Planning confidence

One goal of Financial Management is to ensure proper funding for the delivery and consumption of services. Planning provides financial translation and qualification of expected future demand for IT Services. Financial Management Planning departs from historical IT planning by focusing on demand and supply variance s resulting from business strategy, capacity inputs and forecasting, rather than traditional individual line item expenditures or business cost accounts. As with planning for any other business organization, input should be collected from all areas of the IT organization and the business.

Planning can be categorized into three main areas, each representing financial results that are required for continued visibility and service valuation:

• Operating and Capital (general and fixed asset ledgers)
• Demand (need and use of IT service s – discussed earlier in this chapter)
• Regulatory and Environmental (compliance).

Operating and Capital planning processes are common and fairly standardized, and involve the translation of IT expenditures into corporate financial system s as part of the corporate planning cycle. Beyond this, the importance of this process is in communicating expected changes in the funding of IT Service s for consideration by other business domains. The impact of IT Services on capital planning is largely underestimated, but is of interest to tax and fixed asset departments if the status of an IT asset changes.

Regulatory and Environmental -related planning should get its triggers from within the business. However, FM should apply the proper financial inputs to the related services value, whether cost based or value based. For example:

Case example 10: Regulatory and Environmental planning impacts

At a consumer products corporation, it was determined that all server s older than three years should be replaced. Plan s were properly communicated and, when the time came, a business case was prepared. Adequate justification was provided to substantiate the replacement need, and the related ROI based on the required expenditure barely fitted within acceptable corporate thresholds.

Towards the end of the implementation, it was realized that local governmental regulations and the company’s desired practice of environmental stewardship required special disposal of the old equipment since the casings contained measurable amounts of lead. The cost to remove and properly dispose of the equipment was substantial enough to negatively impact the ROI calculation of the project, and pushed it beyond acceptable tolerance. If the project team had correctly recognized the true costs of replacement, requisite funding would have been identified and included in the planning mechanism.

In this example, ignoring the impact of equipment disposal when building the business case resulted in an overstatement of the benefits of replacement and consequently required adjustments to the funding model.

Confidence is the notion that financial inputs and models for service demand and supply represent statistically significant measures of accuracy. Data confidence is important for two reasons: 1) the critical role data plays in achieving the objective s of Financial Management, and 2) the possibility of erroneous data undermining decision making.

Since Financial Management performs unique financial translation and qualification function s, there is an obligation to ensure that the confidence level of planning data and information is high. Questions about its accuracy will undermine its perceived value. It is therefore important to follow good security practices for access and rights management so that information quality is not compromised. Planning confidence is ultimately a combination of service-oriented demand modelling translated into measurable financial requirement s with a high degree of statistical accuracy. The financial requirements act as inputs to critical business decision making.

Дата добавления: 2015-11-14