Purpose of Business Relationship Management

This process has an important part to play in the alignment of the IT service provider and the customer. The purpose of the process is twofold:

• Establish a relationship between the service provider and the customer, and maintain it with a continued review of business and customer needs. This relationship is extremely important for building a business rapport between service provider and customer.
• Identify customer needs and ensure that the service provider can meet those needs, both now and in the future. BRM is the process that ensures the service provider is able to understand the changing needs of the business over time. The relationship also allows the customer to articulate the value of the services to the service provider.

  One of the most important concepts in this relationship is that of expectation—the customer’s expectation of the service provider capability and the service provider’s expectation of the customer’s needs. It is critical that the expectation of the customer does not exceed what they are prepared to pay for, and BRM is instrumental in the management of this communication.

Objectives of Business Relationship Management

The objectives of BRM are as follows:

• Ensure that the service provider has a clear understanding of the customer’s perspective of the service so that the service provider is able to prioritize the services and assets accordingly.
• Ensure that customer satisfaction remains high, which will demonstrate that the service is achieving the needs of the customer.
• Establish and maintain a relationship between the customer and service provider that enables understanding of the business drivers and the customer.
• Ensure that the organization and the service provider communicate effectively so that the service provider will be aware of any changes to the customer environment. Changes to the customer environment may have an impact on the services provided.
• Identify technology changes or trends that may have an impact on the type, level, or utilization of the service provided.
• Ensure that the service provider is able to articulate the business requirements for new or changed services and that services continue to meet the needs of the business and continue to deliver value.
• Provide mediation where there is conflict on the use of services between business units. This may be a conflict of resource allocation, or perhaps the requirement to utilize or change functionality differs for specific departments.
• Establish a formal procedure for managing complaints and escalations with the customer.

Scope of Business Relationship Management

The scope of BRM will vary depending on the nature and culture of the organization. If the organization works with an internal service provider, it is likely that BRM will be carried out between senior management representatives in both the IT department and business units. Often in larger organizations, you will be able to find dedicated business relationship managers, but in smaller organizations the role may be combined with other managerial responsibility. The business relationship manager will work with the customer representatives to understand the objectives of the business and ensure that the services provided are in alignment and supportive of those objectives.

If an external service provider supports the organization, you will commonly find that a dedicated account manager carries out the process, with an individual allocated to a customer, or a group of smaller customers with similar requirements. As the external service provider relationship with the business is captured in a contract, the focus will be on maximizing contractual value through customer satisfaction.

One of the major requirements for the business relationship manager is to focus on understanding how the services we provide meet the requirements of our customers. The process must ensure that we can communicate effectively with our customers so that we could understand their needs. Some of the key areas we should consider are as follows:

• We need to consider business outcomes so that we understand what the customer wants to achieve.
• We need to understand how the customer uses our services and which services are being offered to them.
• We need to consider how we manage the services that are being offered, in terms of responsibility for the provision, the service levels we deliver, and the quality of service that is being achieved. We should also consider any changes that may be required in response to business and IT plans.
• As IT service providers, it is vital that we keep track of technology trends and advances, which may impact on our service delivery. All too often, customers will hear about new technologies but not understand the impact of them. It is the responsibility of the business relationship manager to ensure that we communicate and provide advice on the best use of technology to deliver service value.
• We need to measure the levels of customer satisfaction and respond to any drop in satisfaction with suitable action plans. The business relationship manager will be a key figure in the communication and management of any such plans.
• We need to consider how we can optimize the service we provide for the future.
• The BRM process should be concerned with the way that the service provider is represented to the customer. This may mean engaging with the business to ensure that commitments from both sides have been fulfilled.

To successfully carry out the BRM process, and so that all of these factors can be taken into consideration, it is necessary to work with other service management processes and functions. For example, the ability to associate business outcomes with services is part of service portfolio management; service level management provides information about service levels and their achievement; and service asset and configuration management maps customers and service owners to the infrastructure, applications, and services.

Often other activities such as project management will use the business relationship manager when they need someone to communicate with the customer. The communication is done by the business relationship manager, but it remains part of the project. The business relationship manager role is discussed further later in this chapter.

