Last week, I had the privilege of launching the TBM Council in Australia. This included the first TBM Summit, which we hosted with the support of our partners Telstra, KPMG, EY, ISG, and UXC, and an opportunity to address Australia’s leading CIO trade association at the SE-Corp CIO Strategy Summit. 

As president of the Technology Business Management (TBM) Council, I was invited to discuss how to bridge the gap that often exists between IT, finance and business leaders. To do this, I brought several executives that are often involved in driving IT transformations — a CIO, a CTO and a CFO – to share their perspectives on bridging the gap. 

We began with Susan Monkley, the CIO from the Government of Australia’s Departments of Education and Employment, who provided a case study on why the “machinery of government” and the financial crisis drove the need for an intra-agency shared services center. Like many private enterprises who have undergone mergers and acquisitions, hers is the merger of two federal departments. The creation of a shared services center required a more defensible chargeback process based on the true costs and consumption of services as opposed to assumed rates. Susan is using TBM to not only provide chargeback and a defensible bill of IT but also drive mandated cost reductions as well, without sacrificing quality of services. 

Next, Rich Gilbert, the former CTO of SunTrust bank, described why the global financial crises exposed IT’s inability to defend their costs (and value) to the business and was mandated to cut $300 million from the bank operating budget. Reacting to this mandate, his team implemented TBM in order to drive a service transformation and move toward a “cloud first” architecture. Similar to Susan, Rich drove the definition of services backed by transparency of costs and consumption both within his IT organization and to the business leaders consuming services.

Finally, we had a CFO of IT from a leading global airline. This IT organization was not only transforming into a services organization, it was shifting to outsourcing a majority of their IT functions. In addition to cost savings goals, the business wanted more innovation. So they’ve employed TBM to not only get a handle on costs (much of it outsourcer fees) but to also shift money to innovation and help govern innovation spending.

The common theme was that TBM and transparency is changing the conversations that all three leaders were having. By translating from finance to IT to business, they are now able to collaborate on important tradeoffs, find ways to save money while preserving service quality, and fund innovation. The CIOs and IT leaders in the room instantly got this; they wanted to know how.

This led to a discussion of the TBM Taxonomy. The TBM Taxonomy classifies and organizes IT costs and other metrics in a hierarchical structure. It provides a means to model IT cost data in a manner that is consistent with industry peers. This helps not only in building commonality across different sets of data to enable comparisons, but it helps those who are executing their TBM roadmap move forward in a fairly consistent and cost efficient manner. 

There are three layers of the taxonomy that represent the major steps of translation of costs and other metrics. From the bottom up we have: 

  • Finance: The lowest layer begins with the general ledger and provides for a standard set of breakouts (e.g., CapEx vs. OpEx, Fixed vs. Variable) and a standard set of cost pools (e.g., hardware, software, labor, facilities, outside services).  This is the basic IT financial reporting layer which is beneficial to show things such as major cost categories, budget variances, and spend rates.
  • IT: The middle layer includes a standard set of infrastructure towers and sub-towers, such as servers, storage, voice and data networks, application development and support. These are common amongst nearly all companies and can be viewed as the basic building blocks of specific applications, services and so on.   The infrastructure tower costs can be benchmarked against peers to determine how your IT organization compares to the industry
  • Business: The highest layer of the taxonomy provides a standard set of applications and services along with higher-layer business capabilities. This layer also includes the business unit consumers, or breakouts (allocations) by consumers.  Items such as cost per application and cost per user can be easily shown.

Because the taxonomy enables IT and financial leaders to “bucket” infrastructure, applications and services into standard categories, and to make connections between them, it enables discussions of what IT delivers in terms that make sense – and matter – to business leaders. 

The TBM Taxonomy was developed by Apptio, the Technical Advisor to the TBM Council, and is part of the Apptio TBM Unified Model™. It has been submitted to and reviewed by the TBM Council principal members and board of directors. But more importantly, the TBM Taxonomy is not theoretical; IT cost and metric models based on the TBM Taxonomy have been deployed at more than 150 Apptio customers, including the three organizations mentioned above. 

We remain very excited about this important tool for bridging the gap. The TBM Taxonomy is becoming a standard among the 1,300+ members of the TBM Council.  Moreover, industry partners like KPMG, ISG, Ernst & Young, UXC, and Telstra are helping us drive the TBM Taxonomy forward and are deploying it at their clients. The Taxonomy is also a focus area for our industry workgroup meetings, where we are defining taxonomy extensions (e.g., applications, services, business capabilities) that are specific to each industry.

On a lighter note, Rich and I took the opportunity to explore a very real bridge: the Sydney Harbour Bridge! We took the bridge climb, a tour across the top of the bridge, which provided some of the most spectacular views of the harbor. Our trip wouldn’t have been complete without it.

Interested in learning more about TBM and its application in managing IT like a business? Click here to register now for the second annual TBM Conference being held at the Fontainebleau Miami Beach on October 28-30, 2014.