Measure portfolio financial health — total cost of technology, cost attribution, vendor pricing risk exposure, and wasted spend

Overview

Financial health metrics for the technology portfolio translate the Technologies Inventory family data into the financial management intelligence that IT leadership and financial leadership need to govern technology spending effectively. The primary financial health dimensions — total cost of technology, cost attribution to applications and business capabilities, vendor pricing risk exposure, and wasted spend — each require different data from the Technologies Inventory and produce different governance and financial management insights.

Best Practice

Measure and report the following financial health metrics on a defined cadence. Total cost of technology: the aggregate total cost of the technology portfolio by inventory type and by taxonomy category, including all cost components of the total cost model. Reported quarterly to IT leadership and annually to financial leadership. Year-over-year cost trend by category: the change in total cost for each taxonomy category relative to the prior period, distinguishing between cost changes attributable to volume growth, price changes, and rationalization savings. Reported quarterly to IT and financial leadership. Cost attribution coverage: the percentage of total technology cost that has been allocated to specific applications and business capabilities through the cost allocation model. Reported quarterly to IT leadership. Vendor pricing risk exposure: the aggregate financial exposure to vendor pricing changes for all technologies where the organization has identified a vendor pricing risk in the vendor health assessment. Reported quarterly to IT leadership and to the risk governance function. Wasted spend identified and recovered: the total wasted spend identified in the current period through the wasted spend identification program, and the total wasted spend recovered through remediation programs completed in the period. Reported quarterly to IT and financial leadership.

Benefit(s)

Financial health metrics for the technology portfolio give IT and financial leadership the ongoing financial visibility that disciplined portfolio management requires. Technology spending is visible, attributable, and trend-analyzed rather than known only at the aggregate invoice level. Vendor pricing risk is quantified and reported as a risk management metric rather than discovered when a pricing event occurs. Wasted spend recovery is measured and credited to the governance program that identified it, creating the financial accountability that sustains investment in the waste identification and recovery disciplines.