The Digital Imperative: No Looking Back

Every company has accelerated its shift to digital, but companies only deliver digital success by quickly responding to changing conditions and competition.

At the recent Technology Business Management (TBM) Board of Directors Invitational in Napa Valley, the TBM Council Board and a few selected guests (CIOs, CFOs, CTOs) celebrated its 10th anniversary. Speakers highlighted how TBM has evolved into an essential discipline to manage the value of technology investments, change the dialogue of how investments in technology are delivering value in their respective organizations, manage the complexities of cloud transformation from a financial and value perspective, and clearly embrace a new portfolio management approach to managing value and resources around delivering on digital initiatives by embracing agile delivery.

At a high level, the evolution in the TBM discipline addresses every business’s most significant pain point: doing everything faster at less cost and continuously showing value every step of the way.  CIOs have now become value creators for their respective organizations.

Meeting the digital imperative means defining and understanding what is, and what isn’t, digital. Every vertical, with its different customer and employee interactions, has a different digital footprint. But the common factor is re-envisioning processes rather than simply automating them. A six-step process to onboard a customer isn’t digitalized if the “digital” version still takes six steps: Digital means removing steps or recreating new ones. Creating business value from tech investments and being driven by data — not emotion — helps you get funding for digital transformation, creates deep alignment with C-suite executives and the board, and tracks ongoing success of digital initiatives.

Technology and business leaders are reacting in the same way to these demands. Innovative leaders are undergoing a project- to product-led transformation and embracing a product mindset.  Some organizations have integrated Chief Digital Officer and Chief Information Officer, but many have this structured as two different roles. One thing is common. Everybody is innovating with integrated technology, product management, and UX teams to deliver innovation at the fastest speed.   This new way of working changes how you invest and evaluate innovation. How do you fund products or value streams? How does ideation happen? How do you align resources to work? How do you measure business outcomes and continuously prioritize your funding and resources? And finally, how do you tie products to business outcomes?

Impact of digital on the business

Companies are reimagining the customer and employee experience. The Great Resignation and hybrid office culture shine a light on the need to maintain connections — of data, of people, of experience —with a distributed workforce. The pandemic fast-tracked changes in the customer experience too. Digitally reimagined customer transactions and support went from nice-to-have into must-have.

Apptio customers take a holistic view of technology in supporting these experiences. They ensure they are always optimized in their technology run costs, free up capital to reinvest in new investments, change the dialogue of technology costs to value, use cloud as a competitive advantage, align their resources to product delivery models, and continuously measure value. They show up with data at their fingertips. Data allows them to build credibility around costs and value of technology investments and change the language with other C-suite counterparts in their organizations.

Greatest barriers to your digital success

CIOs tell me there are three main drivers of TBM change. And these drivers, if not harnessed well, may become barriers to your digital success.

First, money. CIOs need to make data-driven decisions around technology investments to know where the money is going and why. There is a universal need to tie spend to business value.   Spreadsheets are an inadequate way of demonstrating a data-driven approach.

Second, time. 50% of IT spend structures tend to be on resources and people. For large organizations with thousands of developers, and support staff, it is hard to measure the productivity of people and see what they are working on and if their work is delivering value. That’s also true from the resource and team view. Most CIOs I talk to aggregate team-level work to a portfolio or product view. And they track objectives and key results (OKR), business outcomes, measure the backlog of innovation, and fund teams and value streams.  They look at delivered business value and tie cost metrics to epics and sprints to deliver the right value at the right time.

Third, cloud transformation. Many Apptio customers say it is not cheaper to move from on-premises to cloud, but other reasons — scalability, access to innovation — make it the smart move.   Everybody agrees that every organization needs a total cost of ownership (TCO) model for on-premises and cloud to help continuously measure the costs and value of cloud transformation. Apptio customers see how the public cloud hides a lot of inefficiencies. For example, teams not leveraging committed use discounts (CUDs) or developer teams leaving resources on outside of work hours.

TBM is the discipline, and Apptio is the system to overcome these barriers

The core capabilities of the TBM discipline, and a system like Apptio to apply and automate deployment, address these barriers to success across core technology financial management (i.e., money), digital investments (i.e., time), and cloud-specific financial management.

TBM defines a core set of analytics, insights, and planning capabilities; Apptio solutions codifies these capabilities into discrete solutions for the modern enterprise.

tbm capabilities 3 - The Digital Imperative: No Looking Back - Apptio

Apptio is the only solution uniquely positioned to demonstrate the business value of IT because we are at the center of the ecosystem. Apptio pulls in data from any financial, operational, or vendor data sources to address 100% of your technology investments.

