Build an ITFM Improvement Roadmap

Find the ideal entry point for maturing your practice of IT financial management.

Analyst perspective

Everything you need to demonstrate IT’s true value is at your fingertips.

Too often, IT approaches organizational challenges and opportunities from the perspective of a technologist, not a business leader. This leaves internal partners thinking that IT doesn’t understand what they do and why they do it, leading them to relegate IT to the sidelines and undervalue its contributions.

However, there is one thing that binds all organizational functions together – money. All functions require funding, and they all generate expenses. A critical opportunity exists for organizations to see financial management as their common denominator – a shared capability – and turn it into a common ground for dialogue, collaboration, and strategic decision-making.

As a result, IT would be wise to set out a concrete roadmap for evolving its IT financial management capabilities with the goal of establishing this common denominator, getting itself in the game, and proving its value.

Jennifer Perrier

Principal Research Director, CIO Practice
Info-Tech Research Group

Executive summary

Info-Tech Insight

For good or bad, how you execute on one capability in the ITFM system will have a significant impact on how other capabilities are performed. Much like the inner workings of a clock, how well you know what each piece does and how well you’ve assembled those pieces according to a thoughtfully engineered design can determine whether you are ready to go on time, are running late, or miss out entirely.

Complexity is driving a shift from spend to value in technology finance conversations

IT has become more integral to business operations and achievement of strategic goals, driving complexity in how IT funds are allocated and managed.

How IT funds are spent has changed

IT spend has moved from the purchase of discrete hardware and software tools traditionally associated with IT to the need to address larger-scale issues around interoperability, integration, and virtualized cloud solutions. As a result, today’s focus is more on big-picture architecture than on day-to-day operations.

The funding decision cadence has sped up

Many organizations have moved from three-to-five-year strategic planning cycles to one-year planning horizons or less, most noticeably since the 2008/2009 recession. Not only has the pace of technological change accelerated, but so too has volatility in the broader business and economic environments, forcing rapid response.

Justification rigor around IT spend has increased

The need for formal business cases, proposals, and participation in formal governance processes has increased, as has demand for financial transparency. With many IT departments still reporting into the CFO, there’s no getting around it – today’s IT leaders need to possess financial management savvy.

Clearly showing business value has become a priority

Value demonstration is two-pronged. The first is return on performance investment, focused on formal and objective goals, metrics, and KPIs. The second is stakeholder satisfaction, a more subjective measure driven by IT-business alignment and relationship. IT leaders must do both well to prove and promote IT’s value.

Get ahead of the trend curve by enabling meaningful conversations about IT value

A modern and mature practice of ITFM is your IT value Rosetta stone.

What ITFM is:

As a formal practice, IT financial management (ITFM) evolved from traditional accounting and budgeting. Today, it goes beyond these tactical activities, encompassing the strategic disciplines of cost optimization and benefits realization.

ITFM’s main goal is to lay bare the financial implications of technology, namely:

• The cost to acquire it.
• The cost to operate and maintain it.
• The cost to evolve, change, replace, or dispose of it.
• The measurable value that these costs generate.

ITFM is a business discipline. As such, it’s critical to align the implementation and outcomes of ITFM practices with your organization’s goals and objectives.

What ITFM does:

A sound ITFM practice helps you address some important questions, such as:

• How and where are your organization’s technology funds being spent?
• Which technology projects are, or should be, prioritized and why?
• What resources are needed to deliver on the promise of a technology investment?
• What’s the true value of technology to your organization?

While ITFM’s main goal is to understand the financial implications of technology, its main benefit is to improve decision-making capabilities by:

• Generating transparency.
• Facilitating meaningful communication between IT leaders and stakeholders.
• Fostering a service and partnership mindset organization-wide.

ITFM faces numerous challenges

For most, ITFM practices are immature. The ITFM activities that do occur are often ad hoc, inconsistent, retrospective, short sighted, and strictly administrative, leaving no room to forecast and plan IT spend and investment. What caused this situation?

