Fiscal Responsibility – The Marriage Between IT and Finance is Sorely In Need of Counseling

By Phara McLachlan

Savings. Cutbacks. Economic Downturn. These are all words that we are all too familiar with of late. Corporate executives at all levels are facing difficulty trying to advance the technology within their organization, while trying to simultaneously find cost savings. The problem faced by many organizations is a misalignment of Finance and IT. In reality, both departments work towards a common goal and should work together to find efficiencies in cost, human resources, process and operational effectiveness (in general). The issue is that Finance and IT communicate very differently. Think Men are from Mars, Women are from Venus and the disconnect between language, communication style and emotional need by gender. Finance and IT share a very similar disconnect. In fact, I’d venture to say that one is the sun, while the other is the moon. Both equally important to each other relationally, while serving different, yet vital needs, but very different “styles”.

One very important aspect of being a fiscally responsible organization is simply to have an effective IT asset management (ITAM). Most finance executives don’t look at IT as a priority or something that falls under their job description aside from approving line items for hardware and software purchases. Truth be told, these executives don’t realize what a disservice they are doing themselves in their careers. Successfully managing an IT department and being part of a planning and management process that can save as much as 20% on annual support and maintenance costs will certainly get the attention of the C-Suite for anyone involved.

IT assets – from hardware, software, mobile assets – need to be managed on an ongoing basis in order to ensure cost efficiencies are being realized. Here are some examples of why this is important:

Budget Tracking and Management – When faced with a large IT project, most financial executives will review the proposal, approve the budget and maybe check to see if the project was completed. Case in point: IT and Finance need to work together towards the same goal of optimizing the organization’s technology and minimizing costs. The finance executive should be asking questions during the entire process and be involved every step of the way – Is the budget remaining the same? Are the predicted costs accurate? Is this implementation going to cost us more in the long run? Five years down the road, that same executive should be checking in to see if the software or hardware is still valid and useful and if there is a less expensive way to maintain it. Approving a budget should never be the beginning and end of any major IT implementation. Think of it like the average household. Most wives are the primary decision makers when it comes to purchasing things for the home, but the husbands need to have some involvement, for example, if purchasing electronics or appliance, or even a new lawnmower. This may be a bit stereotypical, but one way or another, these decisions need to be weighed by sides, the one who pays, and the one who uses the item. Another example would be the method in which financial executives look at hardware. Hardware procurement is looked upon as a depreciation cost, but a savvy ITAM program would review these purchases from the point of IT disposal and recovery, which allows them to recoup some value from old, no longer useful hardware.

Expense Line Management – Annual support costs is often 20% (annually) of the upfront cost of a software or hardware investment. By properly managing assets, keeping track of your contracts with vendors and having a proper contract lifecycle management process in place, a significant savings can be realized. For example, are you properly retiring assets or are you paying for equipment that isn’t being used? Something as simple as Telecom Expense Management is another example. Are you paying for phone and T1 lines for an office that doesn’t exist? Have you retired phone extensions/lines of employees that have been fired? How would you know unless you are properly tracking your assets?

Vendor Management – Managing vendor contracts is an important aspect of IT Asset Management. If not properly managed, costs will get out of hand and overinflated payments are made based on over-licensing or non-usage. For example, renewing a software licensing agreement without a comprehensive discovery process often leads to the procurement office unknowingly agreeing to pay for licenses which will not be used or for terms and conditions that no longer make sense to the business. Re-negotiating a software licensing agreement to properly align business objectives and software needs will cut down on unnecessary costs. But again, unless the Finance executives and IT are aligned, this may not be a clear-cut as one would think. Generally, IT isn’t involved in conversations around business goals until the last possible moment, when more hardware or software is needed. This is a big mistake, as IT has more potential to save on ongoing costs if they plan ahead. Planning ahead is a great way to save; this can be said for any aspect of life or business. Last minute decisions always end up costing more!

Compliance – Compliance or more importantly non-compliance can end up costing big if you are faced with an audit or are not meeting regulatory compliance. The only surefire way to know you are in compliance is to properly track assets, reconcile the central repository at the very least every 6 months, and reconcile fixed assets at least once a year. In large organizations, hardware and software both are difficult to track with the comings and goings of employees and IT is typically caught up in fulfilling incoming requests. Add mobile devices, laptops, iPads, iPhones to that ever growing list of assets, and well, you get the point – major headaches. Many organizations will rely on RFID technology to track hard assets, which certainly creates a more streamlined method of tracking, although there still needs to be a strict “human element” to accompany the effort.

IT Service management – IT isn’t always internal. The contributions that IT makes to the customer experience must also be considered by Finance. Particularly in vertical markets such as banking, retail and travel, where the backend IT functions are directly responsible for the customer experience, costs can easily be tied to IT, for example, downtime at a retail location will equal a direct loss of sales, something that Finance is sure to notice. The practice of ITSM is vital to successful outcomes, particularly for those organizations that are customer-centric.

ITAM is never as simple as knowing what you have and where you have it, although that is a good place to start. In order to be successful, ITAM needs to be an ongoing process with all hands on deck. Finance has an objective within the organization: to save money and to make money. IT departments can bleed money if they aren’t being managed properly and at the same time, be a vital function to the organization’s profit center. Proper alignment of Finance and IT is the only way to ensure that these objectives are being met by both sides and IT projects are returning the best possible outcome. Proper communication is key, bringing it back to the husband and wife example, if decisions are not made in tandem, with proper communication; you may end up with a riding lawnmower for a four-foot-square piece of lawn.

About the Author

Phara McLachlan is the CEO of Animus Solutions, Inc.