This will require clear boundaries, relationships, and responsibilities to be identified between BRM and other service management processes, since there is a strong potential for confusion. Business relationship management should focus on the relationship between the customer and service provider, and the achievement of customer satisfaction, but the other service management processes should focus on the services themselves and how well they meet the specified requirements.

Business relationship management does not ignore the services, but it should be focused on the high-level perspective of whether the service is meeting the business needs rather than specific targets for delivery. Equally, the other service management processes do not ignore this aspect of customer satisfaction, but they should be focused on the quality of the services and how customer expectations can be met.

An example of this is the difference between the service level management and BRM processes. They both have regular interaction with customers, and both are concerned with the ongoing review and management of service and service quality. But each has a different purpose, and the nature of the interface with the customer differs in content and responsibility. This is clearly shown in Table 19.1, which is an extract from the service strategy publication.

Business relationship management is also concerned with the design of services, which makes them the ideal contact for strategic communication with customers for all departments in the service provider. There is a potential connection for BRM with application development, as well as other development and design areas.

There are many connections and similarities between BRM and service level management and other service management processes, and the roles are often combined. But as you can see in Table 19.2 there are distinct differences in the activities for the processes, and there needs to be a clear understanding that when carrying out BRM, an individual needs to be aware when they are working on a strategic business relationship and when they are working tactically.

Value

Business relationship management delivers value by providing structured communication with customers. This enables the service provider to understand the business needs of its customers, now and as they develop. Only through reaching this level of understanding can the service provider ensure that the services it is providing are what the business needs. The customer is also helped to understand the viewpoint of the service provider and what it can realistically deliver. This relationship of mutual understanding and trust helps when difficult issues arise. BRM can act as mediator in these circumstances because it is trusted by the customer and not seen as biased in favor of the service provider. Effective BRM encourages the customer and the service provider to work together as strategic partners.

BRM’s focus on customer satisfaction enables the service provider and customer to understand if the business objectives are being met. Although service provision without BRM is possible, BRM helps to ensure that the service understands and continues to provide what the customer needs within the budget they can afford.

Policies, Principles, and Basic Concepts

Next we consider some of the policies, principles, and basic concepts of BRM.

The BRM process is often confused with the business relationship manager role. This is because the role of many business relationship managers is broader than just the BRM process. The business relationship manager often represents other processes when engaged in BRM—for example, when obtaining information about customer requirements and business outcomes for use by service portfolio management, demand, and capacity management.

Among the key concepts are a number of data repositories. You saw these earlier when looking at the service portfolio:

• The customer portfolio is a database or structured document used to record all customers of the IT service provider. It is BRM’s view of the customers who receive services from the IT service provider. It is produced by the BRM process and used by several other processes, such as service portfolio management. The customer portfolio documents the service provider’s commitments, investments, and risks relative to each customer.
• The customer agreement portfolio is a database or structured document used to manage service contracts or agreements between an IT service provider and its customers. It is an output of the service level management process and contains a contract or other agreement for each IT service provided to a customer. Although produced by SLM, it is an important tool for BRM.
• Contracts or SLAs are negotiated and managed separately for each customer. For internal service providers, SLAs are negotiated and maintained by service level management, involving business relationship managers where these exist, whereas for external service providers the process involves legal specialists, service level management, and dedicated business relationship managers.

BRM works throughout the service lifecycle to understand customer requirements and expectations and ensure that they are being met or exceeded:

• In service strategy, BRM ensures that the service provider understands the customer’s objectives and overall requirements.
• In service design, BRM ensures that the service provider has properly understood the customer’s detailed requirements and initiates corrective action if this is not the case. In addition, BRM will work with service level management to ensure that the customer’s expectations of the new service are set at the appropriate level.
• In service transition, BRM ensures that the customer is involved in change, release, and deployment activities that impact their services, ensuring that their feedback has been taken into due consideration. The business relationship managers may represent the customer on the CAB, or they may arrange for the customer to be at CAB meetings and change evaluation meetings when appropriate.
• In service operation, BRM works with service level management, incident management, and the service desk to ensure that services have been delivered according to the contract or SLA and may well be part of the escalation procedures.
• In continual service improvement, BRM monitors service reports and is given frequent updates about levels of customer satisfaction, exceptions to service levels, or specific requests or complaints from the customer. Working together with other processes and functions, BRM will help identify appropriate remedial action and agree this with the customer.

