Service Strategy Financial Management in ITIL – ITIL Course

Service Strategy

Financial Management

The Financial Management process provides cost effective management and control ofIT assets and financial resources used in providing IT services.
The purpose  of financial  management  for IT services  is to secure  the appropriate level of funding to design, develop and deliver services that meet the strategy of the organization.
Financial Management generates meaningful critical performance data.
Most importantly,this gives an organization insight in the cost of IT, and the cost of a specific service. This insight will help in determining investments and possible chargeback models.
Financial  Management  deals with budgeting,  planning,  revenues,  cost and market analysis. This helps in quantifying the value of IT services and value of service provisioning assets.
Financial management consists of three main processes:
Budgeting This  is  the  process   of  predicting   and  controlling   the  income  and expenditure of money within the organization. Budgeting consistsof a periodic negotiation cycle to setbudgets (usually annual) and the monthly monitoring of the current budgets.
Accounting:This is the process that enables the IT organization to accountfully for the way its money is spent (particularly  the ability to identify costs by customer, by service  and by activity).  It usually  involves  accounting  systems,  including  ledgers, charts  of accounts,  journals  etc.  and  should  be overseen  by someone  trained  in accountancy.
Charging: This is the process requiredto bill customers for the services supplied to them. This requires sound IT accounting practices and systems.

Business Case
A  business  case  clarifies  the  reason  for  undertaking   a  service  or  a  process improvement initiative.
Business  case  justifies  the  organizational   goals  that  have  been  stated  by  the organization as well as assess potential benefits and the resources and capabilities required.
The structure of a business case is as follows:
•   Introduction Presentsthe business objectives
•              Methods and assumptions Define the boundaries of the business case such as the time period, the costs and the benefits
•              Business impacts The financial and non-financial business case results, such as faster time to market, better customer retention or bigger market share
•   Risks and contingency The probability that alternative results will emerge
•   Recommendations Specific actions recommended
Service Valuation
Financial Management of IT assists in the task of service valuation which is used to help the businessand the IT Service Provider agree upon the value of the IT service.
Service  Valuation  helps  to determine  the balance  demonstrating  the total  cost  of providing an IT service against the total value offered to the business by the service.
Service Valuation focuses on two key concepts that apply in Financial Management are:
•              Provisioning  value Determines  the minimum  cost baseline for providing  the service
              Service  value  potential   Value-added  component  based  on  the  customer’s perception of value from the service or expected marginal utility and warranty

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