FINANCIAL MANAGEMENT FOR IT SERVICES Jose Mathew Monica Jain Mohanaraj

IT Financial Management Charges Financial targets Costing models Charging policies Feedback of proposed charges to business Business IT requirements IT operational plan(incl budgets) Cost analysis (IT accounting)

Budgeting Ensuring that the correct monies are set aside for the provision of IT services Key influence on strategic & tactical planning Budget could have Limits on capital & operational expenditure Guidelines on how the budget must be used An agreed work load & services to be delivered

Ensuring that the correct monies are set aside for the provision of IT services

Key influence on strategic & tactical planning

Budget could have

Limits on capital & operational expenditure

Guidelines on how the budget must be used

An agreed work load & services to be delivered

IT Accounting Base decisions on assessments of cost-effectiveness, service by service Make more business like decisions about IT services Provide information to justify IT expenditures & investments Demonstrate under or over consumption of service in financial terms

Base decisions on assessments of cost-effectiveness, service by service

Make more business like decisions about IT services

Provide information to justify IT expenditures & investments

Demonstrate under or over consumption of service in financial terms

Categorization of cost units Fixed Costs fixed for a reasonable long period of time Variable Costs that will vary with usage or time Direct Costs that can be directly allocated Indirect Costs apportioned across a no of customers Capital Assets that are depreciated over time Operational Day to day running costs

Fixed

Costs fixed for a reasonable long period of time

Variable

Costs that will vary with usage or time

Direct

Costs that can be directly allocated

Indirect

Costs apportioned across a no of customers

Capital

Assets that are depreciated over time

Operational

Day to day running costs

Charging Recover from customers the full costs of the IT services provided in a fair manner Ensure that customers are aware of the costs they impose on IT and influence customer behavior Make formal evaluations of the IT services and plan for investment based on cost recovery and business benefits

Recover from customers the full costs of the IT services provided in a fair manner

Ensure that customers are aware of the costs they impose on IT and influence customer behavior

Make formal evaluations of the IT services and plan for investment based on cost recovery and business benefits

Charging & pricing options Charging No charging Notional charging Actual / real charging Pricing Recover of costs Cost price + Going rate Market prices Fixed price

Charging

No charging

Notional charging

Actual / real charging

Pricing

Recover of costs

Cost price +

Going rate

Market prices

Fixed price

Thank You!

Thank You!