CIO — IT departments have traditionally been weak at controlling IT spend, let alone be able to explain the cost in the first instance to the business. So why is it so difficult to manage IT spend? Typically this is due to:

• The fragmented nature of IT. Spend is often incurred in many departments and business units with a varying degree of central control. This is often further exacerbated by spurious IT recharges.

• An ever expanding IT environment. Demands on IT grow continuously. This results in increased cost. However, businesses often fail to distinguish what is a real cost increase (unit price), versus expansion of the IT environment (volume).

• Lack of financial skills. Typically, IT staff lack finance understanding and they are unable to talk the language of the accountants.

As a result many businesses feel that IT is not properly managed. Businesses respond by cutting or "freezing" IT spend. This leads to frustration in the IT department and with an equal annoyance on the business side as the business feels that they need to "watch" the IT function as the "techies" cannot be trusted to make managerial and cost effective decisions.

In this article we outline how StarBev, a leading Central Eastern European brewer — operating in seven countries, has managed to bridge this gulf between the business and IT, and how they successfully control IT spend.

How to Solve the IT Cost Control Problem: Establish a Robust Framework

In order to manage spend, a strong framework was established which captures the total IT cost at StarBev.

This framework was developed by finance and IT staff to ensure that standard accounting practices were adhered to but also to make sure that costs drivers were captured to allow the IT team to analyze operations effectively.

The cost framework distinguishes between operating spend and capital investments.

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