IT and Finance Must Work to Understand Each Other

it and finance work together

Both finance and IT attempt to work toward a common goal, but rarely do they find efficiencies in cost, human resources, process, and operational effectiveness (in general). They are both equally important to each other relationally, while serving different yet vital needs, but with very different “styles.”

What’s the issue? IT and finance are misaligned. Speaking different “languages” and having different objectives when it comes to IT have commonly put organizations at risk. The major issue is the way IT and finance look at IT assets. Finance purchases IT based on what’s the best deal because this is what will save money. IT is focused on the best way to use the assets and what’s needed short term and mid-term. Unfortunately, IT doesn’t always seek out the mid-term or long term, which results in issues further down the line.

ITAM is never as simple as just tagging and tracking, or knowing what you have and where you have it. Successful, ITAM programs are an ongoing process. IT departments can bleed money with overspending, bloated projects, overlicensing, underlicensing, shelfware, and vendor audits, just to name a few. IT assets must be managed with a focus on the organization’s profit center. Finance seemingly has an opposite and opposing objective: to save money and increase profits. How do we close this gap?

SOLUTIONS TO THE IT-FINANCE CHALLENGE

Joint Task Force. Since both hardware and software are vital to the health of any company, they should be a top priority. In order to streamline ITAM, a joint task force comprised of various departments/groups should be created to oversee ITAM strategy. Ongoing and open communication among all departments is the key to closing financial risk gaps from mismanaged vendors, improperly or poorly executed IT and software asset management programs, mismanagement or misunderstanding of expenses, noncompliance, and poorly executed IT service management.

Speak the same language. It shouldn’t be surprising that with different mind-sets and functions, the language used by IT and finance is not the same. Even with a joint task force, it is important that each person on the task force takes into account what’s important to each department and how to best deliver the message.

A centralized repository. IT and procurement must work together on a centralized repository of IT assets (hardware and software) that is tracked and managed closely. The centralization of all data—from purchase orders to receipts to contracts—will act as an all-encompassing knowledge base for the entire enterprise. This will be useful not only to IT and finance, but to executives, IT architecture strategists, security, risk management, and managers as well as any project manager.

An ounce of prevention is worth a pound of cure. Create a Software Asset Management (SAM) program. Period. SAM heads off one of the main risks in IT. It reduces audit exposure and financial risk to the enterprise resulting in IT speaking the language of finance. SAM also may:

  • Create significant savings or cut costs (most of the time) during the first audit pass.
  • Provide information to defend against an audit.
  • Significantly reduce financial risk.

Case in point, a Fortune 500 financial services company was being audited by Adobe with an initial $3.6 million true-up cost. Fortunately, because the firm had a comprehensive SAM program and used SAM best practices methodology, the vendor audit fine was significantly reduced by more than 75 percent to approximately $800,000. In the case of this Fortune 500 company, the three main SAM areas optimized to reduce spending were: enterprise agreement terms and conditions, license entitlements, and optimization and reduced maintenance costs.

Optimize your software: negotiate a master contract for better control. Once you have a central repository, it will be easy to have a 360-degree view of IT assets and data trends that will allow an organization to aggressively manage the life cycle of its assets as well as initiate a negotiation for advantageous terms and conditions. At this point, an enterprise should consider creating and negotiating a master contract with the vendor which can be beneficial for:

  • Negotiating better conditions—from pricing to training to licensing to renewal terms and conditions.
  • Taking advantage of a single source for all the vendor’s assets with one set of terms and conditions guiding all the assets under this vendor.
  • Creating collaboration and cooperation between finance and IT as both must work together with their legal department to negotiate the master contract, both are invested and take pride in the outcome, and both will equally seek to continue on the same course.

While some finance executives do not see the full importance of IT and are unaware of the ramifications of cutting IT’s budgets, many senior executives have become much savvier about their IT operations and have begun to truly understand how vital IT is to a company.

Truth be told, finance executives who don’t realize or work with IT are doing themselves and their organization a disservice. Successfully managing an IT department and being part of the planning and management process that can save as much as 20 percent on annual support and maintenance costs—potentially millions— from enterprise software alone will certainly get the attention of the C-Suite for anyone involved.

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Phara E. McLachlan
About Phara E. McLachlan 1 Article
Phara E. McLachlan is the CEO of Natheava LLC, a management and IT consultancy specializing in IT and software asset management and advisory services.