Poor Alignment & Integration

Processes, data, and the business functions that engage with them remain siloed, leading to miscommunication, confusion, and waste. Notable examples exist in the core finance/ procurement relationship and within IT management itself.

Poor Competency Performance

Both financial and technological literacy levels remain low across organizations. The highest profile impacts include accountability gaps, low compliance, the absence of analysis and planning, lack of confidence, and erosion of trust.

Poor Decision-Making

Exclusion of key inputs, lack of governance rigor, over-focus on the near term, and under-application of sound risk management make for a reactive posture, costly surprises, and conflict. Long-term planning remains a nice-to-have for most.

Poor Tools & Technologies

Lack of automation haunts financial processes, leading to high error rates, unreliable data, inefficiencies, and delays. Many non-financial business unit leaders still can’t directly access the systems in which their financial data resides.

If IT hopes to be a strategic force in the organization, apply technology to support organizational strategic objectives, and prove its worth, how it carries out ITFM must be approached in a more strategic and sophisticated way too.

Misalignment dominates ITFM practice

Findings from Info-Tech Research Group’s CEO-CIO Alignment Diagnostic illustrate how ITFM challenges are manifesting in real life.

Data source: Info-Tech Research Group, CEO-CIO Alignment Diagnostic, January-December 2024, n=207

Key findings:

• CIOs and CxOs clearly agree that there are problems with aligning IT expenditure to organizational need. Whether these problems are perceived or real is another question.
• Interestingly, CIOs are feeling slightly more pain on the financial misalignment front than their CxO counterparts. This difference likely speaks to the fact that CIOs are living with IT spend challenges every day, while CxOs are somewhat removed.
• Perceived or real, these problems are still problems rooted in the immaturity of the IT financial management practice and the lack of meaningful communication about technology spend and investment.

Improving ITFM fundamentals is essential

A 2023 Freeform Dynamics survey of 50 CIOs shows that IT leaders feel a strong need to strengthen their ITFM capabilities.

Data source: Freeform Dynamics, 2023; N=50

Yet specific obstacles are slowing improvement

There are some key sticking points that will affect how quickly you can move through your ITFM challenges and how far you can take resolutions.

• Missing fundamentals: Many IT departments have yet to gain confidence or expertise in basic expenditure tracking and reporting, not to mention more strategic business finance capabilities.
• Unfriendly data: Many IT organizations can’t run a query on their data to get a current snapshot of spend to date, let alone run a more complex report to aid IT cost forecasting or planning efforts.
• IT exclusion: Too many decisions about technology spend and investment are still made without IT’s input or participation, leading to confusion around accountabilities, unexpected costs, waste, finger-pointing, defensiveness, and fragile relationships.
• Lack of control: IT is not the owner of its organization’s financial management processes – the CFO is. This fact puts limits on what IT can independently do to change and improve, and it necessitates extensive collaboration (preceded by a critical phase of relationship mending and trust building in most cases).
• Lack of roadmap: A major complicating factor we see our members facing is not knowing where to start on the path to ITFM improvement, especially as IT is not the owner of organizational financial management processes.

Construct a roadmap to help you find your way

There’s more to ITFM than annual budgeting, which makes figuring out the ideal starting point for ITFM improvement and navigating your way through the twists and turns a bit overwhelming.

ITFM is a system of interconnected components that must work together to effectively contribute to the organization’s overall financial management capability.

A high-level diagram of the workflows that fall under the ITFM banner looks something like this…

ITFM System Workflow

These five little yellow boxes represent the entirety of the annual IT budgeting process.

Like any system, ITFM can be complex. When trying to navigate such a complex system, knowing where to start is your first problem, and knowing where you’re going is your second.

There isn’t a right or wrong place to start, but there’s always a better one.

Given ITFM complexity and the potential scope of any ITFM improvement exercise, a roadmap is essential so that you don’t get side-tracked or lost on your ITFM improvement journey.

Info-Tech’s framework

Create a strategic roadmap to improve your IT financial management capabilities and change the conversation about IT spend and investment.

Understand your context

Outcome: Completed assessment of organizational context

Identify your current state

Outcome: Completed ITFM capability maturity assessment.

