The fundamental battle between the CIO and CFO revolves around understanding the company’s IT spend, where the money goes and what it accomplishes. The CFO may look at IT as a cost center and as a prime candidate for the budgetary axe, while the CIO naturally wants to preserve his or her own territory.
The TBM model and cost transparency
Before the cloud, IT tended to operate as a “virtual priesthood,” with the CIO passing final judgment on who gets what IT services, and when. The result often involved lengthy rollout times for IT services, and deliverables that seldom took input from the line of business managers and end users. This model – besides resulting in less than optimal deliverables – lacks cost transparency. In the priesthood model of IT, the greatest challenge is that IT provides services to the business in a unidirectional, non-collaborative environment, and then the business inevitably questions why they have to consume the service and why they have to pay for it.
Today, IT leaders still have a foot in both worlds – with one foot firmly planted in day-to-day operations, reducing costs, and legacy infrastructures, and the other in the more forward-looking, cloud computing world in which they are shifting from being a cost center, to an engine of growth and innovation. Technology Business Management (TBM) is a primary tool and methodology used in making that shift.
TBM brings that transparency to the forefront with a framework for managing the business end of IT, and promoting greater collaboration between IT, Finance and the various lines of business throughout the company.
TBM imposes a strategic framework of processes to operationalize a business’s cost transparency program. According to Alex Manders, TBM Practice Lead for the Americas at ISG, a global technology research, analytics and advisory firm, “When I think of cost transparency, I think of clients that have done it via Excel or a software solution such as Apptio, which allows them to load large volumes of IT spend data and IT operations data, aggregate the two together, and have a clear line of sight into what they’re spending on infrastructure, applications and services.”
The true cost of IT is hidden in the shadow
Collecting all that IT spend data is complicated by “shadow IT,” a phenomena in which low-cost and easy to deploy cloud services get deployed at the departmental level without the oversight and approval of the IT department.
That’s not to say that all IT deployments must go through a creaky and time-consuming IT approval process. “In some cases it might make sense for a business to go down the path of shadow IT, depending on what the discussion is between IT and the business,” said Manders. So long as there is an open collaboration – and readily available financial data from all lines of business – the “shadow IT” phenomenon can in fact, have a positive impact in that it empowers the lines of business, and allows the IT department to focus on more important innovation and new technologies.
The emergence of the “IT Evangelist”
“One of the most impressive things I’ve seen is the CIO for a large healthcare provider, who has created a program that put in place what I call business developers, or ‘evangelists,'” said Manders. “These evangelists go from the IT department out into the business, and develop relationships with the business itself. This develops a new level of trust between the business and IT, creating a back channel of information – so that IT is learning from the business what types of services the business wants, what their pain points are, what they want to see in the future, and what is important to them. Now you are creating a collaborative environment. You create a mechanism to drive more strategic business decisions.”
The biggest challenges facing the CIO
The biggest challenges for the CIO – which can be remedied with a TBM approach – once overcome, will allow IT to become a much more strategic partner to the business. These challenges include:
Defensibility of the numbers. Business will always question the numbers. “If the business questions the number, and IT can’t defend that number, then it reduces the credibility of the program,” said Manders. “That’s why I guide them to be mindful of how you roll out your cost transparency program, to make sure you are fully defensible on the data you have aggregated, and that you have governance processes in place to have a productive conversation.”
Rationalization of apps. Under the “priesthood” model of IT, it’s far too common to spend money on apps and services that have a limited appeal and justification outside of the IT department.
Getting the financial IT data aggregated. Especially in a shadow IT environment where IT spending may be distributed throughout the company, aggregating this data requires two things: First of all, a software application such as Apptio that allows for large amounts of IT spend data to be aggregated, parsed and analyzed; and second, a more collaborative process where IT works hand-in-hand with the lines of business to ensure that those apps, whether “shadow IT” or not, are deployed in a cohesive and strategic manner.
Metrics and benchmarking. “There is continued interest in metrics,” said Manders. It’s important to know how a company’s IT spend compares both against the market, and internally – an understanding that leads to better control over consumption management.
Innovation. Lastly, the big challenge facing the CIO is taking the existing budget, which traditionally may be used largely for day-to-day operations, and applying some of it to innovative activities, ultimately facilitating a shift from IT as a cost center, to a strategic partner with the rest of the business.
A Powerful Methodology for Change and Innovation
A big part of TBM is benchmarking, and its history actually goes back to 1979, when Compass Benchmarking (since acquired by ISG) first set out a framework for IT benchmarking. “This set the framework for IT benchmarking, that in turn enabled businesses to compare themselves against each other,” said Manders. “That is TBM. Now, you understand what your costs are, and you haef insight into them and can compare them against your peers.”
Manders also notes that only five years ago, TBM as a methodology was formalized with the creation of the non-profit Technology Business Council. “Having TBM, and a software that enables you to collect this data and make decisions off of it, that’s powerful,” said Manders. “In the past, it was all done with gigantic Excel spreadsheets, and you would have to look at a big workbook, and then three other workbooks. And you couldn’t know whether it was valid, because you couldn’t reconcile it. Now, with some of the software on the market, you can aggregate all that data in a central source and report off of it – and you have a platform to make very agile business decisions quickly. You have more time to spend on insights and strategies. That’s where the real innovation is.”
~ By Dan Blacharski