To optimize investments, plan efficiently, and drive transformation, CIOs need easier access to accurate IT costs that explain operational strengths and weaknesses. New SaaS-based apps utilize Technology Business Management (TBM) to improve visibility into IT demand, utilization, and service, driving more strategic, value-based conversations with the business.
Why is cost transparency elusive for so many CIOs? It’s not due to a lack of financial reporting. Instead, the method of reporting IT costs fails to show the cost of the things that matter to decision makers. For example, your business partners want to know what services they’ve consumed and how much those services cost them. Your application owners need to know the TCO of their applications, including the infrastructure they consume. Your service owners need to know the cost and consumption of their services. In most companies — and probably yours as well — your IT costs are reported from only a single perspective: that of your corporate financial reports.
In most companies, costs are captured and reported using general ledger (GL) accounts and cost centers. GL accounts represent types of expenditures, such as hardware, software, salaries, consultants, contractors, utilities, or taxes, and expenses that are realized such as depreciation and amortization. Cost centers usually reflect organizational units, such as teams within a department. This structure is two-dimensional, as illustrated by Figure 4‑1.
But what is needed is a multi-dimensional perspective of costs, married to other metrics, such as units (e.g., users, servers, applications, hours of labor). The dimensions (think of these as slices or perspectives) you need include your services, applications (TCO, not just purchase costs), business units, business capabilities (if you know them), locations (e.g., data centers), vendors, and so on. These dimensions give the right people the right information to make good decisions. That is not possible with a GL-only view of costs.
To create transparency, you will need a TBM model of costs, resources, towers, services, and consumption. This model unifies the finance, technology and business perspectives (and data) using TBM taxonomy, combining five types of data — financial, technology, service (or application), project, and business — to provide the analytics and metrics for TBM value conversations.
The value conversations of TBM depend on clarity regarding the consumption of your resources — money, people, infrastructure, software, and so on — and of your services and projects. Since money is a proxy for most other resources, most TBM models in practice are focused on financial costs. This is where Technology Business Management: The Four Value Conversations CIOs Must Have with Their Businesses will begin describing how to build a TBM model.
Much of this article was excerpted from Chapter 4, Creating Transparency, “Technology Business Management: The Four Value Conversations CIOs Must Have with Their Businesses.” Learn more about how organizations are using the TBM model to take a more proactive approach to fostering transparency and optimizing value by ordering your book today.