ITIL Implementation Roadmap (Financial Management for IT) — Part 12
So call it what you want, but in both cases money is being transferred to the IT organization for services rendered. You see contrary to what ITIL suggests charging is never really optional. What is optional is the formality in which you conduct this transaction. Whether it is a formal bill or a transfer of money to an internal cost center, money is still changing hands.
Recently this has become even more important with the current focus of the market being on cost reduction, outsourcing and financial governance. IT organizations are no longer being afforded the grace they once were, and the business is demanding an accurate accounting and tracking of IT costs related to use and consumption.
While IT struggles in many areas to become more proactive in the management and delivery of its services to the client. This is nowhere more apparent then in the way that technology costing is typically done.
Regrettably what usually occurs during the year is that all IT costs and expenses are collected into a large cost centre or proverbial bucket which at the end of the fiscal period gets upended on the table and then is divided up equally across the business clients regardless of use.
Financial Management for IT Services
Objective: Financial Management is the sound stewardship of the monetary resources of the organization. It supports the organization in planning and executing its business objectives and requires consistent application throughout the organization to achieve maximum efficiency and minimum conflict
The primary activities of Financial Management include costing, accounting and recovery. Most organizations have a rudimentary costing and budgeting process based on a technical domains instead of service architecture. This is largely due to the missing input of other processes such as Service Level and Configuration Management. In principle, the services defined in the Service Catalog are the same services that are modeled within the CMDB. These same service definitions should represent the general ledger accounts and chargeable elements that appear on a client bill. Without this integration, the Financial Management process is typically implemented along the following levels of maturity.
Troy's thoughts what are yours?
“This planet has - or rather had - a problem, which was this: most of the people on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn't the small green pieces of paper that were unhappy. ~Douglas Adams
- Costing models are targeted at understanding the cost of individual or like collections of assets or resources, such as an individual server or collection of servers. Costs for these technical components or people resources are bundled and allocated back to the business customer based on a shared allocation model not representative of actual use. Forecasts and actual expenses are based on a technical model. If services are defined, they are done so from a financial perspective that is not representative of the actual services delivered to the business by the IT organization. At this point of maturity, there are no real dependencies as the Financial Management process mitigates the lack of other processes by defining costs models and chargeback systems at a best effort level.
- As indicated above, the services defined in the IT Service Catalog should form the basis for the IT budgets and the GL accounts defined in the costing, reporting and forecasting models. This level of maturity requires Service Level Management to be implemented at least to the point that services are defined and are used for planning and forecasting. In order to establish which costs are direct and indirect, Configuration Management is required to establish the relationships between components as they relate to IT systems and services.