IT Financial Management: the More Things Change…

Last week’s IT Financial Management Association (ITFMA) conference in San Francisco marked the 25th anniversary of the association dedicated to professionals involved with the financial management of IT.  Conference attendees came from a variety of industries and government organizations with some attendees travelling from as far afield as Africa.

After the conference, I reflected on the fact that, despite monumental shifts in technology over the last 25 years, the fundamental issues facing IT financial management professionals haven’t really changed.  We may be talking now about Cloud instead of CICS, and Tablet PCs rather than Time Sharing, but the financial challenges of today’s CIO are similar to those faced by the Data Processing Manager 20+ years ago.

Indeed, the time-honored and still relevant themes of the conference were:

  • Chargeback and Activity Based Cost Management
  • Performance Management and Benchmarking
  • Financial Planning, Budgeting and Reporting
  • Telecommunications Financial Management

One of the most interesting (and heart-warming!) presentations was a case study on sustainability that was brilliant in its simplicity. The J Paul Getty Trust has turned a PC and laptop asset management disposal problem into an annual revenue source of approximately $100K and a fantastic benefit for Getty staff.  The program involves semi-annual employee “shopping” days when Getty staff can pick up end-of-life end-user computing devices, flat panels and printers for less than what they would pay on eBay, and Getty receives cash for equipment they were previously paying salvage dealers to haul away.

I spoke on the topic of “Benchmarking with Your Service Provider to Drive Transformational Change Initiatives.”  My presentation explored how mature clients and service providers are using contractual benchmarking language to enable the transition to standard outsourced or managed services delivery – a transition that generates  both client savings and improved service provider margins.

Traditional benchmarks set a target price for service providers.  In justifying an aggressive number, clients will argue that top performance should be the goal and standard that service providers aim for.  Service providers, meanwhile, typically counter that top-performance targets defined by the benchmark are arbitrary, inaccurate or based on cherry-picked numbers from myriad environments, and not necessarily reflective of the unique, customized and often constraining reality of the individual client.

In this context, the process often becomes contentious, and the benchmark’s role is limited to that of a club to wield during the negotiation process. The task of finding efficiencies and savings rests, moreover, largely with the service provider. As a result, the lower the price target, the lower the vendor’s profit margin.
The traditional rules of the game are fundamentally changing, as ISG increasingly sees benchmarks being used to define and implement broader transformational change programs characterized by demand management, standard service delivery and usage-based “pay by the drink” utility computing models.  In this context, benchmarking is the first step in a mutually agreed program of client and service provider transformative change.

For additional information, check out ISG white papers on benchmarking. If you have comments or questions or would like a copy of my presentation, please contact me.

And, ITFMA is planning an August conference which promises to be another comprehensive and informative gathering for IT finance professionals.