Business Solutions Benefits for IT Startups (ITIL Service Strategy Practices)

A Tactical Financial Management & Business solutions
[for IT Startups using ITIL V3 practices]
Author: Shanthi Kumar V, IT Management
consultant
Contact: vskumar35@gmail.com

Overview with Questions
Typical Questions:
➲ Did you define the financial framework of the organization
on how to operate?
➲ Using this framework, Can the service provider identify,
manage, and communicate the actual cost of the service
delivery?
➲ Is this framework helps in understanding the changed or
new service or with the latest organizational strategies
impact or implications?
➲ Do you have a structured plan to secure the funds during
the IT services providing?
Note: Questions are Continued in next slide also.
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Overview
➲ Questions are Continued from previous slide...
➲ Do you have the mechanism to adopt and apply the
company policies and practices related to financial controls?
➲ Do you have mechanism to understand the future financial
requirements of the organization?
➲ Do you have the mechanism for providing the financial
forecasting and budgeting?
Note: You can see the lack of Financial Management
practices in a graphical chart in the next slide.

Overview – Financial management
for IT
As per the ITIL definition:
➲ The financial management function and the processes
responsible for managing an IT service provider’s
budgeting, accounting and charging requirements.
➲ Financial management for IT services secures an
appropriate level of funding to design, develop, and
deliver services that meet the strategy of the
organization in a cost effective manner.
Note: With the above definitions I have developed a chart
to remember the attributes.You can see it in next
slide.

Scenarios for inadequate and adequate financial
management
Let us assume a scenario; the startup company wants to implement
the automation of the following:
Incident management, Asset management, Help desk
management, Accounting, payroll and HR process.
To complete these applications, we need to have
a) People, b) Software, c) Hardware and d) Support from the
management.
The financial management team needs to measure their cost,
budget them for approval and project the outcome.
The reasonable profits or cost savings by using these applications
need to be estimated for ROI.
Note: Next slide talks on how to plan with and
without financial planning.

A Practical scenario on
Financial planning
Note: In the mext slide you can see the Example/scenario on scope
of IT Financial management.

Financial operations and internal strategy
➲ Let us see how the internal financial team operations should
happen with A scenario.
Example/Scenario:
➲ In most of the large IT organizations, there are qualified
accountants in charge of corporate finances.
➲ And they will be part of the finance department.
➲ They will have capabilities in setting up the financial policies,
standards, and accounting practices for the business.
Note: In the next slide you can see the continuation of this
example/scenario

Recommendation
Continued Conclusion on internal Strategy:
➲ It can create the environment or culture to own
responsibility on introducing the IT services with
reduced cost and reasonable ROI to any unit.
➲ By using the service level management approach,
one can get an idea and responsibility to deliver the
services by understanding ‘the accounting for IT
services is more effective, detailed, and efficient’.
Note: In the coming slides you can see the sub-processes useful in financial
management of an IT company with examples or scenarios.

What is Budgeting in financial
management?
➲ The budgeting is a process for predicting and controlling the
income and expenditure of money of an organization.
➲ Budgeting consists of a periodic cycle.
➲ The cycle can facilitate to negotiate to set the budgets and regular
or monthly monitoring of the same.
➲ The usual cycle can be yearly.
➲ On special cases it can be half year or quarterly.
➲ If it is a startup company it is better to have a quarterly budgeting.
With this mechanism they will come to know Profit and loss in a quarter.
And the required improvement areas can be identified to strengthen the
company financially and its business.
Note: In the next 2 slides you can see the example of; IT company on Budgeting.

Example/Scenario for IT Budgeting
Continued Example/Scenario:
➲ By doing a monthly monitoring the manager can have
control on the costing.
➲ The finance management team can have periodical reviews
on the running cost and the
predicted cost to find the ROI.
➲ Let us assume one payroll application need to be designed
for internal use.
➲ The estimated budget can be USD 60,000 for 6 months
duration.
Note: In the next slide you can see the continuation of examples or scenarios on
budgeting.

Example/Scenario for IT Budgeting
Continued Example/Scenario:
➲ Please note due to lack of these plans and controls many IT
projects have been failing and ultimately it can lead to the
name of as bad resourcing or operation.
➲ In this case one can find the real reasons.
➲ And such plans or controls are not being enforced by either
party [IT & Finance teams]; it is vulnerable to consider such
projects.
Note: In the next slide you can see the Accounting.

Note: In the next slide you can see an example or scenario on Accounting for IT
company

What is charging in financial management?
➲ Using this process it can be billed to customers for the use of
the IT services.
➲ This will be applicable on the instances where the
organizational accounting model requires to take place.
➲ It definitely, requires sound accounting practices. There should
be supporting systems to track the cross charging and its
accuracy.
➲ Processes automation is recommended for easy tracking.
Note: In the next slide you can see in chart on typical Charging areas and reasons.

IT services companies Horizontals and verticals
internal business operations
Note: In the next slide you can see A Charging scenario within an IT Company.

What is reporting in financial
management?
➲ As we have been observing from previous definitions, all the
financial data is business critical for a company.
➲ All these sub-functions like; forecasting or budgeting,
accounting, charging, invoicing need to be integrated for easy
managing and tracking by different teams.
➲ By using these applications any timely reports can be
obtained from top management to low level people.
➲ Issues tracking can be made easy with accuracy of the
calculations.
Note: In the next slide you can see the continuation on reporting of financial management
within an IT Company.

What is reporting in financial
management?
➲ Using the financial reports, all the role based people who all are
from different departments involved can
understand them very clearly rather than with the
excel sheets.
➲ The internal departments also can estimate their
revenues for their OLAs[Operational Level Agreements].
➲ At the same time, if the business units are having the resources
project work hours time entry systems, the billability tracking can
be made easier on weekly basis.
➲ So that the accountants can have revenue forecasting also for
senior management’s presentation on the company’s
performance.
Note: In the next slide you can see the Dos and Donts of financial management.

What are the sub-processes of financial
management?
The financial management has the below sub-processes as
per the ITIL V3 practices.
➲ Financial management support
➲ Financial planning
➲ Financial analysis and reporting
➲ Service invoicing
➲ The importance of a Business case
Note: In the next slide you can see the sub-processes of financial management in a graphical chart.

Sub-processes of financial management
Financial analysis and reporting:
This process can support in analyzing the structure of service
provisioning cost and the profitability of the services.
The financial analysis allows the service portfolio management to
make their informed decisions, when they decide to implement the
changes to the service portfolio.
Using this practice the estimated P&L [Profit and Loss] measurement
also can be forecasted.
Note: In the next slide you can see the definitions for sub-processes of financial
management.

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