Misalignment between finance and IT is a common problem in many organizations, giving rise to a long-standing debate about just how involved finance executives need to be with the IT department. Both departments have the same goal, that is, operational efficiencies throughout the organization that will keep costs down.
So why is there so often a lack of alignment? Why do these two functions seem to be working against each other?
The reality is that IT and finance are two very different organisms. They work differently, talk differently, and think differently. In fact, they have very little in common, aside from their goals. They are apples and oranges.
A perfect example of this divide is the differing approaches to a very important aspect of an organization's IT function: ITAM. To the finance side of the house, ITAM means short-term cost savings. Period. Never mind even if that can lead to penny-wise/dollar-foolish decisions!
Finance executives most certainly should be paying attention to the ITAM program. Although they don't need to know the ins and outs of the actual program, financial executives will care about the bottom line: ITAM programs that can garner as much as 20% overall organizational savings annually.
There are countless reasons why ITAM is important or should be important to any organization. First and foremost, ITAM touches on all aspects of an organization—anywhere from small projects to corporate compliance and everything in-between. Anything that can touch upon all aspects of an organization has to be vitally important. With ITAM, we've only just begun our journey. ITAM is still a maturing practice, but the following are some common critical factors that make ITAM important:
- Compliance: Compliance, whether it's with software vendors or with government regulators, is a key issue for any organization. Noncompliance means one thing, huge costs—fines, fees, and, in some cases, even jail time, not to mention bad PR. All of these things cost an organization dearly. ITAM is an efficient way to keep track of all of your IT assets so that you always know what you have, where it is deployed, and who is using it. When the auditors come calling, you will be better prepared to answer their questions and have a better understanding of your levels of compliance. Being unprepared is never a good option.
- IT asset lifecycle: IT assets, be it software, hardware, or mobile assets, are the lifeblood of an organization in today's world. Managing their life cycle efficiently can bring cost savings to your organization. For example, if a piece of hardware is no longer performing as it should be, it could actually hinder productivity and cost you money every minute it's in use. Constant evaluation of your assets and their performance is a great way to keep everything running at its optimal level and keeping productivity up at all times.
- Expense management: IT assets and their maintenance come with a cost, typically as much as 20% of the IT budget annually. In order to keep that line item on the expense report to a minimum, properly managing your assets can help in many ways—from ensuring that assets are properly retired to reconciling your equipment against fees. For example, are you paying for assets that you aren't using? When employees come and go, is there a process in place to reassign their cellphone, laptop, and other equipment? In a large organization, with constant changes on a large scale, lack of a process can mean big expenses for idle assets.
- Security: When you think of ITAM, security isn't usually something that comes to mind, but it should. A successful ITAM program can mean increased security and decreased risk. How? For starters, consider that virtually every employee has a computer at home, some of them company-issued. How do you keep track of what they are downloading or sharing when they are outside of the office? If they don't vpn, how are you ensuring that they are getting the necessary patches? You may be pushing out to all assets connected to the network. A solid set of IT policies and procedures can control the level of security risk your organization is exposed to simply by setting limits. Another way to think of security is the collaboration between ITAM and the IT Security team. Your security team can leverage the data that ITAM has collected to proactively identify known software vulnerabilities. IT security will be able to assess the assets that pose a threat to your organization. They will know where the assets are located, view software, install data, and the business service it is tied to. This is all possible by having ITAM in place.
- Software contract management: With most organizations in a constant state of change, managing software contracts is often overlooked. The finance department needs to understand that there are significant cost savings to be had simply by paying close attention to terms and conditions and renegotiating when the time calls for it. Additionally, with vendors changing their rules as frequently as they do, not being on top of your terms and conditions can equal noncompliance, and we know what that means! Suppose that your organization has just opened an office in London, and your IT department ships them preloaded laptops to use, but nobody checked your software licensing agreement. Your terms and conditions don't include transferability. Software licenses generally limit transferability. Lack of transferability increases the cost of divestiture, requiring additional licensing for the divested company and creating a glut of additional licenses for the retained companies. Additional licensing terms, including pricing, may be less favorable for the divested company, further increasing the divestiture costs. If the divested company owns the contract and licenses without transferability, the divested company may be stuck with a glut of licenses and create a gap and licensing requirement for retained entities covered by the contracts licenses. This is just one example of how organizations can fall out of compliance, resulting in additional hefty fees and penalties.