Business relationship management is involved in defining and clarifying requirements for service. Customers may sometimes request a particular solution, which may not be the most effective solution. BRM needs to focus on the outcome and the value that the customer requires and then work back to defining the service.

Business relationship management enables service providers to be involved in strategic discussions about the customer’s business. BRM also ensures that relevant information about the strategic direction of the customer is communicated back into the appropriate processes and people within the service provider organization.

Process Activities, Methods, and Techniques

The BRM process itself consists of activities in every stage of the service lifecycle, rather than a single end-to-end process. The particular activities executed will depend on the situation that has caused the service provider or customer to initiate the process. The process interfaces with a number of other service management processes throughout the service lifecycle. Business relationship management is not a single end-to-end process with a single beginning and end. Rather, it consists of a number of key activities that are linked together. Figure 19.1 shows the process activities.

The BRM process is initiated either by the customer or by service management processes and functions—usually by contacting the business relationship manager. For customers, BRM provides a way for customers to communicate with the service provider about their needs, opportunities, and requirements, and to have these taken care of in a formal, organized manner.

The business relationship manager should document all opportunities, requests, complaints, and compliments to ensure that they are followed through and do not fall between different processes and functions. The service provider is also able to initiate the BRM process if they need input from customers, or if they need to initiate the creation of a new service or changes to an existing service.

Triggers

Triggers of BRM include the following:

• A new strategic initiative or a new service, or a change to an existing service, has been initiated.
• A new opportunity has been identified or a service has been chartered by service portfolio management.
• Other triggers could be customer requests, suggestions, or complaints, or the fact that a customer meeting or customer satisfaction survey has been scheduled.

Inputs

Inputs to BRM include the following:

• Customer requirements, requests, complaints, escalations, or compliments
• The service strategy and, where possible, the customer’s strategy
• The service and project portfolios, SLAs, and RFCs
• A request to validate patterns of business activity or user profiles defined by demand management

Outputs

Outputs of BRM include the following:

• Stakeholder definitions, defined business outcomes, and an agreement to fund (internal) or pay for (external) services
• The customer portfolio and service requirements for strategy, design, and transition
• Customer satisfaction surveys and their results
• Schedules of customer activity in various service management process activities and of training and awareness events
• Reports on the customer perception of service performance

Interfaces

Major interfaces with BRM include the following:

• Strategy management for IT services works closely with BRM to identify market spaces with information gleaned from customers. BRM also gathers strategic requirements and desired business outcomes and secures funding (internal) or pursues deals (external).
• Service portfolio management works with BRM to identify more detailed requirements and information about the customer environment required to create service models and assess proposed services.
• Financial management for IT services obtains information about the financial objectives of the customer and helps the service provider understand what level of funding or pricing the customer is prepared to accept.
• Demand management works with BRM to identify and validate patterns of business activity and user profiles. BRM will also identify changes to those patterns or the priorities of specific business activities.
• Service level management uses customer information and service requirements gathered by BRM to understand the customer’s priorities regarding service performance and deliverables. Actions agreed to during service reviews with the customers will be coordinated and monitored by the BRM, whether the actions apply to customers or the service provider.
• Capacity and availability management rely on information about business outcomes and service requirements gathered through BRM. BRM will also validate whether proposed levels of performance and availability will be acceptable to customers.
• BRM provides information on business priorities and outcomes for IT service continuity management and ensures that countermeasures, recovery plans, and tests accurately represent the world of the customer.
• Service catalog management provides the basis for many discussions, reviews, and requests that are initiated through BRM.
• BRM is often the initiating point for requests for change and will also be involved with assessing the impact and priority of changes.
• BRM ensures the appropriate level of customer involvement in the release and deployment management, and service validation and testing processes.
• BRM has a strong interface with CSI because service improvements and the seven-step improvement process are an important part of BRM. BRM validates, prioritizes, and communicates improvement opportunities and plans with the customer in conjunction with service level management.

