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State of the Art: IT Financial Management in Ohio

Alongside state governments across the United States, Ohio Department of Administrative Services (DAS) is an IT service broker for a series of state agencies, helping to achieve economies of scale. Over the past five years, the team led by Renee Evans, enterprise service management program administrator for Ohio DAS Office of Information Technology (OIT), has modernized its systems to track costs and IT service consumption, invoice for service usage, and has given service owners and end users significantly improved visibility into IT usage trends.

“We want the agencies consuming IT to understand the choices they are making, and how those choices drive cost,” says Bill Miller, partner and owner, Proven IT Finance (a consulting and services firm supporting Ohio’s financial management modernization projects) at the ServiceNow Knowledge 2019 Conference.

Ohio’s finance team had a long history of managing the invoicing/recovery process well, so the first goal was to do no harm.

This said, Ohio’s leadership team knew they had outgrown their spreadsheet-based legacy processes.

Goals included making the process more user-friendly and more automated – allowing the IT team to re-direct time to higher-value activities such as analytics; streamlining processes to improve cashflow and providing tools to help automate answers to commonly-asked questions. The team knew that taking these steps would enable the best possible service and experience for their customers. i.e., the state agencies consuming IT services.

“When you think about the financial situation across Federal government and state agencies – every dollar counts,” Miller says. “Doing this and doing it well really matters to them.”

Cynthia Hunt, executive management consultant, Optimum Technology and part of Ohio’s team, explained that the state initially implemented ServiceNow in 2014 as part of their IT Optimization initiative. In 2017, the state started looking at the Information Technology Financial Management (ITFM) landscape optimize cost transparency and budget management. In 2018 after careful review of market capabilities in financial management, Ohio selected Proven IT Finance to help them implement a solution. The team executed a proof of value and business case up front, with ServiceNow, built three services and modeled them in the system, then moved into implementation. The state is implementing in two phases – first IT, and then general business services.

Miller explained that Ohio, and all IT service brokers, need to communicate the basis for rates charged. To address, invoices historically contained a lot of detail, but end users always want more. “We needed to be able to share this information in a consistent way that is consumable for the end user, with a self-service view, so they can get the information hopefully outside of the structure of the invoice,” Miller said.

The team initially shifted three key financial processes into ServiceNow.

The first process was the ability to track funding and expenses. Miller explained that it is important to be able to track where funding originated – which appropriation, and what program the funding aligns with. The state needs to be able to trace dollars all the way through the process. And, some of the funding is Federal – which means the state is required to report back on how much they received and how the funds were used. With ServiceNow, Ohio automated this auditing process, and can more easily stay in compliance with Federal reporting requirements (SWCAP).

Next, Ohio created digital workflows for budgeting and rate setting. Overhead costs for recoverable services are distributed across the agencies consuming that service. The state executes a modeling process that aligns each overhead expense with the recoverable service using business rules. The team created five categories of overhead charges, to ensure visibility into the layers.

“We wanted to provide a lot of clarity around the overheads,” Miller explained, as there were always questions in this area. He explained that the team wanted to ensure they could provide the visibility needed to enable end-user agencies to understand their charges.

The third key financial process the team modernized is consumption invoicing. Miller explained the state is issuing 5,000+ invoices every quarter, and they needed to automate the process as much as possible. Using ServiceNow ITFM, the team built the budget and created a model – integrating rates and consumption data – and the ability to generate an invoice.

Today, the team supports 19 of Ohio’s agencies with ServiceNow, supporting 65,000 employees, managing 24 out-of-the-box and 15 custom-built applications. Miller noted there are multiple models running at any given time including the current fiscal year, and as requested by the state, baselines for the next several fiscal years.

The solution provides the ability to produce reports with detailed performance analytics – easy-to-use dashboards that clearly break down costs (direct vs. overhead, variance reporting for budgets vs. actuals, etc.)

Miller emphasizes the importance of dashboarding and improved transparency. “If you can’t create a dashboard to help people understand what they are looking at, no one will use the system or the information.” The dashboards help tell a story, communicating with service owners, the finance team, service consumers, and leadership – explaining what they are getting from their investments.

“If all you tell people is how much you cost, the only answer you’ll get is that you cost too much,” says Miller. “If you can…show what you are getting for what you are paying, that helps to drive that conversation much more effectively.”

“Many organizations are so consumed with the transactions associated with billing and invoicing that they don’t get into the true financial management functions,” Hunt says. “[ITFM] frees up time for people … and allows them to do that analysis and move forward from a financial management standpoint.”

The team has only just begun – successful rollouts mean a backlog of new project requests for IT and non-IT related applications.

This said, Ohio’s efforts over the past five years have created a leading example of modern IT financial management – automating tasks and empowering the team with insights into consumption and costs of IT services so state agencies can optimize IT investments to make meaningful contributions to the mission.

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