reduce spend, and provide deep insights that maximize technology investments.
- Review IT investments across the organization
- Shift from keeping the lights on to fueling innovation
- Align IT spend with projects and business units that move the needle
- Track your progress
Strategic IT finance plans need KPIs that show a clear understanding and ability to support the business strategy. These aren’t simply operational measures, they are proof points that IT is delivering value across the entire organization. Measuring these metrics for success fall into four main steps which we cover below.
Review IT investments across the organization
With the growing complexity of technology, many organizations are challenged with IT Finance Management costs that are scattered in multiple systems. Further, these various systems often measure costs in different ways.
In order to solve these challenges, organizations need to understand where their spend is going vs. the plan they have in place. A robust operational plan allows for the actual implementation of the strategic IT finance plan-they go hand in hand. An on-budget operational plan enables the financial resources for the strategic plan to succeed. If you are running into variances, the operational and strategic plans are out of sync.
Essential metrics for strategic IT finance planning:
- IT Spend vs. Plan
- IT spend by business unit
- IT investment by business initiative
Shift from keeping the lights on to fueling innovation
It’s not enough for IT to just keep the lights on and the internet working. CIOs need a solid IT finance plan to drive innovation. Here is where IT must shift from running the business to fueling the changes that allow organizations to thrive.
IT is expected to direct spend toward critical projects. And while maintaining lean and efficient IT spend is a given: proving IT spend had an impact across the organization is often less obvious. At the end of the day, business strategy has to focus on the customer—that’s the organization’s whole reason for existing. CIOs often don’t convey IT value to a customer with operational metrics, but they need to be able to communicate the proportion of spend that is customer-focused.
Essential innovation metrics for IT finance:
- IT investment on running vs. growing the business
- Spend on customer-facing innovation
Align IT spend with projects and technology that move the needle
Technologically mature organizations deliver business value across a wide range of departments. CIOs must align IT spend to the projects and business units that move the needle on revenue. The ability to demonstrate that IT spend will have a material impact drives the IT strategic plan in supporting the business strategy,
If IT is not delivering value, internal teams will fail to drive business and customers will let you know. After all, a business strategy is a path to how you plan to drive revenue growth with new or existing clients or retain current ones. End user adoption and customer satisfaction scores for IT services can indicate how well IT is supporting revenue growth.
Essential technology investment metrics:
- Infrastructure technology costs
- Application and service costs
- End user and customer satisfaction scores
Track your progress
A comprehensive IT plan must include ongoing reviews of project outcomes and delivery dates. After all, IT metrics can only do their job when IT decision makers pay attention to them. Establishing a regular cadence of metrics reviews for different audiences and aspects of IT performance is critical.
Delivery metrics allow your organization to track project execution and the ongoing delivery of services. These metrics may include satisfaction surveys, budget and completion measurements, and data that influence labor and resourcing strategies.
SLAs for IT services enable you to demonstrate a measurable commitment to the strategic plan. An accurate operational plan delivers the right resources. If the SLAs are off, the operational budget is off, and the overall strategy is put at risk.
Essential metrics for tracking your progress:
- % of projects on time and on budget
- % of IT services meeting SLAs
Benefits of strategic IT finance planning
Continuous alignment: The rate of technology and business change is now too fast to be encapsulated in a static multi-year plan. Organizations need their strategic IT finance plans to be responsive.
Robust business strategy: A business strategy that is heavy on aspirational language but light on actionable detail increases the risk of wasted IT investments. CIOs need the right visibility and data to develop a more robust business strategy.
Operational accountability: IT organizations without the capability to deliver efficiencies add unseen risk to the business strategy. The essential KPIs allow your organization to understand the risk, and how it is trending once the financial plan is in action.
Executive partnership: CIOs and IT leadership can use the essential KPIs to build a bridge (at the executive level) between the strategic plan and the business strategy.
Authentic buy-in: Trust is built when IT leadership operates with transparency and clearly-communicated planning targets. Successfully implemented strategic plans develop the goals they are working towards and create a framework for success.