Information Management

We have explored some of the documentation and information required for effective BRM, in particular the service portfolio, project portfolio, and application portfolio. These important information sources document current and future services and are used by BRM to facilitate effective communication between the customer and the service provider. BRM ensures that the customer portfolio and customer agreement portfolio are maintained.

Customer satisfaction surveys are another important information source. The BRM process ensures that the surveys cover the relevant aspects of the service and are conducted in a fair, consistent, and objective manner to ensure that the results are an accurate reflection of customer satisfaction. The results will also need to be stored so that trends can be identified and progress against baselines measured.

The service catalog is another important reference used to communicate with customers about the available services.

Business Relationship Management Process Roles

This section describes a number of roles that need to be performed in support of the BRM process. As with the process-specific roles described in other chapters, these are specific additional requirements to the generic roles applicable to all processes throughout the service lifecycle described in Chapter 1, “Introduction to Operational Support and Analysis.”

Critical Success Factors and Key Performance Indicators

Finally we consider the CSFs and KPIs for this process. Here are some examples of CSFs and KPIs for BRM:

• Critical success factor: The ability to document and understand customer requirements of services and the business outcomes they wish to achieve.
  • KPI: That business outcomes and customer requirements are documented and signed off by the customer as input into service portfolio management and service design processes. If this KPI is present and achieved, the CSF will be achieved.
• Critical success factor: The ability to establish and articulate business requirements for new services or changes to existing services.
  • KPI: Every new service has a comprehensive set of requirements defined by business managers and staff, and these have been signed off by both business and IT leadership at the strategy, design, and transition stage.
  • KPI: The reasons for, expected results of, and detailed requirements for changes to services are documented and signed off at the strategy, design, and transition stages.

Challenges

Challenges for BRM include the following:

• Moving beyond using BRM purely as a means of working on levels of customer satisfaction. BRM needs to be involved in defining services and tracking that they are delivered according to the specified levels of service.
• Another challenge can be overcoming a history of poor service, which means BRM struggles to have any credibility. This sometimes results in customers not being willing to share requirements, feedback, and opportunities.
• There may be confusion between the role of business relationship manager and the BRM process. Although business relationship managers are often required to execute activities from other processes simply because of their customer-facing position, this does not make those activities part of the BRM process.

Risks

Business relationship management risks include the following:

• Confusion regarding the boundaries between BRM and other processes. This may lead to duplication of effort, or alternatively, some activities may be neglected. An example of this would be during a major incident the incident manager may receive multiple calls from BRM, service level management, and so forth. It is important that these boundaries be clearly defined.
• A disconnect between the customer-facing processes, such as BRM, and those focusing on technology, such as capacity management. Both are critical for success, and they need to be properly integrated.

Purpose of Financial Management for IT Services

To design, develop, and deliver the services that meet the organizational requirements, we must secure an appropriate level of funding. This is the main purpose of financial management for IT services. At the same time, the financial management process should act as a gatekeeper for the expenditure on IT services and ensure that the service provider is not overextended financially for the services they are required to deliver. Obviously this will require a balance between the cost and quality of the service, in line with the balance of supply and demand between the service provider and their customers.

Cost and quality are key factors in the provision of services, and the only way we can allocate and understand the cost of service provision is through sound financial practices.

Objectives of Financial Management for IT Services

The objectives of the financial management process include the following:

• Defining and maintaining a financial framework that allows the service provider to identify, manage, and communicate the actual cost of service delivery.
• Understanding and evaluating the financial impact and implications of any new or changed organizational strategies on the service provider.
• Securing the funding required for the provision of the agreed-to services. This process will require significant input from the business and will depend on the overall approach to financial management and cross-charging within the organization.
• Facilitating good stewardship of service and customer assets to ensure that the organization meets its objectives. This should be done by working with service asset and configuration management and knowledge management.
• Performing basic financial accounting in respect of the relationship between expenses and income, and ensuring that these are balanced according to the overall organizational financial policies.
• Reporting on and managing expenditure for service provision on behalf of the stakeholders.
• Management and execution of the organization’s policies and practices relating to financial controls.
• Ensuring that financial controls and accounting practices are applied to the creation, delivery, and support of services.
• Understanding the future financial requirements of the organization; providing financial forecasts for the service commitments and any required compliance for legislative and regulatory controls.
• If appropriate, defining a framework that allows for the recovery of the costs of service provision from the customer.

