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 \n\nit so difficult to manage IT spend? Typically this is due to:\u2022 The fragmented nature of IT. Spend is often incurred in many departments and business units with a varying degree of central \n\ncontrol. This is often further exacerbated by spurious IT recharges. \u2022 An ever expanding IT environment. Demands on IT grow continuously. This results in increased cost. However, businesses often \n\nfail to distinguish what is a real cost increase (unit price), versus expansion of the IT environment (volume).\u2022 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 \n\nthe 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" \n\ncannot be trusted to make managerial and cost effective decisions. In this article we outline how StarBev, a leading Central Eastern European brewer \u2014 operating in seven countries, has managed to bridge this \n\ngulf between the business and IT, and how they successfully control IT spend. How to Solve the IT Cost Control Problem: Establish a Robust FrameworkIn 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 \n\ncosts drivers were captured to allow the IT team to analyze operations effectively. The cost framework distinguishes between operating spend and capital investments.Operating SpendThe IT operating spend is divided into "packages" such as hardware maintenance, software maintenance, application support etc, and with further \n\ndrill-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 \n\ncountries 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 \n\npicture of the baseline and extraordinary activities as well as expansionary costs. This is particularly helpful during the annual budget cycle to justify \n\nwhy 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 \n\ncentral and local IT teams about fairness and allocation keys. Figure 1. An extract of IT operating spend framework (example only).Capital InvestmentsIT spend, which is capitalized, is divided into two broad categories: Infrastructure (mandatory) and business initiatives (discretionary), with several \n\nsub categories, as shown in figure 2: \u2022 Infrastructure initiatives, e.g. hardware refresh. This type of IT investments is managed directly by the IT department with limited \n\nbusiness involvement. Typically, it is difficult to justify this spend on a normal "Return on Investment" basis. Thus, instead of making unrealistic \n\nbusiness 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 \n\ntype of investment. \u2022 Business IT initiatives, e.g. application developments. This type of spend is based on business priorities. During the budget cycle a \n\nnumber 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 \n\nbudget will not cover all projects. So during the year, projects will be launched inline with business priorities and once a business case is \n\ndeveloped.The business IT initiatives are managed as a portfolio of projects and there is no equal allocation between the countries. Instead, IT investments \n\nare channeled to the countries and business functions where the largest return can be realized. Figure 2. An extract of IT capital investment framework (example only).The Success of Our Approach: Detailed Follow-up and Information-based Decision-makingThe key for successfully controlling the IT spend at StarBev is the ongoing follow-up. On a monthly basis the actual spend is captured and tracked \n\nagainst budget. A summary is presented on a one page financial scorecard. This balance scorecard is shared with all IT staff to ensure everyone understands the \n\nfinancial position. The balance scorecard is also presented to the senior executive team. There is only a single picture as far as IT spend goes. Furthermore, on a quarterly basis an IT steering committee meets to discuss and prioritize the IT investments for the forthcoming quarter and \n\nremaining part of the year. This steering committee includes the senior leaders of the business, including the CEO, CFO together with CIO and Project \n\nPortfolio Director. The IT steering committee reviews the business IT initiatives as well as how over- or under-spend in previous months will impact proposed future \n\nprojects. The aim is to ensure that the total annual budget is adhered to. The key lessons learned from implementing the cost control framework and managing the IT costs successfully at StarBev comes down to a few \n\nsimple rules: \u2022 Use an IT cost framework that adheres to common accounting standards and captures all the relevant IT cost drivers.\u2022 Capture and analyze IT costs on a consistent basis every month. \u2022 Share IT spend information with all IT staff (central and local teams) as well as to the senior management team to ensure there is a single view \n\nof the cost.\u2022 Use the IT cost information to make the right business decision. StarBev is the largest Central and Eastern European brewery firm. Its portfolio includes well-known brands, including Staropramen and licence \n\nproducts such as Stella and Becks etc..