As CIOs grapple with service transformation initiatives, shadow IT and competition from cloud providers, the need for a well-designed IT financial management (ITFM) program has become acute. However, before you buy any ITFM tools, stop and assess why you need an ITFM program in the first place.
Gartner research has identified 4 main “Vectors of Entry” for the adoption of ITFM tools and the key assessments required for each vector to determine how organizations should proceed with ITFM initiatives.
In our previous two posts on this topic, we explored the Optimization and Transparency Vectors.
Gartner finds that in the Optimization Vector, IT managers are under no specific external pressure to manage IT finances but do so on their own to streamline IT operations and reduce per-unit costs. In the Transparency Vector, however, leaders react to specific external mandates to provide IT costing detail and typically have to quantify IT’s business value in an ongoing manner.
What is the Demand Management Vector?
In this third installment, we’ll examine Gartner’s Demand Management vector of entry. For companies in this vector, Gartner finds that the CIO or CFO is the primary driver of IT financial management initiatives. These IT leaders are looking for better ways of influencing business unit consumption of IT services and maximizing alignment of IT to business priorities. What does that look like?
- Helping the business make better IT demand & usage decisions
- Appropriately balancing IT investments
- Establishing project selection & funding criteria
- Evaluating performance versus plan
- Demonstrating TCO and/or return on investment
As Gartner points out, a comprehensive view of IT costs with reliable modeling capabilities, benchmarks, etc. is a critical prerequisite for these activities. In fact, many initiatives that start out in the Optimization vector deliver this baseline capability and then evolve into “demand management” initiatives as the CIO becomes engaged as executive sponsor. When CIOs shift their strategy to align with the business’ goals and objectives, they focus more on:
- Maximizing revenue impact
- Optimizing IT cost structures
- Minimizing technology-related risk to the business
Gartner finds that for IT organizations in the Demand Management vector, the initial steps are similar to those in the Optimization vector: as quickly as possible, IT must adopt accurate forecasting and budgeting systems. IT must develop the skills to predict and manage IT spending. Next, IT must standardize models for understanding run, grow, and transform costs.
If you’ve read the prior post in this series, you know that Apptio offers a purpose-built Cost Transparency Foundation application to automate these essential IT cost analytics processes.
From there, Gartner recommends these next steps for those in the Demand Management vector:
- Ensure IT and corporate objectives are aligned
- Focus data and cost capture mapping on total cost of IT deliverables – measure delivery against the business priorities
- Report and demonstrate business-valued IT services as defined by the business
- Enable the business to choose the services and/or service levels needed
Here too Apptio offers purpose-built applications to automate the analytics activities outlined in steps 2-4. Apptio Cost Transparency for Applications and Services provides visibility into the cost of IT deliverables and Apptio Cost Transparency for Business Units analyzes the cost of business consumption of applications, services, and underlying infrastructure. And with Apptio Bill of IT, you can provide your business units with a monthly pro-forma invoice for their usage and "what-if" modeling of service levels and quantities so they can proactively manage their demand and costs.
For more details on the recommendations for other vectors, download the entire Gartner report here. Which stage are you in the ITFM tool selection process? What guides your decision-making? Tell us in the comments below, or on Twitter.