Begin your TBM journey from anywhere

TBM practitioners will tell you it’s not where you start but that you start. As your TBM practice matures, value conversations expand to other business areas. There isn’t one path to TBM, and there isn’t one starting point with Apptio either. Apptio continues to be a leader in core technology financial management, cloud-specific financial management, and digital investments.  You can start in multiple areas: (a) baseline all your technology spend into vendors, hybrid infrastructure, and applications; (b) budget and forecast your technology spend; (c) manage and optimize your public cloud spend on AWS, Azure, and GCP; (d) manage the value and OKRs and resources around a portfolio.

A CFO for a publicly traded education company told me about the challenge of managing technology spend that, after people, is the company’s second-highest expense. “We are a SaaS company, so our hosting costs are variable. Seeing daily hosting spend helps us identify areas to improve efficiency,” said the CFO. “In any single quarter, if we miss our earnings, there will be an impact on our stock price. With Apptio Cloudability, we have visibility into this large expense; we can assess our efficiency and impact on operating costs by changing how we provision and use cloud.”

Starting with core technology financial management

Many of our customers start with ApptioOne to answer basic questions about cost: Which area of my IT spend is over budget? How am I tracking the allocated budget? Answers to these questions look to optimize every dollar spent. Core technology financial management starts in the Office of the CIO or IT Finance team. Foundational TBM maturity starts with budgeting and forecasting processes for cost and resource management. Advanced TBM maturity focuses on business value by applying the total cost of ownership (TCO) to infrastructure, vendors, applications, business unit consumption, and preparing for a product-level profit and loss (P&L) view.

I recently spoke with the CFO at a professional services company about its use of decentralized IT and security spend. “Before working with Apptio, we couldn’t make our data digestible,” said the CFO. “We use Apptio to view the size of our spend and where it sits. All our service and project managers do budgeting within Apptio. We’ve also expanded into managing our $200M/year cloud spend. We have a multi-cloud environment where everything needs to be charged down to a charge-load level—across the globe. On the finance side, we help our service managers provide services to their territories. Apptio Cloudability helps the service managers show cloud consumers the impact of consumption choices on cloud spend.”

Starting with digital investments

Digital investments demand funding for value streams, capacity management, headcount productivity, and visibility into resource gaps. Digital investment management starts in the digital or agile transformation office, and foundational TBM maturity starts with resource budgeting and forecasting. Advanced TBM maturity focuses on portfolios and value streams which ultimately can lead to a digital TCO.

We are integrating Apptio Targetprocess and ApptioOne so you can fund a value stream rather than only fund a project. All the labor costs at the team level will automatically flow back into ApptioOne. A granular view of resources enables you to roll up to a collection of value streams. Many CIOs tell me they struggle to adapt existing project-based solutions to digital investments. A VP of performance management at a financial services company said that his team adopted Apptio Targetprocess. “We were early TBM adopters and had a concrete TCO model. But two years ago, we recognized that our portfolio system was waterfall-focused—we needed mixed modality management.”

Starting with cloud financial management

Cloud Financial Management (CFM)requires a multi-cloud dashboard, direct and indirect cloud spend roll-up, business mappings, and contract renewal visibility into SaaS commitments.

CFM starts in a Cloud Center of Excellence (CCoE), or a FinOps practice, and foundational TBM maturity starts with IaaS and SaaS cost management. Advanced TBM maturity delivers fully burdened cloud TCO.

The majority of Apptio’s customers are moving toward the unit economic view of cloud. This includes not just what is in each cloud provider bill but also labor and third-party security spending. Apptio Cloudability customers use ML algorithms to find optimization opportunities that deliver 20% savings.

Leveraging TBM to Accelerate Cloud Adoption

A TBM Council board member recently shared with me how his Fortune 100 organization closed 50% of its data centers leveraging TBM and redirected that spend into public cloud. Their call to action was a detailed financial analysis that showed low utilization of on-premises hardware and the potential to save by migrating testing environments. Initial results were positive and, more importantly, created confidence and momentum for ongoing cloud migration. TBM validated and accelerated this company’s cloud initiatives. They retired 250K servers and cut TCO of $250M to $125M of AWS.

Fig 2 Invitational SG 5 27 - The Digital Imperative: No Looking Back - Apptio

The digital imperative is your key to success and survival

Debating what is and what isn’t digital can distract from the urgency of the digital imperative. If you modernize an old system—lift and shift a legacy solution to the cloud, apply project financial management to products—you simply get a brand-new old system. And that’s not meeting the digital imperative. Interactions with customers and employees have evolved, and the TBM discipline and the Apptio solutions have too.

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