Altough this sounds very logical, today many organizations do not have the financial transparency to enable solid strategic business decisions. Typically the financial data is scattered across multiple systems and organizations. And as ITIL indicates: "Without meaningful operational financial information, strategic decisions become little more than instinctive responses to flawed or limited observations and information, often from a single organizational unit. Such methods can often incorrectly steer strategy, service design and tactical operational decisions.". So in an economic crisis like we are in today , these type of organizations cut costs (as opposed to optimization). Traditionally by terminating contractors, throttling back on external cnsultants, and canceling discretionary projects or putting them on hold. In the short-run, budget targets are met while in the long-run a price must be paid....

Let's take the positive approach... with an adequate IT Financial Management function which aggregates, refines and distributes meaningful and critical performance data, you can answer important questions like:

• Is our differentiation strategy resulting in higher profits or revenues, lower costs, or greater service adoption?
• Which services cost us the most, and why?
• What are our volumes and types of consumed services, and what is the correlating budget requirement?
• How efficient are our service provisioning models in relation to alternatives?
• Does our strategic approach to service design result in services that can be offered at a competitive 'market price', substantially reduce risk or offer superior value?

The IT Financial Management data used by an IT organization may reside in, and be owned by the accounting and finance domain, but responsibility for generating and utilizing it extends to other areas. IT Financial Management aggregates data inputs from across the enterprise and assists in generating and disseminating information as an output to feed critical decisions and activities.

IT Financial Management is a key input to Service Portfolio Management. By understanding cost structures applied in the provisioning of a service, a company can benchmark that service cost against other providers. In this way, companies can use IT financial information, together with service demand and internal capability information to make beneficial decisions regarding whether a certain service should be provisioned internally. See also my earlier post on Service Portfolio Management

Ultimately IT Financial Management enables IT Service Providers to be more effective in Goverance of IT Planning, Accountability of IT Spending and Predictability of IT Budgets. And isn't this what everbody wants? Surprisingly enough there have been no real good IT Financial Management solutions in the market. So it was no surprise for me that HP's announcement on IT Financial Management caught so much attention and positive feedback from customers and industry analysts at the recently held HP Software Universe in Las Vegas (see press release here).

With this announcement I think HP provides a unique IT Financial Management offering that fits perfectly in the current economic climate and unlike any competitor in the market. Do you agree?

Regards,
Jeroen Bronkhorst