IT cost management is a financial methodology for controlling IT-related expenses, including evaluating and analyzing an organization’s IT expenditures. It is essential for operational efficiency and organizational success, and is an important component of a commercial company’s strategic business plan. Software applications are widely used, and the responsibility for IT cost management depends on the nature of the organization. Failure to engage in IT cost management could lead to serious cash flow problems.
Information technology (IT) cost management, also known as IT cost accounting, is a comprehensive financial methodology for controlling IT-related expenses. This includes evaluating, estimating and analyzing an organization’s IT expenditures, which could 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 expenditures and is necessary for operational efficiency and organizational success.
For a commercial company, including an existing business or start-up company, IT cost management is an important component of its strategic business plan, which is a fundamental component of a functional corporate company. Within the strategic business plan, the IT cost management portion will include tracking the expenditures of several IT-related areas, including information technology purchases, employee labor costs, indirect expenses and overheads of technology. A prime example of technology overhead is the ongoing cost of an Internet connection, the presence of which is essential in contemporary organizations. An example of an employee labor cost is expense associated with IT department human operations, such as the salaries of a network engineer and a software developer.
If, for example, a business does not engage in any level of IT cost management, this could lead to business going out of business. As part of a business plan, future estimates of IT-related expenses are included. A business plan typically includes five-year financial projections. The financials within the IT cost management component of a business plan depend on the company’s annual budget. If the IT cost management section is out of sync with the rest of the business plan, this could cause serious cash flow problems for a company.
Software applications such as spreadsheets and specialized accounting programs are widely used in the area of IT cost management. Which people handle IT cost management depends on the nature of an organization. For example, a director of a start-up company may be solely responsible for developing IT cost management strategy. A large, mature company, however, might have an entire accounting department that focuses solely on managing IT costs. Transnational corporations, which typically spend huge amounts of money on technology every year fall into this category.
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