Assessing IT financial management maturity in government
How does a government organisation demonstrate the value of its IT spend with transparency? How can CIOs and CFOs broker a strong relationship to achieve IT Financial Management (ITFM) maturity?
The advent of technology innovation, and transition to modern hybrid cloud-based IT solutions, is challenging public sector organisations to be more agile, efficient, and effective in delivering digital solutions – at pace – to meet service delivery and transformation objectives. But as reliance on technology and IT spending grows so does the perceived challenge in managing the traditional ‘IT black-hole’ stereotype.
Synergy’s ITFM specialists, Liesel Meinecke and Adam Jansen, explain the value of assessing an organisation’s ITFM capability to ensure IT costs are transparent, IT services are delivering the intended value, and the value of the IT portfolio is being optimised.
Government IT investment
The government’s national spending on IT is significant, with billions of dollars of taxpayer funds invested annually. IT is the fourth largest procurement category across the Commonwealth (based on an ANAO report). Yet, there have been significant IT spending failures over the years. The current economic and government climate continues to place pressure on IT departments to deliver more with less, while also justifying every decision.
Given the IT team is the engine that drives business outcomes and service delivery transformation, a clear analysis of return on investment is needed. “For the CIO to deliver the outcomes they need to, they have to be better at demonstrating value for what they spend, and be transparent about how and where their IT budget is being invested,” says Liesel.
“Accountants and IT professionals tend to speak different languages, so finding a common language for them to communicate with each other is critical. A robust ITFM capability helps bridge this communication gap as well as deliver back for every dollar spent on IT.”
Bridging the IT and finance gap
It is difficult to find people who understand both IT and finance. This can make it difficult to manage the business of IT effectively. There is generally a lack of appreciation for all the different skills that need to be juggled to effectively manage, measure, and justify IT financial performance.
“Traditionally, IT has been viewed as a back-office function – now, it is the business!” says Liesel. “Yet many organisations lack an appropriate level of IT Financial Management capability to effectively manage their IT spend and drive value.”
An effective ITFM function aims to efficiently manage the supply and demand of technology assets and resources by maximising the value of IT services, drive value-based investment conversations with business partners and optimise run-the-business spending. ITFM tools and practices provide transparency that can help the whole organisation understand how IT money is being spent. Transparency allows costs to be charged-back or showed-back logically across relevant cost centres through evidence-based data modelling.
“Mature approaches to ITFM require a mastery of a number of different capabilities, such as IT strategy and governance, planning and forecasting, service costing and service portfolio management, investment portfolio management, and contract and vendor management,” says Adam. “It is more than running an IT cost centre variance analysis each month.
“Organisations also need a solid foundation across people, processes, technology and data. Without these basic building blocks in place, the ability to maximise the benefits that effective ITFM functions deliver will be limited.”
Done well, ITFM can create a common language, shared approach, and establish value-driven partnerships between IT and business with clear responsibilities to achieve better business outcomes. Importantly, the relationship between the CFO and CIO becomes a strategic business partnership built on effective collaboration and communication – with specialised skills that complement each other.
“ITFM can create a shared approach and establish value-driven partnerships between IT and business with clear responsibilities to achieve better business outcomes.”
How to bring ITFM to a mature state
For those government organisations seeking to improve their ITFM capability, the starting point is to work out their existing level of ITFM maturity.
“At Synergy, we have developed a comprehensive ITFM Maturity Assessment Framework which enables an organisation to objectively assess their ITFM capability, and from that, implement a targeted plan to develop and mature their ITFM capability,” explains Adam.
This assessment encourages teams to reflect on each of their capabilities – such as service costing, forecasting, vendor management and monitoring.
“We compare assessment results against targets or benchmark against other organisations,” says Liesel. “It draws attention to processes that are unclear or need to be optimised, and enhances technical understanding across both disciplines – finance and IT.”
Ultimately, when the ITFM function reaches maturity, it becomes a system for conducting analysis, justifying IT investment, and driving efficiencies and improvements across the organisation.
