Assess Your IT Financial Management Maturity Effectively

Influence your organization’s strategic direction.

Analyst Perspective

Make better informed data-driven business decisions.

Technology has been evolving throughout the years, increasing complexity and investments, while putting more stress on operations and people involved. As an IT leader, you are now entrusted to run your outfit as a business, sit at the executive table as a true partner, and be involved in making decisions that best suit your organization. Therefore, you have an obligation to fulfill the needs of your end customers and live up to their expectations, which is not an easy task.

IT financial management (ITFM) helps you generate value to your organization’s clientele by bringing necessary trade-offs to light, while driving effective dialogues with your business partners and leadership team.

This research will focus on Info-Tech’s approach to ITFM maturity, aiming for a state of continuous improvement, where an organization can learn and grow as it adapts to change. As the ITFM practice matures, IT and business leaders will be able to better understand one another and together make better business decisions, driven by data.

This client advisory presentation and accompanying tool seek to support IT leaders and ITFM practitioners in evaluating and improving their current maturity. It will help document both current and target states as well as prioritize focus areas for improvement.

Bilal Alberto Saab Research Director, IT Financial Management Info-Tech Research Group

Executive Summary

The value of ITFM is undermined

ITFM is often discarded and not given enough importance and relevance due to the operational nature of IT, and the specialized skillset of its people, leading to several problems and challenges, such as:

• Unfamiliarity: Lack of knowledge and understanding related to ITFM maturity.
• Shortsightedness: Randomly reacting to changing circumstances.
• Exchange: Inability to consistently drive dialogues.
• Perception: IT is perceived as a cost center instead of a trustworthy strategic partner.

Constructive dialogues with business partners are not the norm

Business-driven conversations around financials (spending, cost, revenue) are a rarity in IT due to several factors, including:

• Foundation: Weak governance, inadequate skillset, and less than perfect processes and tools.
• Data: Lack of adequate taxonomy/data model, alongside inaccurate data leading to poor reporting and insights.
• Language: Lack of a common vocabulary across the organization.
• Organization culture: No alignment, alongside minimal communication and collaboration between IT and business partners.

Follow Info-Tech’s approach to move up the ITFM maturity ladder

Mature your ITFM practice by activating the means to make informed business decisions.

Info-Tech’s methodology helps you move the dial by focusing on three maturity focus areas:

• Build an ITFM Foundation
• Manage and Monitor IT Spending
• Bridge the Language Barrier

Info-Tech Insight

Influence your organization’s strategic direction by maturing your ITFM practice.

What is ITFM?

ITFM is not just about finance.

• ITFM has evolved from traditional budgeting, accounting, and cost optimization; however, it is much more than those activities alone.
• It starts with understanding the financial implications of technology by adopting different perspectives to become adept in communicating with various stakeholders, including finance, business partners, IT managers, and your CEO.
• Armed with this knowledge, ITFM helps you address a variety of questions, such as:
  • How are technology funds being spent?
  • Which projects is IT prioritizing and why?
  • What are the resources needed to speed IT delivery?
  • What’s the value of IT within the organization?
• ITFM’s main objective is thus to improve decision-making capabilities by facilitating communication between IT leaders and stakeholders, while enabling a customer focus attitude throughout the organization.

“ITFM embeds technology in financial management practices. Through cost, demand, and value, ITFM brings technology and business together, forging the necessary relationships and starting the right conversations to enable the best decisions for the organization.”
– Monica Braun, Research Director, Info-Tech Research Group

Your challenge

IT leaders struggle to articulate and communicate business value.

• IT spending is often questioned by different stakeholders, such as business partners and various IT business units. These questions, usually resulting from shifts in business needs, may revolve around investments, expenditures, services, and speed to market, among others. While IT may have an idea about its spending habits, aligning it to the business strategy may prove difficult.
• IT staff often does not have access to, or knowledge of, the business model and its intricacies. In an operational environment, the focus tends to be on technical issues rather than overall value.
• People tend to fear what they do not know. Some business managers may not be comfortable with technology. They do not recognize the implications and ramifications of certain implementations or understand the related terminology, which puts a strain on any conversation.

