The relationship between IT leaders and their business partners has gone through an evolution greater than any other aspect of the business. Technology is intrinsically linked to every department, whether to improve costs, efficiency or drive innovation. However, today’s CIOs are not only being asked to operate with less but are now being pulled toward their internal and external customers. CIOs that remain focused on internal IT concerns are facing extinction. This is why Technology Business Management (TBM) is an essential discipline for today’s IT organizations.
Technology Business Management (TBM) is a decision-making discipline for maximizing the business value of IT spending. TBM blends financial transparency with service and product constructs to give technology leaders and their business partners the facts needed to collaborate on business objectives.
TBM is helping CIOs and IT executives manage and communicate the cost, quality and value of technology services to the business. It brings together the best practices of financial and performance management and applies them to the complex environment of IT.
By looking at technology from the businesses perspective IT leaders can finally gain visibility into the cost and quality of IT services. They can use facts and metrics to tackle their spending on keeping the lights on (i.e., business as usual costs) and fund greater innovation. They can use those same facts to communicate the value of IT to business leaders and reduce costs without sacrificing necessary levels of service. The final result is the ability to align with business priorities through collaborative budgeting and planning processes.
The old world
Although the IT function has largely met the technical challenges of managing an extremely complex set of applications and infrastructure technologies, it has traditionally struggled to understand and communicate its costs. Individual user departments have viewed expenditure as the sole responsibility of IT and rarely accept that they themselves are actually driving the costs.
A lack of information has challenged the credibility of the IT function and stifled its ability to create competitive advantage through efficiency and agile, innovative, business processes. Without a sensible dialogue between IT and the business about demand it can prove almost impossible to control IT costs. This does not always equate to IT coming in over budget; an equally damaging result can be coming in under budget without explanation. Without the ability to provide a transparent view into actual costs, the IT department puts itself under added pressure and risks budget reductions without explanation or the resources to defend itself.
The current world
While recent advances in technology have been great for businesses, they have a more demanding type of user, one who expects to access to a widening range of information, through whatever device they choose and from any location, and at a competitive price. This has created an ongoing pressure for IT teams to deliver a high-standard of systems that are expected to work flawlessly, be constantly available and increasingly agile. Add to this the constant pressure to cut costs and you begin to understand the challenges faced by today’s IT leaders.
Employees see how easy it is to download an application from an app store, and therefore can’t understand why IT application deployment isn’t that easy. They see the cost of it and the speed of delivery and cannot understand why IT over-complicates the process. The reality, as many CIOs understand, is that Software-as-a-Service (SaaS) or on-demand IT delivery is never that simple; even Salesforce.com can’t deliver with a ‘one-click’ purchase.
A multi-year journey
The first step to Technology Business Management is to create a foundation of cost transparency. This is best done with specialized TBM software that can gather the financial, technical, and organizational data together to create the right reports for decision-making.
Here, too many IT leaders rely on spreadsheets or cumbersome reporting packages that aren’t designed for IT cost transparency. This is a mistake. Spreadsheets are error-prone, don’t provide a single pane of glass for disparate stakeholders, and aren’t trustworthy; and trust is an essential element of transparency. General reporting packages and business intelligence tools are very expensive and difficult to maintain, and talented report-writers should be focused on strategic, business decision-making needs.
By using the data your organization already maintains, you can allocate overhead costs, including labor, hardware, software and facilities, to the applications and services they support. In turn, you can shift emphasis from technology costs to the cost of providing services.
The benefits are cost transparency or the ability to manage performance and make trade-offs whilst supporting long-term growth and continuous improvement for business planning.
Cost transparency empowers IT managers with the ability to provide variance reports, labor utilization, project management status and total cost of ownership (TCO) to the business. It enables them to make better decisions on managing the IT portfolio, optimizing IT costs and improving the quality and value of the services it provides.
By expressing costs in terms of services, individual user departments finally understand that they themselves drive most IT costs through their demand. This shifts the debate from the cost of IT to the value it provides. For example, application owners and their business partners start to ask if an application or service is worth its true cost. This enables IT to deploy applications and technologies more cost-effecitvely to support business objectives and leads user departments to make better decisions about what they consume or demand.
Continuous improvement and planning
What is needed now is a culture of continuous improvement from IT; this begins with cost transparency. With true cost and consumption data in hand, businesses can easily identify where best to focus. Perhaps some departments would benefit from access to third party applications or cloud services? Maybe we should cut some areas of spending to fund investments in innovation? Perhaps there are areas of IT that can be consolidated or even retired? It’s impossible to understand the full impact of these changes without a clear and transparent view of IT.
IT must also become more agile by automating and continuously managing its plans, budgets and forecasting. With consumers able to react in real-time, thanks to social media and online retailing, businesses have to be just as quick to react to sudden shifts in company strategy, market sentiment and economic climates. This is easier when you have the facts at your fingertips.
The new world
By embracing TBM, IT leaders can finally gain visibility into the cost and quality of the IT services they provide. They can communicate the value of IT to business leaders; reduce cost without reducing quality; and align with business priorities through collaborative budgeting and planning processes. Implementing TBM takes an investment of time and technology, but it will pay dividends for CIOs and ultimately, the business.
The opinions expressed in the article above are those of the authors and do not reflect those of Datacenter Dynamics, its employers or affiliates.