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The Budget Oversight and Performance Analysis (BOP) capability aims to compare actual IT expenditure against planned IT expenditure over extended time periods, and in doing so provides management with the stimulus to confirm or reset budget allocations, where appropriate.

• Improve visibility of actual IT expenditure over extended time periods.
• Better inform decisions regarding future funding levels and allocations.
• Improve the quality of future budgets, and identify favourable budget trends and areas of concern.
• Increase confidence that budget allocations can avoid unplanned adjustments midway through a financial cycle.

The Budget Oversight and Performance Analysis (BOP) capability analyses past budgeting and expenditure patterns to inform decision-making on current planning for budget forecasts and allocations.

Better quality plans, budgets, and forecasts facilitate smart decisions that can help organizations react to challenges, grasp opportunities, and grow. Decision-makers who have access to relevant IT budget performance and trend information are in a better position to understand past performance and, with appropriate analysis, they can understand what is likely to occur in the future¹. It is within this dynamic landscape that the Budget Oversight and Performance Analysis (BOP) capability helps decision-makers to manage the IT budget so that it remains in synch with and responsive to evolving business activities, strategies, and KPIs. By applying pattern analytics to understanding how budgets perform over extended time periods, organizations can identify how best to drive planned improvements¹

By establishing an effective Budget Oversight and Performance Analysis (BOP) capability, an organization can have access to more accurate and timely IT budget analysis data, and can significantly reduce the guesswork from its decision-making processes. The Budget Oversight and Performance Analysis (BOP) capability looks across a series of budgets and financial planning timeframes to determine their effectiveness, to recognize historical IT budget expenditure patterns and emerging trends, and to use the analysis to support better forecasts and decision-making regarding the financial management of IT². Investing in appropriate financial planning, budgeting, and forecasting approaches can accelerate the decision-making process, even when underlying assumptions and conditions change.

The Budget Oversight and Performance Analysis (BOP) capability is the ability to compare actual IT expenditure against budgeted IT expenditure over extended time periods. Where appropriate, it offers management the opportunity to reprofile or reprioritize budget forecasts and allocations. The Budget Oversight and Performance Analysis (BOP) capability covers:

• Developing approaches and tools for budget performance analysis.
• Performing multi-year tracking and trend analysis of expenditure patterns in IT projects and IT budget categories.
• Reviewing IT budget plans versus actual expenditure.
• Providing a stimulus for rebalancing and reprioritizing budgets.
• Forecasting future IT funding levels, allocation requirements, and prices for IT services.
• Determining the impact of historical budget performance on future budget planning and on general cost management.
• Communicating IT budget performance metrics to key stakeholders.

Representative POMs are described for BOP at each level of maturity.

2Basic

• Practice

  Track IT budget performance within the current period at operations and project levels.

  Outcome

  Data begins to be accrued on actual versus planned expenditure.

  Metric

  Percentage of projects and operational activities with budget analysis reported.

• Practice

  Adjust IT budgets based on budget performance analysis.

  Outcome

  IT budgets become more realistic and transparent.

  Metrics

  • Percentage of projects and operational activities that meet their original IT budget allocations.
  • Percentage of those that meet their adjusted IT budget allocations.

• Practice

  Use extrapolations from historical patterns to stress-test planned IT expenditure for larger IT projects and IT budget categories.

  Outcome

  Confidence levels for budget planning can be improved by more formally leveraging past experience.

  Metrics

  • Percentage deviation from planned to actual expenditure by budget category.
  • Percentage deviation from planned to actual expenditure for larger projects.

• Practice

  Establish basic reporting of IT budget performance at operational and project levels.

  Outcome

  IT personnel are aware of the role that budget performance plays in meeting business objectives.

  Metric

  Percentage of relevant IT personnel who are aware of IT budget performance.

3Intermediate

• Practice

  Expand in-period tracking and trend analysis to cover most IT budget categories.

  Outcome

  Oversight and performance analysis can be performed, and it becomes easier to identify issues across broader budget categories.

  Metric

  Percentage of IT budget categories with budget metrics reported each period.

• Practice

  Facilitate IT budget analysis, with partial automation of the reporting approach.

  Outcome

  Partial automation allows for more timely budget analysis and decision-making.

  Metric

  Number of days after month end that the monthly budget analysis report is produced.

• Practice

  Report a standardized set of budget performance metrics (for example, cost per unit or earned value) for all budget categories and link them to IT targets.

  Outcomes

  • A standard set of budget performance metrics can be compared across budget categories, thereby facilitating deeper analysis.
  • Management have a suite of metrics and understand the strategic alignment of these metrics.

  Metrics

  • Percentage of budget categories with budget metrics reported.
  • Survey of stakeholder confidence in fiscal management by the IT function conducted.

• Practice

  Use budget analysis to predict future IT expenditure for all budget categories.

  Outcome

  The inclusion of all budget categories enables more accurate scenario-modelling and planning.

  Metric

  Percentage deviation from planned budget for each reporting period.

• Practice

  Report IT budget performance against the objectives of business units.

  Outcome

  There is wider visibility into how the IT budget performance can positively and negatively affect business goals.

  Metric

  Frequency of communication on budget performance to stakeholders in other business units.

4Advanced

• Practice

  Sufficiently automate multi-year budget tracking and trending analysis.

  Outcome

  More accurate and more timely analysis is available to management across the organization.

  Metric

  Percentage of IT projects and operation activities with budget tracking and trending analysis.

• Practice

  Promote organization-wide reuse of the IT budget performance analysis to inform planning on future expenditure.

  Outcome

  There are better discussions regarding organization-wide buy-in to how best to balance between run the business IT expenditure and change the business IT expenditure.

  Metric

  Year-on-year percentage change in budget allocations by category.

• Practice

  Establish regular reporting cycles to communicate IT budget performance against the organization-wide objectives — for example, via management dashboards.

  Outcome

  There is increasing awareness across the organization of IT expenditure patterns, which in turn informs planning activities.

  Metric

  Percentage of the IT budget aligned with business units' objectives.

5Optimized

• Practice

  Continually review the scope of real-time gathering, analysis, and reporting of budget performance data.

  Outcome

  Management will have the ability to make better informed decisions more quickly — for example, budgets can be adjusted immediately based on trend data.

  Metric

  Percentage of IT projects where corrective actions lead to budget adjustments.

• Practice

  Continually use budget performance analysis to optimize unit cost management.

  Outcome

  Budget analysis identifies opportunities to optimize unit cost management decisions for improved business value.

  Metric

  Percentage improvement in business value that results from unit cost adjustments.

This capability was introduced in Revision 16 as a new critical capability.

It was deprecated in Revision 18.10, being updated by Budget Oversight and Performance Analysis (18.10).

The following CCs cover topics that are related to BOP in some way:

BGMBudget Management

Data on actual expenditure across all budget categories, costs centres, and projects

FFFunding and Financing

Details on the management of funding for various types of budget expenditure

FFFunding and Financing

Determining funding and financing for IT investments

PPPPortfolio Planning and Prioritization

Prioritizing the IT investment portfolio

SPStrategic Planning

Establishing alignment between the IT function and the rest of the business

SRPService Provisioning

The IT services catalogue that defines and prices the IT services that are available

TCOTotal Cost of Ownership

A full understanding of total costs to ensure accurate comparison of actual with predicted expenditure

TCOTotal Cost of Ownership

Monitoring budget expenditure on a day- to-day basis