5 steps to take before selecting an ITFM tool for cost management

The promise of a well-architected IT financial management (ITFM) program is gaining traction for many organizations as they work to identify and control costs and increase the value of IT to the business.

But selecting the right tool is secondary to assessing why you need an ITFM program in the first place.

A Gartner report makes recommendations on key assessments an organization must make before selecting an ITFM tool.

Ahead of an ITFM tool purchase, IT leaders must determine a single “vector” that most closely represents their current state and near-term objectives.  According to Gartner, the “optimization vector” is the most frequent starting point for exploring ITFM tools. 

You’re most likely to be in the “Optimization Vector”

Those in the optimization vector share a common focus on identifying and managing costs. They are usually middle to upper level IT managers who understand the advantages of managing IT costs.

The organizations in this vector are under no specific external pressure to manage IT finances, but they are simply more open to recognizing the value of having more cost-effective IT financial management.

This, in turn, enables:

  • improved IT operations efficiencies
  • better spend management
  • lower per unit costs
  • the ability to define and defend budgets
  • more accurate budgeting and forecasting 
  • product mix optimization 

Other benefits of cost-effective IT management include fact-based funding decisions, improved resource utilization and increased business relevance.

According to the report, IT leaders in the optimization vector have not only the luxury of time (compared to the other vectors) but they also have limited external pressures to demonstrate cost transparency. 

Gartner observes that in many cases, increased IT financial transparency toward business units is not a key CIO or CFO priority, with cost models often constructed only at the asset or technology level rather than going all the way to the business-value service level. 

This allows for benchmarking and then optimizing technology components. The challenge, according to the report, is often that management and even the rest of the IT organization may not share the same vision.

Gartner’s recommended next steps if you’re in the Optimization Vector

  1. Calculate the cost of what you do (IT tasks) – aggregating total cost is more important than mapping cost to the ideal cost or services model.
  2. Improve data accuracy and sourcing. Question what data will you need, is it accurate and what it will take to access it? 
  3. Clarify the mandate and identify an executive sponsor.
  4. Prioritize costing efforts – focus on the top priorities first – where priority is a function of spending/cost allocation.
  5. Work with the business to understand what they value (refine your products and services over time).

In our experience, every IT organization struggles with calculating the cost of IT tasks and improving data accuracy (points 1 and 2). Many are intimidated by the prospect of having to clean their data before getting started with an ITFM program. 

These challenges led Apptio to build our suite of Technology Business Management applications.  With Apptio Cost Transparency, you can automate the categorization and calculation of IT costs on a monthly basis, starting at the level of common cost pools and IT towers, working up to applications, service and business units.  To address the data quality challenge, Apptio embedded native data remediation capabilities into our suite of TBM applications.  Apptio’s platform takes customer data in any form and cleans and refines it internally. You can skip costly data cleanup projects beforehand. Learn how Apptio Cost Transparency helps you quickly get a handle on IT costs, no matter the current state of your data.

For more details on the recommendations for other vectors, download Gartner’s white paper here. 

Which stage are you in the ITFM tool selection process? What guides your decision-making? Tell us on Twitter.


Editor's note: this post was originally published in 2014, and has been updated with new links and recent content.