Scope of Financial Management

Financial management is a well-recognized activity in any organization, but the specific requirement to manage funding related to the provision of IT services may not be so well established.

It is important to understand the strategic approach that is adopted in relation to IT service provision. How will it be managed; is it internally or externally sourced? If internally, is there a requirement to cross-charge for services, or is another mechanism of cost recovery in place?

In the majority of organizations, qualified accountants are in charge of the corporate finances, usually as part of the finance department. They will set the policies, standards, and accounting practices for the business. The strategy relating to IT funding will be part of the overall accounting approach, but the specifics may be managed locally as part of the IT department.

Those engaged in FMITS must ensure that the practices are consistent with the corporate controls, and that reporting and accounting activities meet with the governance standards as defined for the whole organization. Adherence to these standards will also assist with general understanding by the various business units of how IT is funded. Communication and reporting of internal funding practices across an organization is extremely important for enabling a true understanding of the costs of IT services.

Using a service management approach to delivering services should mean that the accounting for IT services is more effective, detailed, and efficient. In an internal service provider, this will enable a translation of the information between service provider and business.

Financial management consists of three main processes:

Budgeting Budgeting is the process of predicting and controlling the income and expenditure of money within an organization. Budgeting consists of a periodic cycle (usually annually) of negotiation to set budgets, and the monthly monitoring of expenditure against these.

Accounting Accounting is the process that enables the IT organization to account fully for the way that its money has been spent. It should enable a cost breakdown by customer, service, activity, or other factor to demonstrate the allocation of funds. It will normally require some form of accounting system (ledgers, charts of accounts, journal, etc.) and should be managed and overseen by someone with an accountancy qualification or skills.

Charging Charging is the process required to bill customers for use of the services and will only be applicable where the organizational accounting model requires it to take place. It requires sound accounting practices and supporting systems so that any cross-charging is accurate and traceable.

The cycles associated with financial management are shown in Table 19.3. The two cycles are

• A planning cycle (annual), where cost projections and workload forecasting form a basis for cost calculations and price setting
• An operational cycle (monthly or quarterly), where costs are monitored and checked against budgets, bills are issued, and revenue is collected

Value

Internal IT organizations now realize that they are quite similar to market-facing companies. They share the need to analyze, package, market, and deliver services just as any other business. They also share a common and increasing need to understand and control factors of demand and supply, and to provide services as cost-effectively as possible while maximizing visibility into related cost structures.

Sound FMITS provides the information the service provider needs to achieve the following:

• Enhanced decision making
• Speed of change
• Service portfolio management
• Financial compliance and control
• Operational control
• Value capture and creation

Financial management provides the information needed to generate strategies or to devise new ways of using assets to achieve our goals. It enables the business to understand the financial results of current strategies—for example:

• Has cutting our prices resulted in more business?
• Is that business profitable?
• Which services cost us the most and why?
• How efficient are we compared to alternatives?
• Where could we improve?
• Which areas should we prioritize for CSI?

Good financial management results in a number of specific benefits to the business. It enables the business to comply with regulatory and legislative requirements and generally accepted accounting principles. This compliance ensures that the business is operating legally and is not at risk of being fined for noncompliance. By understanding costs, a realistic budget can be prepared so that the money available is sufficient to cover the cost of service. Finally, the business has the information it needs to make sound business decisions regarding the use of and investment in IT.

Sound financial management also ensures that when it comes to charging for IT services, internal service providers can recover the full cost of service from the business if required. The business units will also have the information regarding the charges they need for preparing their own budgets. External providers can ensure that they charge customers a sufficient amount to cover costs and make a profit. Most fundamentally, linking IT services to business outcomes ensures that all IT spending has a business justification.