- IT service management: IT isn't just something that affects employees; it affects everyone touched by your organization, from vendors to customers. Any finance executive worth their salt can see how a failure in IT can directly affect the bottom line. On the flip side, having a solid performing IT department will result in a better experience for everyone, including customers. The degree to which IT affects the customer service will vary according to industry, but it will have an effect.
Now you understand a little more about why ITAM is so important to both the bottom line and top line. However, the following question remains: how can finance get involved?
I have a few suggestions for how finance and IT can work better together; the first step is simply realizing just how much they need each other!:
- Schedule recurring meetings: Finance should always know what is going on with IT, and vice versa. Monthly or even quarterly update meetings will be mutually beneficial for both parties. Discuss new projects coming up, new initiatives being taken, and use each other to help accelerate your mutual goals. This should also be an opportunity for the finance team to check in on projects that they have previously approved. Most executives approve a budget and leave it at that. Both parties should always be in the know regarding ongoing and even completed projects.
- Always consult the tech guys: IT is usually brought in at the last minute when more software licenses or hardware are needed due to a large business change. This is a big mistake. When IT is given the chance to plan ahead, they have a greater leverage and potential to save money for the organization. Last minute decisions will end up costing more in the short and long term. Bring in the IT department from the beginning, and make it a collaborative process.
- Make ITAM a priority, for everyone: I have explained how ITAM can equal significant cost savings. The next step is getting buy in across the organization. An ongoing ITAM program needs to be on everyone's priority list in order for it to work. This includes the C-Suite. An alignment between the finance and IT departments is an important step, but in order to keep the project going, it's important that these two departments work together to keep the rest of the organization in the same mindset.
Implementing an effective ITAM program within your organization is a positive step toward lowering risk, increasing compliance, and creating optimal efficiency. The marriage between finance and IT is imperative to its success. Marriages are never perfect, so you can expect some bumps along the way. However, working in tandem, with open lines of communication, is in the best interests of the organization and, more importantly, the bottom line.
We will build the case for ITAM using the following ways.
Over 50% of senior executives feel that improving the overall quality of their organization's leadership is a critical challenge, and 46% believe they must do a better job of developing the next generation of leaders, increasing employee commitment, and retaining top talent.*
*Sources:
- Global CEO Study, Booze Allen Hamilton
- 2009 Duke University Executive Leadership Survey
"We live and work in a world where organizational failure is endemic, and where frank, comprehensive dissections of those failures are still woefully infrequent; where success is too easily celebrated and failures are too quickly forgotten; where short-term earnings and publicity concerns block us from confronting, much less learning from our stumbles and our blunders." – Jena McGregor, Fast Company Magazine, February 2005
The best companies, as measured by innovation, profitability, growth, reputation, and long-term track record, always seem to have the best leaders—not just at the top, but also at every management level throughout the enterprise. This is not an accident. These are companies with senior leaders who understand how to get the best from themselves and their people. They understand that their most valuable resource is not products, capital, or real estate, but people. They know that good people led by outstanding leaders is what separates great organizations from the rest.
Understand that good leadership doesn't have to be a question of luck, and it certainly isn't magic. Leadership is a business skill like any other, the most important business skill of all. Work with mentor individuals, management teams, and larger groups to increase their leadership skills. Help them understand the dynamics of individual and organizational leadership. This is a proven delivery system for better thinking, smarter decisions, effective communication, motivated employees, and ultimately, better top-line and bottom-line business results.
Great leadership enables the following:
- Attracting and retaining top talent
- Motivating your workforce
- Shaping the personality and reputation of your organization
- Generating value from outsourced relationships
- Organizational change
- Employee awareness and communications
You must be thinking, what does leadership have to do with ITAM and building the case for ITAM?
