As IT leaders work to identify and control costs and increase the value of IT to the business, the promise of a well-architected IT financial management (ITFM) program is gaining traction. But before you buy, stop and assess why you need an ITFM program in the first place.
A new Gartner report makes recommendations on key assessments an organization must make before selecting an ITFM tool.
In a previous blog post, I explored the “Optimization Vector of Entry” that Gartner identifies as a common starting point when selecting an ITFM tool and highlighted 5 steps to take before making this selection.
According to Gartner, organizations in the “Optimization Vector” share a common focus on identifying and managing costs. While the IT managers in these organizations are under no specific external pressure to manage IT finances, they do recognize the value of better IT financial management and better, more cost-effective IT.
However, the situation differs for IT leaders in the “Transparency Vector.” Gartner research indicates that IT leaders in this vector are reacting to specific external mandates to provide IT costing detail.
With business-line or product-line budget owners looking to cut costs, large IT allocations or charges quickly become targets for potential reductions, pushing IT leaders to demonstrate business value of IT to the target executive and provide clarity on their IT spend, according to the report. The failure to provide this clarity prompts budget owners to look at external service providers as alternative sources for IT services and encourages “shadow IT” engagements, according to Gartner.
The challenge for IT leaders is that they are reacting to pressure from the business without the benefit of a proactive plan.
So how do you identify whether your IT organization is susceptible to such external pressure?
Here are some key characteristics of organizations in the Transparency Vector, according to Gartner:
- Limited costing detail: your IT costs are tracked in the general ledger at an asset or cost of labor level but they are not associated with the relevant project, program, application or service.
- You have a technical rather than a business value view of IT
- Too often IT leaders in your organization are pulled into detailed costing discussions, often to meet the demands of one or two budget owners
- Asset or technical level costing does not communicate the business value of IT – to show business value, IT costs need to aggregate cost into services that are valued by the business
- There is no good way to present the cost discussion to the business – poor graphical presentation layer and current spend data.
Does this sound familiar? If so, consider following Gartner’s recommended next steps for those in the Transparency Vector:
- Work with the business to understand what they value
- Focus on costing relevant, business-valued services first
- Aggregate costing information to the highest practical level as valued by the business owner; business needs drive value definition
- Concurrently develop supporting cost detail for the technical components (or services)
- Report and demonstrate IT services at a business value level
- Enable the business to make choices on services and/or service levels actually needed
You might be looking at this list and wondering how you’ll ever get it done. Points 2-5 may seem particularly daunting—in fact, you’ve probably already tried doing those things with spreadsheets or BI tools.
That’s where Apptio can help. Our suite of Technology Business Management applications is purpose-built to address the needs of IT leaders looking to proactively manage the business of IT. Apptio Cost Transparency helps you make better resource decisions faster by putting actionable, current, and trusted information about IT costs at your fingertips.
For more details on the recommendations for other vectors, download Gartner’s white paper.