Bridging the opex/capex divide
Your business struggles to understand IT value for several reasons.
First, according to Gartner, nearly 80% of CIOs manage IT spend with only two things: an opex budget driven by the G/L and a list of projects that are often capex-intensive. Because this data is limited to general buckets of assets (hardware, software, labor, etc.), this results in a fairly limited understanding of the cost and value of IT.
Second, even when CIOs do have the additional data needed to communicate total cost of ownership (infrastructure, support, operations, etc.), many of them function without an integrated view of project and service portfolios. This limits their understanding of the cost and benefit of new capabilities generated by projects and the impact of said capabilities on the delivery and consumption of services. To analyze TCO (including implementation and support), plan for projects and service demand, and understand the value derived from both, these interlocking portfolios are key.
Gartner covers all of this and more in their report titled Financial Transparency: Project and Service Portfolios Required. We’ve made it available for download here because we believe this is an important topic and an area of opportunity for many IT leaders.
However, we have one correction. The report references tools that are designed specifically to manage one portfolio or another, but not the integration of both. Apptio now has a solution that integrates services and project portfolios to provide a unified view of their impact on IT spend.
Last fall, with input from over 60 customers, Apptio announced new activity-centric applications that enable CIOs, finance professionals, and budget owners to better analyze resources and investments around IT projects and demand for services. These applications help bridge capex and opex budgets, leveraging cost transparency and IT planning to automate a business-centric view of IT spend.
In fact, one of the prime benefits of Apptio’s suite of SaaS-based apps is the ability to translate IT project costs into language that is meaningful to the business (i.e. apps and services). Leveraging an industry standard model (ATUMTM) to align IT, finance, and business units around common IT financial information, this provides a two-way benefit. Business units can prioritize their IT agendas in business terms, which in turn gives IT leaders a better understanding of IT services demand and enables more effective alignment of IT initiatives with enterprise strategies.
Apptio Project Financial Planning
Apptio’s new project-focused application helps IT leaders forecast and track project cost changes on IT budgets and resources. As Gartner illustrates, whereas Project Portfolio Management (PPM) systems focus on the operational delivery of projects— staffing, change control, schedule risk mitigation—Apptio complements PPM by enabling IT to also scope and manage project capital, resources, and operating costs.
This product directly addresses Gartner’s concern that CIOs lack an understanding of the project costs incurred to create key services. Apptio Project Financial Planning enables IT leaders to avoid surprises by planning single and multi-year projects (including capital, run, carry over costs, etc.) and model IT service pricing scenarios based on project run costs.
Key capabilities empower IT leaders to:
- Forecast direct and indirect project costs, including labor and equipment capitalized costs
- Break down investments by purpose through allocation to projects
- Calculate project cross-charges to business units and departments
- Estimate project labor costs throughout project lifecycle
Apptio Service Demand Planning
SDP also builds on IT Planning Foundation to create and manage demand-driven IT service budgets and drive accountability through P&L ownership of IT services. Again, where Project Portfolio Management (PPM) and service management systems focus on the demand for service resources, resource capacity, and operational metrics, Apptio plans for the consumption of services, including the financials associated with services delivery, pricing, and recovery.
Key capabilities include the ability to:
- Determine service unit prices
- Model service price impacts and pro-forma bill scenarios
- Create service-based budgets with direct and indirect costs
- Forecast demand for services
- Forecast department chargebacks and cost recoveries
According to Gartner, “Effective financial transparency requires integrated portfolios of projects and services to provide transparency to the cost and value IT delivers to the enterprise.” We couldn’t agree more. Opex and capex are equally important, so these two portfolios should play well together.
To learn more about Apptio’s new Service Demand Planning and Project Financial Planning applications, download our IT Planning datasheet.