Budget Oversight and Performance Analysis
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.
Structure
BOP is made up of the following Categories and CBBs. Maturity and Planning are described at both the CC and the CBB level.
- AAnalysis
Tracking and modelling approaches, tools, sources, and data structures required to conduct budget performance analysis.
- A1Scope, Granularity, and Sophistication
Establish budget tracking and forecasting approaches (for example, single versus multi-year analysis).
- A2Tools and Processes
Develop tools and processes to generate budget performance analyses.
- A3Data Consistency
Develop the sources of data, and structure the data required to conduct budget performance analyses. Develop a common budget management terminology in the organization to enable wider comparisons to be made.
- BImpact and Value
Metrics for reporting the impact of budget performance analysis on planning and cost management.
- B1Metrics Reporting
Develop a suite of metrics to enable reporting on a range of budget performance criteria (for example, over/under expenditure and expenditure run-rates), and the relationships between them.
- B2Future IT Expenditure
Inform decision-making for planning of future IT expenditure.
- B3Management of Unit Costs
Inform decision-making regarding unit cost adjustments — for example, those relating to pricing and consumption.
- CAlignment
Promotes understanding of IT budget management practices.
- C1Awareness and Communication
Communicate IT budget management practices and methods, and details of their business impact to stakeholders.
Overview
Goal
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.
Objectives
- 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.
Value
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.
Relevance
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.
Scope
Definition
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.
Improvement Planning
Practices-Outcomes-Metrics (POM)
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.
Reference
History
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).