Identify your target state

Outcome: Defined ITFM capability maturity target state.

Identify improvement tactics

Outcome: A list of ITFM improvement tactics by subdiscipline.

Develop an improvement roadmap

Outcome: A final ITFM improvement roadmap and executive presentation.

“ITFM can be defined as the processes and tools necessary to provide an organization with the key capabilities to effectively account for, manage, and analyze IT costs and communicate IT’s value to the business.”

– Olav K. Vedeld and Alexsander Leikvoll Stavenes, EY, 2024

Insight summary

Don’t lose your way

Finance is like a web of city streets where the activity never stops. Getting distracted by urgency and frustration can cause you to miss your turn, get lost, or end up in the wrong neighborhood entirely. Having a roadmap won’t eliminate the traffic, but it will help you pinpoint where you want to go, plan an efficient route, spot key landmarks along the way, and arrive at your destination in one piece.

Adopt systems thinking

ITFM is an interconnected system of moving parts. An error, inefficiency, or gap in one part of the system will slow or block progress elsewhere. Coordination of the parts is key to keeping the whole system running smoothly.

Honor ITFM with a plan

IT expenditure is one of the top sources of financial outflow in most organizations. Don’t leave something so important to chance. Have a plan for how you’ll safeguard your money and the system through which it flows.

Ensure every stage of your journey drives transparency

The goal of improving your ITFM capability is to make better decisions. You can’t do this if you can’t see what you’re working with. Ensure every improvement you make to ITFM builds transparency.

Practice good timing

Expense tracking doesn’t stop just because it’s annual budget season. Both your practice of ITFM and your improvement efforts must happen on multiple parallel fronts with great sensitivity to your organization’s financial cycles.

Be strategic yet tactical

Improving ITFM doesn’t have to be about big projects. More often than not, the early wins on the ITFM improvement front come in the form of low-effort, low-cost tactics that facilitate better communication and governance.

Blueprint deliverables

Each step of this blueprint is accompanied by supporting deliverables to help you accomplish your goals:

IT Financial Management Capability Maturity Assessment and Workbook

Leverage this Excel tool to determine the current state of your ITFM capabilities, capture your target future state, and create key artifacts to populate your final ITFM improvement roadmap presentation.

Key deliverable:

IT Financial Management Improvement Roadmap Template and Sample

Use this combined template and sample to create a visual summary of your plan to improve and mature your ITFM capabilities.

Blueprint benefits

IT Benefits

• Understand the financial management capabilities that IT needs to support as both a business process participant and technology services provider.
• Gain insight into how to progressively and systematically evolve IT’s financial management capability and competency over time.
• Close the historical communication gap that’s existed between IT, finance, procurement, and other business function leaders.
• Create a clear IT financial management improvement roadmap that serves as a strategic plan for getting from current state to future state.
• Position the organization to be more effective in its technology investment decision-making and funding to ensure that the right technologies are available to the right people at the right time and at the right cost.

Business Benefits

• Develop IT’s understanding about what the core finance and procurement functions do and need.
• Gain better performance from IT in executing and complying with core finance and procurement policies and procedures.
• Create more effective working partnerships between finance and IT functions within the organization.
• Introduce more rigor into organizational technology governance.
• Reduce wasteful and ill-advised technology expenditure.
• Make more informed and inclusive technology investment decisions.

Measure the value of this blueprint

You’ll be in the high-maturity ITFM zone when you’ve achieved these targets.

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful."

Guided Implementation

"Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

Workshop

"We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place."

Executive & Technical Counseling

"Our team and processes are maturing; however to expedite the journey we'll need a seasoned practitioner to coach and validate approaches, deliverables, and opportunities."

Consulting

"Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks are used throughout all five options.

Guided Implementation

What does a typical GI on this topic look like?

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is 8 to 12 calls over the course of 3 to 4 months.

Workshop overview

Contact your account representative for more information.
workshops@infotech.com 1-888-670-8889

PHASE 1

UNDERSTAND YOUR CONTEXT