Policies, Principles, and Basic Concepts

Financial management for IT services applies the financial management policies of the organization. It must therefore follow the policies and practices of the organization as a whole. Policies that impact an IT service provider might include the following:

• What level of financial expenditure needs to be tracked
• Which configuration items need to be recorded as financial assets and how they should be classified
• How fixed assets are depreciated
• How costs are reported
• How revenue is accounted for (and linked to IT services)
• Whether the cost of services will be accounted for individually, or whether the overall cost of IT will be calculated and allocated back to the business units
• Requirements to comply with legislative or other regulatory requirements

It is a policy decision by the organization’s executives whether IT is a profit center or a cost center. A cost center is a business unit or department to which costs are assigned but that does not charge for services provided. It must account for expenditure. A profit center is a business unit that charges for providing services. A profit center can be created with the objective of making a profit, recovering costs, or running at a loss.

Process Activities, Methods, and Techniques

Figure 19.2 shows the financial management process. We are going to examine the high-level steps of accounting, budgeting, and charging.

Triggers

Triggers of FMITS include the following:

• Mandatory monthly, quarterly, and annual financial reporting cycles such as budgeting
• Outputs from audits suggesting or mandating improvement actions
• Other service management processes, which may request, for example, financial information regarding return on investment data
• An investigation into a new service opportunity
• The introduction of charging for IT services for an internal service provider or the need to determine the price of a service for an external service provider
• A request for change, which will trigger the need for financial information about the cost of making changes and the ongoing financial impact of the change

Inputs

We discussed the process inputs earlier. Typical inputs include the following:

• The policies, standards, and practices established by legislation or regulators and those imposed by the organization’s financial managers
• The Generally Accepted Accounting Practices (GAAP) and local variations
• All data sources where financial information is stored, including the supplier database, configuration management system, service portfolio, customer agreement portfolio, application portfolio, and project portfolio
• The service portfolio, which provides the structure of services (these services will be the basis for the accounting system, since all costs and returns will ultimately be expressed in terms of the services provided)

Outputs

Next we’ll look at the outputs of financial management. We discussed these earlier, so we’ll just briefly recap them here:

Service Valuation This is the ability to understand the costs of a service relative to its business value.

Service Investment Analysis Financial management provides the information and history to enable the service provider to determine the value of the investment in a service.

Compliance Regardless of the location of a service provider, or whether they are internal or external, financial data is subject to regulation and legislation. Financial management for IT services helps implement and enforce policies that ensure that the organization is able to store and archive financial data, secure and control it, and make sure that it is reported to the appropriate people.

Cost Optimization The goal of cost optimization is to make sure that investments are appropriate for the level of service that the customers demand and the level of returns that are being projected. Business impact analysis (BIA) involves understanding the effect on the business if a service is not available. This enables the business to prioritize investments in services and service continuity.

Planning Confidence Planning confidence is not a tangible output; it refers to the level of confidence that service stakeholders have in the service provider being able to accurately forecast costs and returns.

Interfaces

All service management processes use financial management to determine the costs and benefits of the process itself. Some also use it to support the execution of their process activities. Major interfaces with financial management for IT services include the following:

• Strategy management works with enterprise financial management to determine the financial objectives for the organization. It defines expected returns on investment, based on information provided by financial management. Financial management will track and report on the achievement of ROI.
• Service portfolio management provides the service structure that will be used to define cost models, accounting, and budgeting systems and the basis for charging.
• Business relationship management provides information to financial management regarding how the business measures the value of services and what they are prepared to pay for services.
• Capacity and availability management are able to provide valuable information to financial management for IT services about the various options of technology and service performance. This in turn will be used to calculate costs.
• Change management uses financial management for IT services to help determine the financial impact or requirements of changes.
• Service asset and configuration management documents financial data about assets and configuration items. This data is used as the basis for financial analysis and reporting. Enterprise financial management also provides the policies that are used as the basis for managing financial assets of the organization (such as depreciation).
• Continual service improvement uses financial management for IT services to determine whether the return of a proposed improvement is worth the investment required to make the improvement.

