IT Showback is a strategy that drives down costs by exposing business units (BUs) to the levers of cost they can control, the resulting value, and the potential ways of lowering that cost structure. But if the bill of IT is indefensible — through assumptive allocations or poor service cost compositions — the BU will push back. (“How are you calculating these IT costs? I can’t pay for something I don’t understand.”)
Build a foundation for showback with data that deliver a defensible unit rate for each service (e.g., $/email account or $/GB hot storage) and cost attributions based on actual usage rather than arbitrary headcount or even-spread cost allocations.
Here are three steps to deliver IT spend accountability with showback.
#1 Understand cost structures
To enable a showback process, you must have visibility into both the underlying fully burdened costs associated with each service and application, and the business unit consumption of each service. A robust, defensible cost model for your services and applications builds credibility with the business and remains accurate as composite costs (e.g., labor, licensing) change over time. Capturing changes in the cost model with manual updates is laborious and error-prone. A better approach is to automatically ingest financial and operational data into your cost model — then your cost structure will always remain current and defensible. Automated data ingestion is key for the long-term viability of cost structures for your showback process.
#2 Operationalize showback
Showback sets an expectation that transparency into service costs will change behavior, but this transparency needs to be scoped out and defined for BUs. Give business units a bill of IT that shows the levers they can pull to change costs. But it’s not just about providing a bill. A fully operationalized showback process is an ongoing dialogue between BUs and IT Finance. Consider a situation where BUs are unaware of infrastructure cost changes (e.g., a cloud migration after retirement of on-premises resources) that will affect their IT costs. BUs should be informed of any changes to their IT costs before they show up on their bill of IT. Conversely, if BUs are aware that their technology stack is about to get a lot deeper (e.g., adopting new services or a premium SaaS offering) they can team with IT Finance to plan out the financial impacts of their operational changes. Similar scenarios can be evaluated with answers to the following questions:
- What are the service costs for each BU?
- What are the quarterly IT costs per BU?
- What are the service costs at each level of the BU hierarchy?
- What are the most significant service costs?
- How many units of a service were consumed this month?
- How many units did each BU consume?
- What are the budget variances for each BU?
- What service prices have changed this month that impact the BU’s bill?
- What service consumption changes have occurred that impact the BU’s bill?
- What allocation changes have occurred that impact the BU’s bill?
#3 Optimize expense portfolio
A BU must stay within its IT spend envelope. Visibility into IT spend, and understanding the levers it can pull, are table stakes for a showback process. But the fully realized showback process must optimize the expense portfolio for delivering business value. BUs must minimize their keep the lights on (KTLO) commitments to fund technology solutions that push their part of the business forward. For example, hastening your selling cycle with an automated request for proposal (RFP) process, or accelerating a customer’s time to value (TTV) with an online onboarding process.
Showback frames the IT value conversation
Showback is a standalone process that communicates the value of technology spend. It also provides, in many cases for the first time, an understanding to the business units of what makes up that single line item of expense they call “IT” and shows them the levers they can pull to make a material change in the cost or improve the business output. It focuses on the outputs of IT (services available to BUs) rather than the inputs (infrastructure costs). If these outputs are communicated to BUs in terms they understand (e.g., price x quantity) and can control (e.g., consumptive rather than assumptive allocations), showback frames up a conversation of IT value without the noisy chargeback distractions of cross-charges and true-ups.
ApptioOne incorporates the industry standard TBM taxonomy to measure and manage IT service costs to build a fully defensible cost composition of services. You can then operationalize your showback with ApptioOne Billing to send recipient-friendly emails with detailed explanations of changes in spend and the ability to drill into the details to learn more.
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