How to Manage IT Spend

StarBev CIO Marcus Johansson and StarBev IT Financial Controller Viera Hraskova share how they successfully implemented a cost control framework and are managing IT costs and some key lessons they learned from the process.

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Operating Spend

The IT operating spend is divided into "packages" such as hardware maintenance, software maintenance, application support etc, and with further drill-down into "blocks" for different suppliers and technical areas, as shown in figure 1.

The framework is consistently used by all the countries within StarBev Group. This makes consolidation of IT spend and comparison between the countries straightforward.

In addition, the framework distinguishes between one-off, ongoing as well as business growth spend. This allows the IT team to present a true picture of the baseline and extraordinary activities as well as expansionary costs. This is particularly helpful during the annual budget cycle to justify why spend varies from one year to another.

IT spend is measured "at cost" and no artificial or inflated recharges are made between the countries and central IT. This prevents debates between central and local IT teams about fairness and allocation keys.

figure1-ITspend.jpg
Figure 1. An extract of IT operating spend framework (example only).

Capital Investments

IT spend, which is capitalized, is divided into two broad categories: Infrastructure (mandatory) and business initiatives (discretionary), with several sub categories, as shown in figure 2:

Infrastructure initiatives, e.g. hardware refresh. This type of IT investments is managed directly by the IT department with limited business involvement. Typically, it is difficult to justify this spend on a normal "Return on Investment" basis. Thus, instead of making unrealistic business cases, the IT team develops an annual plan which is approved during the budget process. Once approved it is up the IT team to manage this type of investment.

Business IT initiatives, e.g. application developments. This type of spend is based on business priorities. During the budget cycle a number of meetings between the business and the IT team take place. A "wish" list of projects is drawn up and capital allocated. The amount in the budget will not cover all projects. So during the year, projects will be launched inline with business priorities and once a business case is developed.

The business IT initiatives are managed as a portfolio of projects and there is no equal allocation between the countries. Instead, IT investments are channeled to the countries and business functions where the largest return can be realized.

figure2-ITspend.jpg
Figure 2. An extract of IT capital investment framework (example only).
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