Virtually, every enterprise of any size talks about ITAM strategy, but how many have successfully integrated it into their IT culture? The evidence suggests only about a third: in 2009, only 32% of IT projects started were completed successfully; another 44 % were considered partial failures, and 24% were considered complete failures.* A batting average of 0.320 might be terrific in Major League Baseball, but no business enterprise should accept such a paltry success rate.
There were many reasons cited for this dismal record of IT failure, such as lack of user input, lack of technical competence, changing requirements or specifications, lack of C-suite support, the economy, lack of resources, obsolescence, poor communication, the list goes on. In fact, all of these factors and many more would become moot, or nearly so, with a comprehensive ITAM strategy in place supported and led by strong leaders/champions of the ITAM program.
A good ITAM strategy starts with expert analysis of organizational needs, followed by C-suite buy in, which likes the operational efficiencies and cost savings over time. A well-designed ITAM strategy also makes the most of available resources, identifies technology and software needs based on business objectives and existing IT portfolios, and makes allowances for company growth and evolving technology requirements.
*Source: 2009 CHAOS Report on IT project success rates, published by The Standish Group, Boston.
The approach starts by asking key questions; here, you will learn what questions to ask, where to go to find the answers you need to help you build the case, and the answer to the hard question of how will ITAM benefit the business:
- What are the corporate goals? Check the company newsletter, town halls, presentations by the CEO, or the information for shareholders on the company website.
- What objective is your competition for budget, and does that objective have a stronger link to the corporate goals? If the link is stronger, you can choose to rework your priorities to a stronger case yourself, or you may choose to dovetail your objectives to the other. For instance, if a health-care system is faced with allocating funds between new imaging equipment and improvements for managing assets, propose reducing the need for redundant portable equipment through improvements in your asset-tracking project request.
- Have you sought external validation? Researching analyst and vendor white papers, and extracting relevant statistics and comments, takes the personal aspects out from your project request. Check out trends by reviewing headlines over a few weeks in technology and industry websites.
- Have you sought internal validation? Talk to peers and managers in other end departments and listen to their ideas. If you don't have internal numbers to back up your project request, perform a survey or a random inventory and report the findings.
- Have you increased the visibility of the good work you and your team have done already (savings, customer satisfaction, and so on) and highlighted the failures to be corrected in the requested budgeted project?
Look for strategic IT opportunities that will help you to build your case and strengthen a positive outcome to bringing ITAM to your organization. The following are a few examples to help you get started:
- Software audits: Audits by software companies and by compliance agencies are on the rise. Waiting to receive a letter leaves no options for reducing the number of licenses or buying licenses at non-crisis pricing. Can you prove the right to use? Understanding what information you need to keep and what choices you have during negotiations all deliver to the bottom line and to feeding accurate data for strategic planning.
- Acquisition/mergers: IT executives have an important role in determining the cost of integrating a new acquisition into the organization. The level of detail necessary to do the job right requires ITAM. Take advantage of software consolidation rather than be trapped with unexpected expenses. Regulatory compliance is scrutinized intensely during and after an acquisition. Managethis risk with the proper information.
- Technology to drive innovation: Technology certainly enables the business of the organization, but it can also make a difference in market leadership. When executives make a critical choice, it can provide the information they need to assess the advantages and disadvantages accurately. The "devil" in the details is an ITAM program that cannot deliver this critical information when needed.
- Profitability: To be part of the business, IT assets must deliver the expected value and facilitate achievement of business goals. Executives are accountable to shareholders and to industry regulators. Tax requirements, depreciation, and the value of corporate assets can all be verified or their accuracy can be improved by comparison to the tactical ITAM data.
Tactical goals drive the achievement of strategic goals. Group tactical actions and processes into objectives and begin to relate upwards. Here, you will learn some key objectives and their related actions and processes:
Managing the life cycle |
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Managing costs |
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Improving service |
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Supporting other initiatives |
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Managing risk |
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Providing decision support |
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