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.
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
- 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
- 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
- C1Awareness and Communication
Communicate IT budget management practices and methods, and details of their business impact to stakeholders.
Overview
Goal & Objectives
An effective Budget Oversight and Performance Analysis (BOP) capability aims to:
- 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.
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.
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.
- Metric
- Percentage of projects and operational activities that meet their original and 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.
- Metric
- Percentage deviation from planned to actual expenditure by budget category and by 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.
- Outcome
- A standard set of metrics can be compared across budget categories, facilitating deeper analysis.
- Metric
- 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.
- 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 operations activities with budget tracking and trending analysis.
- Practice
- Promote organization-wide reuse of 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 better awareness of IT expenditure patterns, which inform 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 have the ability to make better informed decisions more quickly.
- Metric
- Percentage of IT projects where corrective actions lead to budget adjustments.
- Practice
- Continually use budget performance analysis to optimize unit cost management.
- Outcome
- Opportunities to optimize unit cost management decisions for improved business value are identified.
- Metric
- Percentage improvement in business value that results from unit cost adjustments.
Reference
History
This capability was introduced in Revision 18.10 as an update to Budget Oversight and Performance Analysis (16).