In larger organizations, CFOs and procurement offices are becoming increasingly involved in corporate IT outsourcing decisions. However, with a focus on cost containment and a preconception that IT is at best a necessary expense, this frequently places them at odds with initiatives aimed at innovation or acquiring access to talent and expertise.
This is compounded by the fact that IT leadership is frequently unable to determine the current costs of the IT Services they want to outsource, making it even more difficult for the CFO to perform a meaningful analysis.
Bust most often, cost isn’t the actual issue – it’s an inability for different teams to speak the same language and articulate the business value that is created through outsourcing.
If your organization is wanting to bring in the help of a managed service provider, here are some tips to help you build the case that take into account your key financial decision-maker:
Calculate Current Costs and Think Like a CFO
At the most basic, Managed IT Services are calculated by the cost of the package x the number of users – resulting in a monthly fixed rate. But this alone does not make a business case. A CFO is more likely interested in a longer-term projection that takes into account issues like demand management, growth or contraction, and future needs and projects – such as hardware replacement or server upgrades.
Cost savings and cash flow are important to CFOs, so it’s important to not only consider the dollar value of IT expenditures, but also their nature. For example, Managed IT Services frequently turn a variable capital expense into a predictable operating one, which creates more stability and can improve the accuracy of future budgeting by reducing the need for large one-time spends.
Return on assets often weigh heavily on the mind of a CFO, and in today’s fast-paced tech world, it’s becoming increasingly difficult to determine these as many aspects of IT move to a subscription-style model: Software as a Service (SaaS) Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). In many cases, reconsidering the need and nature of asset ownership in IT has positive benefits when it comes to risk, personnel requirements and business agility.
Consider the Nonfinancial Benefits and Possible Future Scenarios
Managed IT Service Providers can offer you 24/7 support, reduce the chance of downtime, help back-up your data, create a disaster recovery plan and develop an IT strategy that aligns with your business goals. But these ‘soft benefits’ often require quantification to sell them to a CFO.
With some homework and introspection, many organizations can provide a cost-benefit analysis for these services and features – for example, determining how many employee hours were lost waiting for IT tickets to be resolved or a network outage to be addressed. If you are actively engaging with an MSP, case studies can be a particularly effective way to demonstrate value.
It’s also important to remember that CODs are focused on managing risk – which means they must contend with many possibilities and eventualities. For examples, what happens if the business doubles in size through an acquisition, or a branch is sold off, or new regulations ocme into effect?
CFOs generally understand one of the key purported benefits of IT outsourcing is flexibility to scale well with business growth and downturns under a wide range of scenarios – and they need to be confident that the proposed Managed Service Provider will be able to adapt and deliver under these circumstances.
Determine How to Report on Success – or Failure
Even when the contract is signed and your organization successfully transitions to outsourced IT, you can bet that your CFO will be watching things carefully to establish is the promised value is being delivered. This involves establishing metrics relevant to the success of the initiative that can demonstrate the impacts and costs (positive or negative) to not just IT, but the entire company.
When selecting an Managed IT Services Partner, it’s important to ask about their reporting and review processes, and how they can ensure you are making the most of your business resources.
At Discovernet, we believe that technology should inspire your business and help people achieve greater heights. At our core, we want to be your trusted business technology partner, helping drive value to your bottom line through the effective integration of technology. Technology shouldn’t be a burden on your business, it should be an enabler, helping you and your team do things faster, better and easier.
When we do what we’re best at, you’ll be able to focus on doing what you’re best at.