Information Management

The main sources of documentation and information required for effective financial management include the following:

• Financial management systems, such as accounting, budgeting, and charging systems
• Financial management policies, legislation, and regulations defined by external parties, as well as the internal enterprise finance managers
• Financial reporting structures, templates, and spreadsheets (e.g., budgets), as well as the reports themselves, which are the basis of compliance and also a major output to other service management processes
• The organization’s chart of accounts
• The service knowledge management system

Financial Management for IT Process Roles

This section describes a number of roles that need to be performed in support of the financial management process. As with the process-specific roles described in other chapters, these are specific additional requirements to the generic roles applicable to all processes throughout the service lifecycle described in Chapter 1.

Many organizations will have a person with the job title of IT financial manager, which typically combines the roles of FMITS process owner and process manager.

Critical Success Factors and Key Performance Indicators

Finally, we will cover the CSFs and KPIs for this process. We will discuss some examples; the full list is available in the FMITS section of the ITIL Service Strategy publication. Examples of CSFs and KPIs for financial management for IT services include the following:

• CSF: The existence of an enterprise-wide framework to identify, manage, and communicate financial information, including the cost and associated return of services
  • KPI: The existence of established standards, policies, and charts of accounts, which enterprise financial management requires all business units to use and comply with. Audits will indicate the extent of compliance.
  • KPI: The financial management for IT services framework specifies how services will be accounted for; regular reports are submitted and used as a basis for measuring the service provider’s performance.
  • KPI: The production and submission of timely and accurate financial reports by each organizational unit.
• CSF: The requirement for the service provider to be able to account for the money spent on the creation, delivery, and support of services.
  • KPI: The service provider uses an accounting system, and this is configured to report on its costs by service.
  • KPI: The provision of regular reports on the costs of services in design, transition, and operation.

Challenges

Challenges for FMITS include the following:

• Developing effective financial reporting and cost models that focus on the cost of infrastructure and applications rather than the cost of services, without which it is difficult to communicate the value of services.
• Ensuring that while FMITS must comply with enterprise standards and policies, its chart of accounts and reporting should be appropriate for an IT service provider.
• Resisting an organizational focus on cost saving rather than cost optimization, leading to cost-cutting rather than demonstrating return on investment and value.
• Encountering difficulties in the initial phase in finding where financial data is located and how it is controlled.
• The reliance of the process on planning information provided by other processes, which may be poor or nonexistent.
• Internal service providers experiencing difficulties when introducing charging. This requires a change in culture and in how its success is measured, especially the need to articulate value in relation to alternative service providers. There is a possibility that the users may become more demanding as a result of being charged.
• The need for external service providers to balance the cost of services with the perceived value of those services to ensure the correct pricing models. The correct price must be higher than the cost but must also reflect the value to the customer (what the customer is prepared to pay for the service).

Risk

There are a number of risks to financial management for IT services. These include the following:

• The introduction of dedicated financial management processes for an internal service provider may be viewed as unnecessary, even though the cost of a bad investment decision about the type and level of services offered can far outweigh the costs of implementing the process.
• A lack of adequate financial management processes for IT services may lead to penalties for noncompliance.
• There may be no staff in the organization who understand both IT and finance.

Exam Essentials

Understand the purpose of financial management for IT services and BRM. You need to understand the purpose of BRM and financial management for IT services.

Understand the business value of each process. You should be able to explain the value the business derives from each process.

Know the key activities of financial management. You will need to be able to identify the purpose, objectives, and scope for financial management. Remember the three main areas: budgeting, IT accounting, and charging. Financial management is crucial for the calculation of value for services.

Understand how BRM works with the senior business management. Make sure you understand how the business relationship manager works to ensure that the service provider understands the business strategy and provides the services required to further that strategy. Understand that this process also involves explaining to the business what the service provider can and cannot do.

Be able to describe the key differences between BRM and service level management. You should be able to list and explain the difference in activities and focus between BRM and service level management.