Better insight into budgets would give IT managers a better chance of making shrewd investments

IT directors find it hard to make the right investment decisions because they do not have enough details of how their budgets are spent, according to experts at a recent roundtable discussion.

Speakers at the event, hosted by business service management (BSM) software vendor Managed Objects, argued that the IT department remains a "black hole" on the balance sheet of many firms.

Jim White, European business technologist at Managed Objects, said that currently firms have a good idea of the cost of IT salaries, hardware and software licence fees, but are unable to dig down into the figures and understand how much it costs to provide specific IT services, such as email or other applications.

White added that IT directors therefore lack necessary information to make investment or cost-cutting decisions. "If organisations are to reduce costs further in the IT department without damaging service quality, they need more granular information about precisely where their budget is spent," he argued. " How can you reduce spending by 10 percent if you don't know how much the services you currently provide actually cost?"

The problem is likely to get worse as companies develop more shared service centres and service-oriented architectures that make it harder still to work out the cost of running applications, according to Will Cappelli of analyst Gartner.

The comments follow a recent Managed Objects survey of almost 300 IT and business managers that found over half of respondents did not have accurate data to measure the cost of IT applications.

Sean Larner, European managing director of Managed Objects, said the company was aiming to address this problem later this year with the launch of a new Business Services Financial Modelling suite, extending its functionality to provide insight into the cost as well as the performance of components within IT services.

However, Cappelli argued that while service-based costing capabilities are welcome, ultimately IT directors also need to be able to monitor the value of IT services – a capability that remains a long way off due to the lack of an accepted formula for quantifying the financial value of far-reaching IT services, such as email or accounting apps.