The financial implications of IT on our business are always highly levered. It either pays off bountifully or seriously saps our business off huge financial resources. This situation has caused managers and business executives to take the issue of IT governance very serious. What positive impact is IT having on the finance of a business is a question that needs to be answered by all business executives whose businesses are principally driven by IT.?
Businesses are beginning to rely more on carrying out a VFM (value for money) audit on IT infrastructures. VFM audit of IT simply means taking an in-depth look into both immediately quantifiable and non quantifiable financial benefits that the deployment of IT has brought to our business and finance. It is best practice to carryout this VFM audit on IT before and during early deployment of IT infrastructures. The skill for this valuable assessment of value of IT to our business is what a lot of folks are lacking and that is what this article is all about. I will share my vast experience in the field of finance and information technology. So read on.
IT VALUE FOR MONEY (VFM) AUDIT
IT can enable initiatives, inhibit initiatives or destroy initiatives. The objective of every business is to invest in IT infrastructures that will enable her achieve her corporate objectives. Since the objectives of companies before investing in IT is to add value to the profit line of her business, IT value for money audit seeks to see that IT actually creates value to a business.
Standards need to be established before carrying out an audit on it. So, the first thing that needs to be done is to establish the objective of the company. Once this is successfully established, relationship between the company’s objectives and the features of the IT infrastructure should be established. If they are positively correlated, then the IT investment might be fruitful but if negatively correlated or lack correlation, then the probability of that IT investment seeing the light of the day is slim.
This is a very important first step to take as it gives insight to management as to what should be expected of the IT infrastructure investment. If a bank’s objective for instance is to meet her customers online real-time banking needs, investing in IT infrastructures that does not have such features will definitely yield no returns.
After the above initial analysis, the next thing that needs to be done is to carryout assets utilization analysis or return on investment analysis. This will help the company find out if the IT infrastructure is underutilized or fully utilized. Estimates should be made in cases where it is difficult to carryout a meaningful analysis. Surveys should be used to get an overview of what customers’ satisfaction level is. Else, basic ratio analysis should be used.
Another aspect of needs to be looked into is the know-how of the staff of the business. A company will want to make sure that it has the right kind of workforce with the right IT skills to take full advantage of the IT. A cost benefit analysis of hiring new IT staff and foregoing the benefit of IT should be critically considered.
The above steps should help a VFM IT audit be carried out on IT investments. If done well, the increase losses recorded by companies on IT investments would be reduced drastically. Businesses should no longer make IT budgets and forget about it. IT budgets should be closely monitored in order to arrest the increasing extravagant IT infrastructure expenditures.