3 Key Considerations when Making Investments in IT

September 14, 2017

in finance, IT Financial management, itfm

cask-itfm-finance-budget-1.pngMany IT organizations look inward when making investments in IT.  The focus is usually on which new technology to fund or perhaps how to reduce spending because budgets are tight.  Focusing on your customers and the services they need is good place to start changing that paradigm. It may even lead to a larger budget and more investment opportunities.   

Here are three things to focus on:

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  1. Business needs ALWAYS come first. First assess your services and how well they align to meeting business needs. Imagine if you could bring more money to the business’ bottom line by enabling services that they need. They will gladly spend more for services that provide value to their business and as a result your budget should grow. This practice is part of Service Portfolio Management.  

  2. Understand your cost.  Managing services includes understanding the business’ costs.  Good investment decisions require a clear understanding of those costs in language that decision makers understand.  This includes understanding the service cost drivers and demand for those services so appropriate business planning can be done.     

  3. Understand how you measure up. Once you’ve developed a cost model, you can measure how your services stack up to others in your industry.  Benchmarking on cost performance can help you measure this and can be used to improve performance and demonstrate value to your business partners. 

An example I use often of an Investment in IT is to imagine looking at those investments from a homeowner’s point of view. Let’s say you’re married, no kids and own a townhome in the city. You just found out that your wife is expecting… twins. Once you stop reeling from the news, you’ll begin to think about budgets, the size of your home and location. In this example, your family is the “business” and your home provides “a portfolio of services” to your family.  Obviously, this might change the type of “service” you will need for your “business”.  You begin to assess your finances and your spatial needs.  Can and should you add on?  Or should you buy a new house? (These questions are the kind of questions that IT will  asks themselves, which in turn, answers what kind of home or service” that they need to provide the growing family or the “business”.)

Your new situation (now with twins on the way) helps you to understand the cost changes this will bring. You need to know your current and future cost. What is your current service cost?  What is the cost for a new home and the new service it will bring the family.  In housing market, you look at costs and markets to figure out what you might pay for different homes in different neighborhoods.  You wouldn’t think of jumping into buying a new house without some benchmarking of your current situation.  And, you shouldn’t do that with your IT Services. 

To learn more on this subject, come join us on our webinar, “How to Unlock the Hidden Value of Your IT Investments with Service + Financial Management”.

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SAVE YOUR SEAT FOR OUR WEBINAR:
How to Unlock the Hidden Value of Your IT Investments 
with Service + Financial Management

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Topics: finance, IT Financial management, itfm

Written by Mark Liuag

 SAVE YOUR SEAT FOR OUR WEBINAR:
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