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Managing Your IT Financials
On the road to better Fiscal Responsibility, you need to know your financials even better than the Finance folks do.  
Fluency in this area is a prerequisite to all other IT metrics that follow.
  • Functional:  classic
    view shared by all
    departments, to be
    rolled up into overall
    Corporate financials

  • Service:  service- or
    project-based view, to
    give managers more
    specific information on
    their operation

  • SBU:  charge-back to
    each business unit, to
    be rolled up into SBU
    financials

Four metrics for tracking IT financials:
Budget vs. Actual:  the
starting point for all
financial discussions,
compares budget vs.
actual spending each
month.  
Three Views:
Each of these views expose IT spending in a manner that is meaningful to different constituencies, allowing them to
better understand where their money is being spent, and how they can rejigger priorities to get more value.
To map data between different views requires certain assumptions about how to distribute expenses for each service
among the SBUs.
Expense Types:
The benefits of a chargeback model are (1) administrative simplicity, and (2) user incentive to control consumption.  
However, problems pop up when IT groups try to variablize more of their budgets than they should, especially the
indirect and shared costs.
  • Direct:  costs that can be directly
    attributed to a service, project, or
    business unit

  • Indirect:  expenses like Real
    Estate, network, utilities, etc., for
    which everyone has an obligation
    to support

  • Shared:  enterprise-level activities
    that multiple groups may or may
    not consume in varying quantities
Because actual expenses have both fixed and variable
components, its growth slope will not be as steep as that
of a fully variable chargeback model:

  • Over-recovery:  when actual units are higher than
    plan, actual costs will be lower than what is
    recovered from the SBUs

  • Under-recovery: when actual units lag plan, less
    money will be recovered than what is spent

At the end of the day, only the real expenses get paid, so
obviously an over-recovery won’t cost the company any
extra money.
Functional View Categories:
Service View Categories:
Variance:  plots each
month’s variance and
cumulative variance, to
give a running total of
budget overruns or funds
yet to be spent
Spending Ratios:  allows
for comparison of
spending across divisional
budgets that may vary in
size
Rates and Units:  
decomposes spending
into rates and units for
tracking efforts to reduce
unit costs and/or control
unit growth