While smaller budgets are a likely reality for most organizations, increasing technology investments that drive real ROI are a necessity. This paradox requires today’s companies to make judicious decisions when it comes to their technology investments. That means eliminating the silos of IT consumption, usage and cost data, and providing a centralized system that increases IT cost transparency and accountability.
To do that, organizations need to establish the tools, technology and processes that support a transparent approach to IT financial management. Many organizations have managed IT spending either through general ledger accounting platforms or by using disparate systems to track costs and expenses. A general ledger approach may reveal overall costs, but fails to delve deep into the consumption details that comprise a total solution – a key metric in allocating and managing costs.
An IT financial management solution, on the other hand, provides organizations with a centralized line of sight into their own consumption and both macro and micro level details of actual consumption as well as total cost of technology. By presenting costs as a line item via a monthly invoice, for both internally provided services as well as external solutions, business users can begin to fully understand their technology consumption and its associated costs.
This insight enables business users to make decisions or change consumption behavior to deliver increased value to the company. The organization also experiences more productive dialog and organization-wide cost control as a result of increased visibility and accountability. This supports more dynamic forward-facing budgeting, forecasting and planning, enabling business users to make strategic and responsible decisions based on actual data.
A service costing module is critical for technology financial management because it ensures charges are allocated fairly and business users understand what they are paying for, such as the maintenance and support that go with managing an application. Information should be broken down into cost categories and presented in business language so users can process the information and make informed decisions.
By providing insight into complete IT expenses in business language, business managers can better distinguish value-added activities and costs from non-value-added activities and costs. A financial management solution creates a higher level of accountability by delivering the appropriate level of details that enable business managers to make informed decisions, accurately price new offerings and remain competitive in the market.