Introducing an IT Financial Management Maturity Model

As one of the largest and most intangible expense areas for insurers, IT departments often have difficulty demonstrating the value of their expenditures. The practice of IT Financial Management (ITFM) is the best way for insurer CIOs to manage, optimize, and communicate the value of these costs, however, this practice is immature at many insurance organizations. Ultimately, ITFM done well has the potential to lower costs, improve ROI, and clearly demonstrate IT value. Of course the maturity level of any given organization’s ITFM practice falls on a spectrum, but how can IT departments determine both their current and desired levels of maturity?

Novarica recently introduced a new framework in response to exactly this question: the Novarica IT Financial Management Maturity Model. The Model is built around the seven critical dimensions of any ITFM program: budgets, accounting, business cases, charging, costs, ITFM policy management, and communications, each of which are defined for four stages of maturity: elementary, controlled, differentiated, and optimized. This four-stage, seven-dimension model is a great way for organizations considering adopting or adding to an existing ITFM program to understand where they are along an ITFM continuum.

From this, carriers can set objectives for improvement and target specific practice areas for upgrade actions that are company-specific with the ultimate goal of improving the return on IT spending and investment, and implementing greater capabilities and spending control over time. Throughout this process, IT organizations with increasingly mature financial management can easily demonstrate usage based on realistic costs. This is an invaluable tool that can clearly communicate how exactly IT dollars are being spent, and provides Finance with knowledge that gives IT greater authority and influence over enterprise IT expenses.

For more on this topic, see our most recent reference report, Novarica IT Financial Management Maturity Model.

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