I was invited to speak at the recent twenty-eighth annual meeting of IT financial management professionals in Pittsburgh, Pa. The IT Financial Management Association (ITFMA) is a group of practitioners in the art and science of understanding, calculating and communicating the cost of IT in their organizations. (These are my words.) Their ranks include IT CFOs, asset managers, chargeback and showback, budget and forecasting, and other folks who work in the business management of IT (BMIT) function.
The conference attracted about 160 souls seeking knowledge, current (not necessarily best) practices and moral support in the challenging goal of following the money in IT. Many of the attendees were new to the role and were there to learn, network and commiserate. It's possible that the number of newbies is due to growth of the profession, but our field research shows that many of them are in this role for only a few years, then they move on to less stressful occupations like air traffic control. There were a handful of vendor sponsors that offer software and consulting in this specialized sector.
My presentation, entitled "TCO is so 1990s: Welcome to Total Cost of Services (TCS)," was a Gartneresque scenario projecting the future of IT organizations and posing unanswerable questions (key issues) on how to get there. Those key issues were:
- How should IT financial management evolve to address fundamental platform changes?
- How can the annual IT budget process evolve to a value quest?
- What role will IT finance play in the IT service brokerage?
I plan to address each of these issues in depth in future blogs, as each question requires a comprehensive setup, analysis and conclusion.
My speech was well received and generated an number of further questions and discussion by the full room of attendees. Those questions included:
What is the role of ITIL in establishing a service delivery system?
My answer was that ITIL is a useful framework to work with, but a highly disciplined "black belt" approach may be too rigid to adapt to the unique nature of IT department wants and needs. (See my comment below in the observations section.)
I can't get my CIO or CFO to budget for lifecycle assets. Any ideas?
The primary effect of short term budgeting is that the obsolescence factor creates large budget fluctuations going forward. This means "going to the well" for large capital appropriations to catch up on refreshing a failing fleet of servers, printers and end-user devices. If the overall economy or the specific corporate finances are in a pinch, it can be a recipe for calamity. There is a hard cost to old stuff in terms of security, down time, compatibility, vendor support, and break and fix. There are also indirect costs like employee hiring and retention, and IT credibility. Quantify these costs in a TCO model. (TCO is still an integral part of TCS.) Support it with real instances where it cost the enterprise real money because it was shortsighted in the budget and procurement policies.
I don't seem to have the clout or credibility to get over the hurdles of politics and culture in implementing ITFM, ITSM, or ITBM. Is this a dead end?
Often an outside voice can influence the decision makers or arbitrate the conflicting parties. There are a number of consultancies that have expertise in getting to the next level. The application vendors have accrued a lot of expertise as a result of trying to sell this stuff. If you are a customer or prospect they can bring a lot to the table at little or no cost. In the higher price bracket, the usual suspects in advisory and consulting services can help. The International Institute of IT Economics, which I represent, also can help with business case justifications and arbitration. Of course, for those of you that are reading this, the ITFMA is a gold mine of content, networking opportunities and support.
Other presentations that I sat in on focused on case studies, current practices and other very practical aspects of the challenging job of an IT financial management professional.
So here are a few observations:
Almost all attendees agreed that a consumption based, defined services model is the future of IT organizations. However, there was limited success in realizing this goal. While a few enterprises were in the final phases of evolution to this model, and some of them were presenting, most of them were stuck at various points along the road.
The challenges are not technical. Projects like a CMDB, service definitions, frameworks and software for chargeback and showback, while tricky to implement, were fairly well understood and under way. The real issues were cultural and political, and these were torpedoing the implementation. IT internally is well positioned to run itself like a business but the business is often not ready for IT to do so. Issues ranged from the perpetual resistance from business units that were happy to get IT for "free" to the unexpected hurdle of CFOs who refused to cooperate, old financial management policies that conflicted, and other shared services departments that did not play well with IT. These can be, and often are, the most frustrating impediments to change.
The people I talked to felt that their IT functions were unique and that one-size-fits-all solutions would not work for them. This reflects back to the ITIL question above. It also indicates that a real "system" approach to ITFM may be difficult for the unique shops to implement. More adaptable organizations seem to have better success with implementing packaged application software from vendors like VMware, Apptio and others.
This leads to a discussion about best practices. For many of the reasons identified above, there seems to be a lack of best practices in this area. Perhaps this is appropriate based on situational uniqueness. Or perhaps it is due to the lack of maturity in this discipline. We suggest that "appropriate practices" may be a better track for successful implementations of ITFM.
The attendees of this conference do not represent the norm in that they work for companies or agencies that actually have an ITFM function, job description and headcount. These are also likely to be large organizations. I don’t have the numbers, but I have to believe this is more rare than it should be. Given the pressures that IT departments are facing with justification, credibility and market value, I would think that they would, as a whole, be further along the path to ITFM, ITSM, or ITBM.
All in all, it was an interesting conference. In addition to the presentations and vendor events, the conference offered in depth workshops that provide certification in ITFM disciplines. I recommend going to ITFMA.com and checking it out.
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