The IT department is the backbone of business, which is why it is so important to treat IT as a business itself. Treating IT as a business requires a solid strategy to define financial management for IT services, which is where ITIL financial management comes into play.
ITIL provides a framework for many of the IT department’s processes, which is why it should not come as a surprise that it provides a framework for finances as well.
What is financial management in ITIL?
As defined by Axelos:
“[ITIL financial management, or ITFM, is] a generic term used to describe the function and processes responsible for managing an organization’s budgeting, accounting and charging requirements…Financial management for IT services is the specific term used to describe the function and processes from the perspective of the IT service provider.”
In other words, ITIL financial management dictates processes for everything from budget to charging, specific to the IT team. This is part of the “Service Strategy” phase in the ITIL framework.
Outlining the ITIL Framework and Service Strategy
The ITIL framework consists of phases, including the Service Strategy phase. There are four areas of the service strategy phase in the ITIL framework: service portfolio management, demand management, business relationship management, and strategy management for IT services.
In order to understand what financial management for IT services entails, one must break down these four pillars:
Service Portfolio Management
Service portfolio management ensures that the service provider has the right mix of services needed to meet business needs and produce the desired outcomes. Service portfolio management considers services in terms of the business value that they provide.
In other words, service portfolio management requires evaluation of the services being offered and the resources available to meet those demands.
Demand Management
Demand management works with capacity management to ensure that the service provider has sufficient capacity to meet the required demand. At a strategic level, demand management can involve analysis of patterns of business activity and user profiles, while at a tactical level, it can involve the use of differential charging to encourage customers to use IT services at less busy times or require short-term activities to respond to unexpected demand or the failure of a configuration item.
This is slightly different from service portfolio management in that it directly connects the services to the demand.
Business Relationship Management
As you might have predicted, business relationship management is the process responsible for maintaining a positive relationship with customers. This process identifies customer needs and ensures that the service provider is able to meet these needs – this has strong links with service level management and is critical for business alignment.
Strategy Management for IT services
Strategy management is the process responsible for defining and maintaining an organization’s perspective, position, plans and patterns with regard to its services and the management of those services. Once the strategy has been defined, strategy management for IT services is also responsible for ensuring that it achieves its intended business outcomes.
Best Practices for Financial Management IT
With the four pillars of the service strategy phase in mind, financial management for IT services consists of a few best practices to help you treat IT as a business and create meaningful financial impacts. These steps should all be considered when crafting the IT budget and managing IT assets.
Take a Deep Dive into Hardware and Software Inventory
The first step in creating a sustainable, actionable strategy for IT financial management requires a deep dive into the department’s hardware AND software. I emphasize the “and” because we often have full awareness of each laptop, mouse, keyboard, router, and thumb drive – but the same attention to software is often overlooked. Keeping up with software licenses, compliance, expiration, and updates can help prevent duplicate efforts and waste. Further, inventory of both hardware and software will give greater visibility into which assets are aging, which should be replaced, and which licenses should be renewed before it is too late and creates a costly problem.
Identify Essential Corporate Assets
In order to identify areas of waste as well as crucial components, identify which corporate IT assets are available, even if not in use. These assets can be both tangible such as an ERP server or intellectual such as internet. Assets might also even be people who provide specific expertise and irreplaceable impact on the business of IT.
Once those assets have been identified, steps can be taken to make the most of these assets and to optimize the way they are put to use.
Focus on Improving Efficiency
In IT, much rests on efficiency. Identify areas where actions can be consolidated – for example, is the change management process creating wasted time? Are tickets being handled too slowly? Is there system down time? Does the service desk lose time volleying tickets? These small inefficiencies can stack up to mean major time lost, which equates to major financial losses over time through indirect costs.
When focusing on efficiency, consider tools, like IT service management software, which can streamline the provision of collaborative support. This seems counter-intuitive, to mention considering new tools when trying to lower costs, however an investment in the right tools can boost efficiency and lower the cost-per-ticket and handling time, resulting in overall lower costs and actually provide ROI.
Identify Areas to Lower Your Service Costs
Lowering and optimizing service costs is inherently tied to all of the best practices listed above. However, it is a critical step in managing IT as a business. Service costs can be tied to software subscriptions, overhead, server space, or any other number of areas. Optimizing these costs may mean expanding your tools outside of the IT department for a greater ROI, closer departmental collaboration, and business impact, or it may require consolidating subscriptions and identifying any areas of waste.
Conclusion
Whether you are looking to refine your IT financial management or are looking to start a new strategy from scratch, the right tools are key. IT financial management software will help you track and manage IT financial expenditures while answering key questions, including: What are you spending to deliver service? What about on hardware and software assets? And how can you integrate these IT financial processes with other ITIL processes and ensure service and asset management are always taken into account?
EasyVista's ITSM platform allows you to coordinate it all, without the need for disparate systems or the assistance of non-IT departments. Financial management for IT services can be made easy. Gain operational visibility, insight, and superior decision-making capability — and keep IT responsibility with IT. Request a demo today!
