Strategy clinic: How do I fit in with new IT finance group?

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Our panel of experts answers your IT problems

As head of IT I have always had a great deal of autonomy and feel that my department has provided an excellent service while staying within budget. I have been told that an IT finance function is to be set up under the aegis of the finance director to track the value of IT services and projects in purely financial terms. Am I right to see this as unrealistic and a betrayal of trust?

Embrace the new approach and achieve dual reporting

You are right to be concerned, although you would need to see other indicators to consider this situation a betrayal of trust.

Instead of considering the financial evaluation of projects and services unrealistic, you would be wise to embrace this approach.

IT managers who want to progress in their careers need to demonstrate an ability to be business-oriented, and that includes valuing services and assets in financial terms. In particular, there may be a situation in your company that requires a major focus on costs and, if so, you need to be proactive in this area.

It will help if you achieve at least a dual reporting line so that the new IT finance function is also responsible to you. This will give you an opportunity both to learn and to demonstrate leadership in this area.

If you are not comfortable with the financial aspects you should consider taking a course for non-financial managers.

On the question of trust, it would be helpful to confirm that both the end-users and their managers value your services. Adopt some customer service and satisfaction metrics. These will also help you provide an appropriate balance to the financially-based approach that is now being adopted.

Sharm Manwani, Henley Management College

Help the new function to appreciate value over spend

I suggest you welcome the new IT finance function and ensure it is engaged fully with your team, is kept up to speed on technical matters and, most of all, becomes a credible source of insight on your organisation's IT needs, opportunities, costs and funding.

Enquire who wants the new IT finance function and why. The board may want to establish independent expert control processes. Governance processes have changed significantly in recent years; today, extensive levels of autonomy are the exception.

This is also a good chance to confirm that users share your view that they get excellent service.

Tracking the value of IT purely on financial terms is foolish. Of equal importance is the capacity created. For example, £2m for e-mail may seem high, but if this is 1p per mail and others pay 3p, then focus your efforts elsewhere.

Similarly, cutting costs can be counterproductive. For example, extending average PC usage from four years to five provides a 25% reduction in deprecation and may save cash in the first year. But this is folly unless associated impacts are considered, such as supporting multiple operating systems, or delays from slow PCs.

Work closely with the IT finance function to help them understand value over and above the expenditure.

Antony Smyth, Ernst & Young

Make sure you work on the same strategy and tactics

You need to see the new IT finance function as a valuable addition to your IT management framework, and personally make sure you are all working on the same strategy and tactics.

From an overall strategy perspective, maximising the value the company creates from investments in IT is now at the very heart of successful IT strategies, so, far from being unrealistic, it is essential.

If, as it sounds from your question, you have positioned the IT department as a provider of services to everyone else, it will be difficult for you to argue that you should have accountability for the financing of IT and for the delivery of business value from IT investments.

A company simply cannot hand this accountability to a provider, even a very trusted one, so placing it in the finance function is not a betrayal of trust but a recognition that to place it in IT would give you a conflict of interests that you would find, as a provider of the services being invested in, hard to reconcile.

What matters most is that the people who will be accountable for this new piece of the strategic IT jigsaw have the knowledge to make it succeed.

Accounting for investments in IT is relatively easy, but identifying and maximising the real business value created as a result of these investments needs specialised knowledge and experience. As your company's most senior IT expert you are clearly best placed to help the new function succeed.

Chris Potts, Dominic Barrow

Demonstrate the value of your existing department

I think your question is a sign of the times: organisational management is demanding proof of the delivery of IT value.

For too long IT has delivered applications and services the benefits of which are lost in, or even claimed by, other functions. Of course, one expects this as IT always works with business to underpin business processes. Few IT applications provide benefit on their own.

It seems to me you have little choice but to work with the finance staff as any argument would simply confirm to them that you do not deliver value, as you do not wish to be measured.

Why not take the opposite stance? Create a benefits assurance group, and as it is similar to the finance group, have the two groups work as one. Arrange for this group to work with business management before approval of the intended applications and then trace the delivery of the benefits on a quarterly basis. This could, in effect, broaden the tracking of benefits beyond those that are purely financial.

We have seen the outsourcing of many IT functions and I believe this is in part connected to the perceived lack of value delivered by incumbent IT groups. Make sure your department does not follow this direction as outsourcing will be the next step.

In summary, go with the flow and begin to take ownership of benefits delivery and assurance.

Chris Edwards, Cranfield School of Management

Consider specific areas of IT spending and work together

Try not to view a business decision personally and as a betrayal of trust but rather as a financial analysis exercise. As you mentioned, you are providing an excellent service and this decision will only serve to endorse your position.

Generally, IT investment should meet a range of criteria: strategic, economic, technical, benefits realisation and risk management. This includes:

Will the investment meet a business need? For instance will it enable us to sell more?

  • Are processes optimised to deliver maximum cost saving and customer service?
  • Do the business benefits warrant the level of investment required?
  • Will the proposed solution work - ie, is the technical architecture viable and is the sourcing model developed to meet the risk reward needs of the business?
  • Is there a benefits realisation plan? Are individuals tasked with ensuring tangible benefits are delivered?
  • Are all the risks known, allocated and managed?

A robust business plan, which should be signed off by the business should meet the above criteria. Remember that meeting a budget does not necessarily mean that you are delivering good return on investment.

As the finance function is responsible for the IT spend of the organisation, monitoring mechanisms must be in place, and it is right that the finance director is taking a closer look.

My advice is to ensure that your IT spending meets those areas that I have listed and work with the finance director to give consideration to these aspects.

Roger Rawlinson NCC Group


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Cranfield School of Management

Dominic Barrow

Ernst & Young

Henley Management College

NCC Group

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