TBM is a value management framework for decision making by CIOs, CTOs, CFO, and the team. Technology Business Management defines the tools, processes, data, and people needed to manage the business of technology.
Developed by the Technology Business Management Council, a community of thousands of CIOs, CTOs, CFOs, and their key leaders, TBM is now adopted by enterprises in every industry, independent of maturity and size, from banking to healthcare to manufacturing to government and more.
Measuring IT Value with TBM
Many organizations start (and end) analysis of IT value with spend metrics. There’s goodness in an all-up view of IT actuals to budget, but it’s an invitation for further analysis rather an endpoint (e.g., “What’s driving variance? Which cost centers are outliers? Which parts of IT are poorly optimized?”).
Other organizations blend financial and operational data for more insightful calculated metrics. IT Finance takes extracts from the corporate financials and layers in the IT context from a CMDB, project lists, IT asset database, service desk systems.
IT needs to measure, optimize, and operationalize management practices for IT spend—both for traditional on-prem solutions and the emerging majority of cloud-based IT.
Measuring IT value is a metric-driven endeavor (e.g., TCO of apps and IT), but the outcome from defensible metrics is a change in the conversation with the business around trade-offs, IT complexity, and variable spend—particularly from cloud solutions.
This is where TBM comes in.
TBM: The Discipline
Once the domain of “tech companies” like Cisco, JPMorgan Chase, Microsoft, Mastercard, HPE, and Red Hat, TBM is now adopted by enterprises in every industry, independent of maturity and size, from banking to healthcare to manufacturing to government and more. Increasingly, every company is a technology company. More and more value is being delivered to customers digitally, directly through the application of IT.
TBM provides data-driven decision-making to manage, plan, and optimize costs, value, and quality of all technology investments.
Ideally, Technology Business Management adoption begins with a strong financial foundation and then works within a framework to ensure complete business alignment for all technology investments.
Figure 1. TBM Framework
By starting with the basic financial baseline and working toward the ability to communicate and chargeback, companies can also include any of the specialized pillars or specialties they need.
Optimization of cloud resources has been a part of the model since there were cloud costs, but the complexity of gathering, sorting, and categorizing the vast amount of cloud data is the newest challenge to companies only doing TBM.
TBM requires a common language that normalizes tech- and business-speak to connect IT and the business. A hierarchical taxonomy of IT services, towers, and cost sources promote alignment between IT, Finance, and Business Unit leaders. TBM provides a standard taxonomy to describe cost sources, technologies, IT resources, applications, and services.
The TBM Council, a non-profit professional organization dedicated to advancing the discipline of TBM, governs and maintains the TBM taxonomy.
A TBM model requires a data-driven method for mapping and allocating costs and resource consumption from their sources to their uses—powering value conversations with reports, analytics, and metrics.
Cost allocation is an integral part of TBM. Visibility and trust into the fully-loaded cost and quality of IT services requires a defensible allocation of IT costs through a TBM model. TBM relies on trustworthy data. When data quality comes into question, stakeholders doubt the output.
Fig 2. A TBM model maps actual costs from the GL to cost pools, IT towers, applications, services, and business units.
Common allocation strategies fall into six major categories:
- Even spread
- Manually assigned percentage
- Manually weighted
- Direct spend weighting of shared expenses
Technology Business Management’s top-down approach to business value abstracts a lot of operational detail.
Application rationalization (App rat) is a key initiative for many TBM practices. First, segment applications (by revenue-driver, by revenue-supporter, and KTLO) then determine the action to take in each segment (invest to maximize performance, optimize performance and cost, and minimize cost to meet SLAs).
The KPIs for App rat success are not technical—or particularly complicated.
Successful App rat initiatives shrink portfolios, remove duplicate business capabilities, and cut application spend. Anyone, with or without an infrastructure and operations background, understands those metrics.
However, baselining application costs is not easy. Asserting that you’ve cut total application spend depends on knowing what your costs were before the rationalized effort. That isn’t a given.
An IT cost model built on a TBM taxonomy, with defensible cost allocations (from a GL, through on-prem infrastructure, and up to applications and services), is a prereq for confidence in business value metrics.
App rat is a business value conversation, but you need operational and financial detail within TBM to have it.
TBM looks at four broad KPI categories:
- Cost-for-performance KPIs help IT continuously improve the cost efficiency of its services while maintaining quality.
- Business-aligned portfolio KPIs enable IT to focus its time and resources on the services, applications, technologies, and vendors that drive the most value for the business.
- Investment in innovation KPIs helps IT and its business partners to better govern and collaborate on the right level of project spending.
- Enterprise agility KPIs facilitate the creation of a more agile cost structure for IT and accelerate effective decision-making.
