IT departments are increasingly pressured to have dual roles: operate as a utility provider while also partnering with the business to drive innovation. While there is no one-size-fits-all approach to managing the business of IT, some key financial metrics can help you balance these two responsibilities. In this blog post, we will explain five financial metrics that you can use to measure IT efficiency. We will also provide recommendations on how you can use these metrics effectively to manage the business of IT. We recently released an Executive Brief detailing 11 financial metrics that you can use for optimizing the business value of IT. These financial metrics can be employed for tracking IT service delivery, IT efficiency and business transformation.
In my experience as a CFO of IT, I have come across many instances when IT managers were forced to make anecdotal and seriously flawed estimates of the value of their programs. This is because their financial model missed approximately 40% of the underlying infrastructure requirements for things like staging and kitting, repair and returns, and mobile device management. This isn’t just an isolated occurrence. Businesses are often saddled with a culture, as well as IT decision support systems that undervalue IT’s contribution to the business. It was a quest to address this issue and communicate technology value in an accurate, disciplined, and data-driven manner that brought me to the Technology Business Management (TBM) discipline.
We’ve had an incredible November here at Apptio! In the first week of the month, we hosted the inaugural Technology Business Management (TBM) Conference here in Seattle. Apptio is the TBM Council’s founder and technical advisor, and we were proud to see over 400 CXOs and IT leaders gather in Seattle to discuss the future of running IT like a business.
For the tens of millions of IT Professionals around the world, the single most profound gift we can offer is recognition of their enormous role in making organizations run. From the entry-level help-desk professional to the CIO, this group of our peers is perhaps the one that gets the least respect in the organization. In my view, this occurs for a few reasons. These three issues are clearly of perception, but can ultimately be ascribed to the failings of the rest of us; lack of imagination about what IT professionals do. But the fourth issue, I lay at the door of the IT folks themselves. Put simply, they don’t market themselves well.
As a CIO, you have to support a broad spectrum of business needs. On one hand, your IT organization is a utility provider bound to tight operational budgets. On the other hand, you must partner closely with the business in delivering innovation and competitive differentiation. Unfortunately, there is no one-size-fits-all approach to managing the business of IT. It is imperative that you choose the right metrics based on your business role.
How would you feel if your biggest customer called to say they were switching more of their business to a competitor? Their reason? Your inability to quickly fulfill their demand, which resulted in them losing revenue and disappointing their customers. To make matters worse, your customer is taking their business to a competitor who has none of these issues. A version of this scenario often plays out with CIOs and other senior IT leaders. Landing in a situation where order management systems can’t keep up with demand is typically not a technology problem; it’s an investment problem.
Last week, I recapped my five key insights from the inaugural TBM Conference. We had many great discussions with the 400+ senior IT leaders there, and a topic of many was the evolution of the CIO role: As the CMO and lines of business increasingly drive technology decisions, is the CIO becoming less relevant?
We are pleased to welcome Chris Levitt to the Apptio blog. Over the next few weeks, Chris will share his insights on IT Cost Transparency as an experienced CFO of IT. Currently a Senior Strategist at the TBM Council and CEO of the TBM Research Group, Chris brings nearly 20 years of experience from the perspective of a technologist and financial analyst. His strategic experience in advising Fortune 500 leaders gives him a unique view on business strategy creation and execution. Chris is focused on helping firms make the transition to Technology Business Management.
Business innovation can thrive only if your CIO is able to free up his or her IT resources from run-the-business activities and redirect them to change-the-business initiatives. Unfortunately, as much as 80 percent of the CIO’s IT budget can be tied up in keeping the lights on and supporting redundant, no longer used or low-value applications. Application rationalization can help reduce this technical debt that often gets in the way of IT’s ability to drive business innovation.
We are delighted to host an exclusive IT Executive Summit in London on Leveraging IT Financial Transparency and Service Optimisation to Reduce Costs and Fuel Growth. In this summit, you will hear how IT leaders are using Technology Business Management (TBM) to deliver the transparency and insights they need to reduce costs and drive increased investment in business-changing innovation.