Seven steps to aligning IT with the business
The massive growth in IT over the past decade has moved it from being a backoffice support function to a critical business unit. IT now ranks among the top five expenditures of most companies.CIOs have to show how the money is spent, the returns they are getting for their investments, and how IT is driving corporate performance. This increased role requires focus, vision and, above all, transparency – into services, costs, demand, processes and impact on corporate performance.
The benefits of aligning IT with the business
• Improve management control.
• Understand and communicate the financial and non-financial value of each IT project and operation.
• Comply with legislative requirements.
• Reallocate IT resources to projects of most importance to the business.
• Facilitate the elimination of IT projects that are not delivering.
Cost management and transparency
For the CIO to compete for resources, the IT function needs to operate as a business within a business – providing valuable services to the rest of the organization. The CIO must effectively educate the organization and provide clearly articulated and relevant cost information.
A detailed understanding of the cost within the IT business provides clear and positive advantages to the CIO and the wider organization:
• Ensuring optimal resource allocation to areas of greatest value.
• More effective allocation of resources to “areas of need.”
• Reducing complexity within IT and simplifying internal processes.
• More informed budgeting (capital and operating) and pricing of new projects.
• Greater understanding of IT capacity and ability for delivery.
• Ability to link IT investments to overall organizational benefits.
• Facilitating practices and tools such as total cost of ownership (TCO) and return on investment (ROI).
The importance of chargeback
It is difficult to maximize returns from IT when the product appears to be free to customers. Ideally, IT operates as a service provider with a catalog of products and services that are aligned with customer needs and corporate goals. For this, IT needs:
• Accurate pricing for its services that reflects the cost to provide them.
• An understanding of what drives both demand and cost.
• An equitable, repeatable and accurate method to track and invoice customers based on their usage of
the services.
• To encourage end-user accountability for the return on investments.Cost control is the greatest benefit that comes from IT chargeback.Chargeback gives clear transparency into the benefits and the value that IT brings, and the impact on the bottom line means better relationships with the rest of the organization.
Budgeting and planning
IT financial management processes are often resource-intensive, involving the manual collection of financial data that is scattered across the enterprise. With a lack of data to support accurate forecasts, the resulting budget is often based on political biases.This reduces the time and effort involved while increasing the accuracy of forecasts and simulations, and forms the basis for the financial budget, aligning organizational objectives, requirements, volume and cost.
Resource optimization
To maximize returns from new and existing infrastructure, IT needs a consolidated, end-to-end view of use of its applications and infrastructure, both physical and virtual, to understand how all IT components interact. IT organizations have made substantial cost savings through re-purposing underused infrastructure and combining server workloads.
Summary
Managing IT as a business is now an imperative. No longer can IT be seen as a technology supplier – it must be seen to be adding value to the organization and providing corporate strategic capability. IT business performance allows IT to change the focus from technology and production to customers and services. It enables IT to become service-oriented, aligning itself with the organization to provide customer-driven solutions to business problems
The massive growth in IT over the past decade has moved it from being a backoffice support function to a critical business unit. IT now ranks among the top five expenditures of most companies.CIOs have to show how the money is spent, the returns they are getting for their investments, and how IT is driving corporate performance. This increased role requires focus, vision and, above all, transparency – into services, costs, demand, processes and impact on corporate performance.
The benefits of aligning IT with the business
• Improve management control.
• Understand and communicate the financial and non-financial value of each IT project and operation.
• Comply with legislative requirements.
• Reallocate IT resources to projects of most importance to the business.
• Facilitate the elimination of IT projects that are not delivering.
Cost management and transparency
For the CIO to compete for resources, the IT function needs to operate as a business within a business – providing valuable services to the rest of the organization. The CIO must effectively educate the organization and provide clearly articulated and relevant cost information.
A detailed understanding of the cost within the IT business provides clear and positive advantages to the CIO and the wider organization:
• Ensuring optimal resource allocation to areas of greatest value.
• More effective allocation of resources to “areas of need.”
• Reducing complexity within IT and simplifying internal processes.
• More informed budgeting (capital and operating) and pricing of new projects.
• Greater understanding of IT capacity and ability for delivery.
• Ability to link IT investments to overall organizational benefits.
• Facilitating practices and tools such as total cost of ownership (TCO) and return on investment (ROI).
The importance of chargeback
It is difficult to maximize returns from IT when the product appears to be free to customers. Ideally, IT operates as a service provider with a catalog of products and services that are aligned with customer needs and corporate goals. For this, IT needs:
• Accurate pricing for its services that reflects the cost to provide them.
• An understanding of what drives both demand and cost.
• An equitable, repeatable and accurate method to track and invoice customers based on their usage of
the services.
• To encourage end-user accountability for the return on investments.Cost control is the greatest benefit that comes from IT chargeback.Chargeback gives clear transparency into the benefits and the value that IT brings, and the impact on the bottom line means better relationships with the rest of the organization.
Budgeting and planning
IT financial management processes are often resource-intensive, involving the manual collection of financial data that is scattered across the enterprise. With a lack of data to support accurate forecasts, the resulting budget is often based on political biases.This reduces the time and effort involved while increasing the accuracy of forecasts and simulations, and forms the basis for the financial budget, aligning organizational objectives, requirements, volume and cost.
Resource optimization
To maximize returns from new and existing infrastructure, IT needs a consolidated, end-to-end view of use of its applications and infrastructure, both physical and virtual, to understand how all IT components interact. IT organizations have made substantial cost savings through re-purposing underused infrastructure and combining server workloads.
Summary
Managing IT as a business is now an imperative. No longer can IT be seen as a technology supplier – it must be seen to be adding value to the organization and providing corporate strategic capability. IT business performance allows IT to change the focus from technology and production to customers and services. It enables IT to become service-oriented, aligning itself with the organization to provide customer-driven solutions to business problems
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