“Value is not the numbers you visualize on a chart, it’s the dialogue this data generates with your business partners and leadership team.”
– Dave Kish, Practice Lead, Info-Tech Research Group

Technology is constantly evolving

Increasing IT spending and decision-making complexity.

Common obstacles

IT leaders are not able to have constructive dialogues with their stakeholders.

• The way IT funds are spent has changed significantly, moving from the purchase of discrete hardware and software tools to implementing data lakes, cloud solutions, the metaverse and blockchain. This implies larger investments and more critical decisions. Conversations around interoperability, integration, and service-based solutions that focus more on big-picture architecture than day-to-day operations have become the norm.
• Speed to market is now a survival criterion for most organizations, requiring IT to shift rapidly based on changing priorities and customer expectations. This leads to the need for greater financial oversight, with the CFO as the gatekeeper. Today’s IT leaders need to possess both business and financial management savvy to justify their spending with various stakeholders.
• Any IT budget increase is tied to expectations of greater value. Hence, the compelling demands for IT to prove its worth to the business. Promoting value comes in two ways: 1) objectively, based on data, KPIs, and return on investment; and 2) subjectively, based on stakeholder satisfaction, alongside relationships. Building trust, credibility, and confidence can go a long way.

In a technology-driven world, advances come at a price. With greater spending required, more complex and difficult conversations arise.

Constructive dialogues are key

You don’t know what you don’t know.

• IT, being historically focused on operations, has become a hub for technically savvy personnel. On the downside, technology departments are often alien to business, causing problems such as:
  • IT staff have no knowledge of the business model and lack customer focus.
  • Business is not comfortable with technology and related jargon.
• The lack of two-way communication and business alignment is hence an important ramification. If the business does not understand technology, and IT does not speak in business terms, where does that lead us?
• Poor data quality and governance practices, alongside overly manual processes can only exasperate the situation.

IT Spending Survey

79% of respondents believe that decisions taking too long to make is either a significant or somewhat of a challenge (Flexera 2022 Tech Spend Pulse; N=501).

81% of respondents believe that ensuring spend efficiency (avoiding waste) is either a challenge or somewhat of a challenge (Flexera 2022 Tech Spend Pulse; N=501).

ITFM is trailing behind

IT leaders must learn to speak business.

In today’s world, where organizations are driving customer experience through technology investments, having a seat at the table means IT leaders must be well versed in business language and practice, including solid financial management skills.

However, IT staff across all industries aren’t very confident in how well IT is doing in managing its finances. This becomes evident after looking at three core processes:

• Demonstrating IT’s value to the business.
• Accounting of costs and budgets.
• Optimizing costs to gain the best return on investment.

Recent data from 4,137 respondents to Info-Tech’s IT Management & Governance Diagnostic shows that while most IT staff feel that these three financial management processes are important, notably fewer feel that IT management is effective at executing on them.

IT leadership’s capabilities around fundamental cost data capture appear to be lagging, not to mention the essential value-added capabilities around optimizing costs and demonstrating IT’s contribution to business value.

Source: Info-Tech Research Group, IT Management & Governance Diagnostic, 2023.

Info-Tech’s approach

We take a holistic approach to ITFM and support you throughout your maturity journey.

The Info-Tech difference:

• Info-Tech has a methodology and set of tools that will help assess your ITFM maturity and take the first step in developing an improvement plan. We have identified three maturity focus areas:
  • Build an ITFM Foundation
  • Manage and Monitor IT Spending
  • Bridge the Language Barrier
• No matter where you currently stand in your ITFM practice, there is always room for improvement. Hence, a maturity assessment should be viewed as a self-improvement tool, which is only valuable if you are willing to act on it.

Note: See Appendix A for maturity level definitions and descriptions.

Climb the maturity ladder

By growing along three maturity focus areas.

Info-Tech identified three maturity focus areas, each containing three levers.

Identify where you stand across the nine maturity levers, detect the gaps, and determine your priorities as a first step to develop an improvement plan.

Note: See Appendix B for maturity level definitions and descriptions per lever.