Is finance essential to IT strategy success?

Is budgeting and financial management a necessary evil? How crucial is it to our success as IT strategists?

Is budgeting and financial management a necessary evil? How crucial is it to our success as IT strategists?

IT needs a well-structured investment plan

Chris Potts, director, Dominic Barrow

When I sit down with senior executives to discuss the links between strategy, operations and IT, one thing is virtually guaranteed to capture their interest and involvement: a well-structured investment plan.

Some of them even restructure their business plans using the financial template we have introduced for IT.

Need I say more?

If you cannot talk financials, forget aiming for the board

Chris Edwards, Cranfield School Of Management

Budgeting and financial management certainly sometimes feel like a necessary evil when one is applying the ideas to one's own group.

However, an IT strategist's key role is analysing organisational performance with a view to locating opportunities for profitably applying IT. One of the prime contributors to this analysis is the existing patterns of income and spending: are we carrying too much stock? Is the labour/revenue ratio too high compared to our competitors?

In these organisationally difficult times, this perspective is central to such an analysis and is certainly critical in attracting managerial sponsorship for IT projects. An IT strategist that does not understand an organisation's financials is not fully competent to practice.

One hears of IT managers wanting to move upward to become the chief information officer, often aspiring to a seat on the management committee or even the board. Understanding financials is a central pillar of this enhanced role: if you cannot talk financials you should not be on the board.

A necessary evil and key to IT strategy success

Gill Williams, partner in Ernst & Young's information security practice

Financial management and budgeting are both a necessary evil and fundamental to our success as IT strategists.

Poor cost management by the IT function affects credibility, which in turn has an impact on success at the strategy level.

Furthermore, IT spend should be justified, approved and based on its contribution to business strategy and therefore, even attempting to build an IT strategy without these vital ingredients is a recipe for disaster.

But how evil and how difficult are these two aspects of IT: strategy development and execution? Budgeting and IT cost identification are vital in developing business cases for IT investment and financial management enables budgeted costs to be monitored, issues identified and revised costs approved or highlighted.

All these features appear sound business common sense. With the bottom line still the focus point in strategies, whether it is business or IT, it makes sense to give the business what it wants - sound IT investment cases, chargeback mechanisms to business units, operational finance management processes, visibility of IT costs and an accurate return on investment.

After all, the approval of the IT budget and the IT governance procedures are perhaps the biggest indicator of executive level commitment to the IT strategy.

IT strategy is not above financial management

Roger Rawlinson, NCC Global

There was a time when IT often considered itself above the rigour and constraints of business planning and this resulted in poor implementation and IT missing the opportunity to be seen as an integral part of the business. I can remember when the professional engineering bodies would complain about the disparity of salaries between engineers and other professionals, but at the same time speak in a language no one understood.

Fortunately, times have changed and engineering and technology is now a key influencer to business planning. This has come about through the development of business-focused IT and engineering professionals.

It is vital that IT strategy and planning takes finance and budgeting into consideration, as this is a key element in determining the financial case in the business case.

In addition to finance, consideration must also be given to risk, benefits realisation and sourcing options. Without this, the IT development does not have the sound foundation and scrutiny required to measure and deliver success.

If financial management is regarded as an "evil" by an IT strategist, the implication is that they do not consider it a requirement.

If you are an IT strategist, it is a plain necessity

Robin Laidlaw, Computer Weekly 500 Club

Unless you work for an organisation for which IT is of such fundamental necessity that it has to have what you produce, regardless of how incompetently you may have produced it, then yes, budgeting and financial management are fundamental.

How can you consider calling yourself an IT strategist if you do not want to be bothered with such considerations? If you were the chief executive, would you be happy that your IT director was bumbling along, oblivious to any financial constraints or targets?

Are you happy to manage, if manage it can be called, a department about which you have no knowledge of its financial performance against budget and operating targets? Budgeting and financial management are not evil, just plain necessary.


The experts

Computer Weekly has put together a panel of experts. You can draw on their specialist knowledge to solve a problem. E-mail your questions (or your own solutions to this or the next question) to computer.weekly@rbi.co.uk.

NCC Group  www.nccglobal.com

Deloitte &Touche  www.deloitte.co.uk

Cranfield School of Management  www.cranfield.ac.uk/som

Computer Weekly 500 Club  www.cw500.co.uk

Henley Management College  www.henleymc.ac.uk

British Computer Society  www.bcs.org.uk/elite

Impact  www.impact-sharing.com

The Infrastructure Forum  www.tif.co.uk

Dominic Barrow  www.dominicbarrow.com

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