How to build a case to your CFO for IT management tools

charlesbetz.jpgBy Charlie Betz

 

Charlie Betz is research director for IT portfolio management at Enterprise Management Associates (EMA) and author of the white paper, “Business Intelligence for the Business of IT.”

 

IT is under perpetual challenges to be more transparent financially. And the imperative for transparency only grows if you’re a CIO who’s now reporting to a CFO.  

 

I’ve worked in some pretty large companies, and I know that many senior IT managers don’t have nearly the information that they need to manage those shops effectively. The current practice in IT is nowhere as data-driven as it should be. This is one reason I’m so fascinated by what HP is doing with its IT Performance Suite and the Executive Scorecard.

 

The potential to manage IT in a much more quantitative fashion exists. And there is tremendous low hanging fruit, in the systematic application of integrated reporting and analytics on IT management data. There’s also the potential to better execute on some fairly well understood measurement approaches. The problem is, to do this, you need tools and you need a system, and building the case for this is very hard.

 

Are management tools just overhead on overhead?

Traditionally the business views IT as overhead and a cost center. Investing in things like CMDBs, IT management data marts and IT monitoring tools can be seen as overhead on the overhead. So it can be hard to make the business case that you need all these things to run IT better as a function.

 

But in big organizations IT spend can be easily north of 4 or 5 billion dollars a year. That’s a level of economic activity that would put you in the Fortune 500. But IT is not managed with anything near approaching the tools and techniques that would be deployed if it were a standalone 4 or 5 billion dollar company.

 

What’s the tradeoff in cost and risk?

Investing in IT management systems remains a hard business case to make, and yet the alternative is to accept so much more additional cost and risk. After all, those go up because you’re not managing the spend better.

 

This is something I get concerned about when I hear of greater CFO involvement in IT. They may not be familiar with what should be best practices in managing a large IT organization. Are they just going to cut all the stuff they see as non value add and that will include things like continuing to invest in CMDBs and portfolio management systems? Or are they going to see that look, this is a lot of money and a lot of economic activity and the one area that I really need to focus on is how can I understand it better and apply continuous improvement?

 

What’s a reasonable management budget?

That doesn’t mean that you need to spend, say, 20% of the IT budget on managing itself. But every business has SG&A (sales, general and administrative). So, if you’re managing IT as a business, what’s a reasonable SG&A for the IT spend? Maybe it’s 2.5% to 5%? Well some portion of that 2.5% to 5% should be spent on tools to manage your IT spend better. And if you don’t do that, you’re not going to have the visibility you need to continuously improve your IT spend.

 

What do you think? Should we consider an SG&A percentage for the overall IT value stream and use that as the funding basis for IT management tools like the service desk and portfolio systems?

 

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Learn more about the HP Executive Scorecard.  For more insights on the future of IT and how you can optimize IT performance to drive business results, subscribe to the Discover Performance ezine.

Labels: IT management
Comments
Damien4543543 | ‎10-07-2012 05:59 PM

Some interesting points

MylesS | ‎10-08-2012 02:35 PM

Charlie,

 

I really like the premise of your article. If IT is a business, then why isn't it managed like a business. There are a 100 reasons why this hasn't been true hertofore, but they are all bad when you consider that IT runs the guts of the enterpirse capability system--how their company in fact differentiate themselves. With this said, I think it could be good for CFOs to have a position with respect to IT because they do run the rest of the enterprise scorecards. And if they discover that best practices like COBIT 5 gives them how IT should be measured. What do you think?

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