Underpinning these categories are ten specific metrics:
- Financial Fundamentals
- IT Spend vs. Plan (OpEx & CapEx variance)
- Application and Service Total Cost
- Infrastructure Unit Costs vs. Target / Benchmarks
- % of Projects On 5 -Time, On-Budget, On Spec
- % of Business-Facing Services Meeting SLAs
- Innovation & Agility
- % of IT Investment on Run, Grow, Transform the Business
- % of Project Spend on Customer-Facing Initiatives
- Business Value
- Customer Satisfaction Scores for Business-Facing Services
- IT Spend by Business Unit
- % of IT Investment by Business Initiative
TBM informs about all IT costs with general ledger data (e.g., labor costs, licensing, revenue), and operational data from on-prem (e.g., BMC TrueSight), private cloud (e.g., vRealize) and monthly cloud.
TBM and Unit Economics
Technology Business Management delivers a fully burdened and accurate unit economic cost of IT.
Unit economics enables you to determine the revenue you’ll gain from a single unit of your business and the cost associated with servicing it—ultimately revealing the business value of spend.
Put aside financial and operational metrics. Organizations want one metric that rolls-up IT cost, quality and value into one business-orientated KPI (e.g., for a travel company, cost/mile; for healthcare, cost/bed; insurance cost/claim).
Unit economics are organization-specific—there isn’t a universally accepted north star metric by a specific vertical (e.g., hospitals have a different KPI for in-patient and out-patient care, transportation companies have different costs based on the mode of transport).
A Dedicated System for TBM
TBM isn’t scalable if, once operationalized, it requires too much ongoing effort.
When a process is too hard to support, organizations reverse engineer a rationale not to do it. The world becomes more complicated as the new IT operating model footprint expands—complicated, but rich with innovation and agility.
At the point where stakeholders need governance the most, organizations often reject the process because its “too complicated, and we don’t have time for it.”
If you do the same manual steps forever, you’ll never get better and burn through so many cycles that business partners fail to see the value in what you are doing.
TBM must be scalable and robust in the face of change—with low manual effort and high automation.
Pre-requirements for a dedicated system for TBM include:
- Ingestion, aggregation, and normalization of data from virtually any financial or operational source with minimal effort.
- A standard cost model to provide the financial information needed to allocate costs and track consumption.
- Data quality improvements over time.
- Self-service business intelligence tools and a single-source of truth
TBM Automation Framework
Apptio, the technical advisor to the TBM Council, offers solutions to serve the most pressing needs of CIO and IT leaders.
Establish IT financial management best practices around IT budgeting, variance analysis, and forecasting. Automate forecasting to surface spend insights for labors, assets, vendors and cloud, and analyze scenarios to improve spend decisions.
Optimize cloud and hybrid resources with on-premises infra to cloud migration. Manage workload migration and modernization and influence consumption with showback and chargeback.
Continuously optimize spend across the vendor portfolio with a single solution. Classify and consolidate vendors and contracts, control vendor commitments, and allocate invoices to business consumers.
Measure application portfolio TCO and deliver better visibility of costs to optimize the portfolio. Identify and prioritize resource investments jointly and measure consumption by business unit.
Maximize planning for new investments across projects and products, and understand the cost and value of their portfolio. Prioritize investments with visibility of the resources invested in your projects and products.
Link technology investments to business value by influencing business consumption of services. Track consumption by business unit, expose costs and value levers to the business, and recover costs through chargeback.
Read More: TBM for the new IT operating model
An Integrated Approach to Technology Business Management
Apptio is the only product on the market that provides all six capabilities via an integrated platform. Apptio’s enterprise management platform provides the following benefits:
- Ingests, aggregates and normalizes data from virtually any financial or operational data source, with connectors to your existing financial systems for general ledger and fixed asset data, and your service management data (i.e., ServiceNow) to speed implementation with minimal effort.
- Leverages the Apptio TBM Unified Model™, an industry-standard cost model that provides financial information necessary to allocate costs and model utilization.
- Provides powerful tools to help you improve your data quality over time, benefiting not only TBM but also your underlying processes such as cybersecurity or asset management; and
- Empowers stakeholders via self-service business intelligence so that people across your enterprise can make decisions based on the same set of facts.
Meanwhile, Apptio provides important product features that help you create value from TBM more quickly:
- Machine Learning to accelerate the mapping of GL data to cost pools, speeding configuration, and automating data normalization, categorization, and mapping.
- Proactive Insights to automate the extraction of information and best practices collected from best practices across the Apptio community, to surface and track optimization opportunities.
- Interactive Benchmarking data as a means for more frequent cost comparison with your peers.
Apptio offers a unique a complete system to manage your technology business. Rooted in your corporate financials, it surfaces the insights you need to drive the IT operating model change the business needs to be successful.