Technological advances have brought with them one of the most complex cost management structures in business today.  Costs to implement and maintain new technologies within today's organizations continue to spin out of control, despite the best efforts of IT managers to contain them.  IT clients demand new services, faster capabilities, larger storage capacities, and wider areas with which to use it all.  Meanwhile, IT departments have taken all of the accountability and continue to get "beat up" for the increasing spending being demanded by internal clients. 

Many IT organizations have hired their own internal Financial Managers to assist the CIO and other IT executives manage their cost. However, IT Financial Managers have limited tools and capabilities to deliver maximum value (general ledger data (department and G/L account) and annual budget versus actual variance reporting).

At Lontra, we believe that the value of effective IT Financial Management includes the following competencies and tools:

• Unit Cost Modeling - for major work outputs, assets (configurations), billable services, and internal clients
• Cost Recovery - via fair and equitable monthly internal invoicing (chargeback)
• Performance Metrics Trending - that report service-level optimization results
• Perpetual Budgeting & Planning - utilizing rolling demand and cost forecasts

For more of this article, and a podcast from Ron Bradley on this topic, click here

IT budgeting time is coming, is your department ready to face the numbers? 

Take this month's survey, "Are You Getting Enough Bang for Your IT Buck" and let us know where your organization stands.

Look for an article on the results in next month's newsletter and find out where you stack up against other organizations.

Over years of working with a multitude of Information Technology leaders and employees of Fortune 1000 corporations, it has proved to be very telling to ask a series of questions concerning best practices in IT costing and chargeback:

Do you know what services your customers are consuming and how much?

Do you know how much each instance of those services costs?

Are you providing those services faster, better and cheaper than your competition?

In the majority of today's organizations, the answers to those questions would be "No", "No" and "How do I find out?"

A Service Based IT Cost Management methodology provides companies with an efficient way to manage their IT costs through a combination of detailed unit cost calculations and distributed accountability for service consumption (customer) and service unit costs (provider).  In other words, IT service providers become responsible for providing the demanded services at a competitive price, while IT service consumers are more accountable for the types and quantities of services that they demand, creating a customer-focused internal market place.

The best way for any internal IT business to add financial value is to deliver services at a unit cost that is equal to or less than market price, with equal or greater quality compared to the market. The following white paper will provide guidance on how to reach these objectives and improve the overall capability of an IT organization to operate as a successful "business within a business."

For the full PDF of this white paper, click here.

Lontra, industry leader in Service-Centric IT Financial Management, has developed a series of five workshops for IT Financial Management professionals. These workshops are designed to assist organizations with the adoption of the best practices needed to refine their budgeting process.

The series, "5 Steps to Effective IT Budgeting" includes:

1. Service Unit Cost Modeling
2. Cost Recover and Chargeback
3. Strategic Demand Management
4. Establishing What to Measure
5. Consumption Based Budgeting & Planning

For more information on these interactive workshops please click here or email us at info@lontra.com