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IT cost management is a financial methodology used to control IT-related expenses, including evaluation, estimation, and analysis of an organization’s IT expenses. It is essential for operational efficiency and organizational success and should be included in a business plan. Software applications are used, and the responsibility for IT cost management depends on the nature of the organization.
Information technology (IT) cost management, also known as IT cost accounting, is a comprehensive financial methodology for controlling IT-related expenses. This includes the evaluation, estimation and analysis of an organization’s IT expenses, which may include information technology and employee salaries, for example. Information and communication technologies are vital components of an organization’s infrastructure. IT cost management is essential because it provides a strategic overview of all information technology-related expenses, and is necessary for operational efficiency and organizational success.
For a business corporation, including an existing business or start-ups, IT cost management is an important component of your strategic business plan, which is a fundamental component of a functional business corporation. Within the strategic business plan, the IT cost management portion will include expense monitoring of various IT-related areas, including IT purchases, employee labor costs, indirect expenses, and technology overhead. . A good example of a technology overload is the ongoing cost of an Internet connection, the presence of which is essential in contemporary organizations. An example of employee labor costs are expenses associated with the human operation of the IT department, such as the salaries of a network engineer and a software developer.
If, for example, a company is not involved in any level of IT cost management, this could lead to the demise of the business. Within a business plan, future estimates regarding IT-related expenses are included. A business plan typically includes five-year financial projections. The financial figures within the IT cost management component of a business plan depend on the company’s annual budget. If the section for managing IT costs is out of sync with the rest of the business plan, this could cause significant cash flow problems for a business.
Software applications such as spreadsheets and specialized accounting programs are widely used in the area of IT cost management. The people who handle IT cost management depend on the nature of an organization. For example, a director of a newly incorporated company might be solely responsible for designing the IT cost management strategy. However, a large, mature company might have an entire accounting department focused solely on IT cost management. Transnational corporations, which typically spend large amounts of money on technology each year, fall into this category.
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