What is TBM? Technology Business Management Explained

Technology Business Management (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 TBM 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 than 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, and 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.

Companies adopting Agile Development at Scale must fund both a value stream or product and measure the value it delivers. It was much easier when an entire department or cost center worked on a project that delivered a business outcome. Today, teams are striped across program increments (PI) that combine labor and tooling to produce a result.

Traditional IT financial management (ITFM) practices struggle to support the needs of decentralized teams across multiple PIs. The TBM value management framework snaps stakeholders and strategy, whether it is through projects or products, into one single source of truth.

Speed to market is an IT value that depends on agile ways of working. Agile development models depend on public cloud services that scale on demand but come at a cost. In the meantime, organizations must still manage, modernize, and rationalize existing technologies while optimizing costs. Technology leaders must ensure people and teams are working on the best business outcomes, demand innovation at the speed of the business, and confirm precious capital is being invested to create leverage for the business.

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, Microsoft, HPE, and Red Hat, TBM is now adopted by enterprises in every industry, independent of maturity and size, such as banking, healthcare, manufacturing, government, and more. Increasingly, every company is becoming 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.

TBM Framework

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.

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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 Taxonomy

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 governs and maintains the TBM taxonomy.

TBM Model

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.

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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
  • Consumption-based
  • Multi-dimensional

TBM Metrics

TBM’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 general ledger, through on-prem infrastructure, and up to applications and services) is a prerequisite 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 metrics incorporate the needs of product-led value workstreams. Agile metrics monitor productivity across the software development lifecycle, but product portfolios are ultimately judged for the time between the request for delivering a product and actual delivery. Product managers require a trendline of business value delivered by portfolio per quarter. This helps improve time estimates and flag resource constraints if business needs outstrip a team’s productive hours. Measuring and monitoring business value output enables product managers to meet delivery commitments.

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 10 specific metrics:

Financial fundamentals

  • IT Spend vs. Plan (OpEx and CapEx variance)
  • Application and service total cost
  • % of IT spend on cloud

Delivery

  • Product lead time
  • Business value delivered by portfolio per quarter

Innovation and agility

  • % of IT investment on run, grow, and transform-the-business
  • % of project spend on customer-centric initiatives

Business value

  • IT spend by business unit
  • Customer satisfaction scores for business-facing services
  • % 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 enable 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 inpatient and outpatient 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 to not 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 “it’s too complicated and we don’t have time for it.”

If you do the same manual steps forever, you’ll never get better, and you’ll 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. Apptio solutions give you the power of trusted, actionable insights to connect your technology investment decisions to drive better business outcomes.

The ApptioOneMX product suite includes solutions that help you analyze, optimize, and plan technology spend; accelerate business strategies; aggregate demand for IT services from business units; deliver a defensible and predictable bill to business consumers; and provide self-service peer comparisons of IT spend over time.

The CloudabilityMX product suite connects multi-cloud, hybrid, and SaaS infrastructure with cloud financial management best practices to maximize the value of a cloud strategy. The CloudabilityMX product suite includes solutions that help you optimize cloud resources for speed, cost, and quality; simplify your SaaS portfolio management; and migrate confidently to the cloud.

Apptio Targetprocess empowers businesses to adopt and scale Agile across the enterprise. Targetprocess aligns development resources to business outcomes and plans and tracks value delivery for projects or products.

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Read More: The ATUM Poster: The Standard Model for Technology Costs

An Integrated Approach to Technology Business Management

Apptio is the only solution in the market that provides a TBM automation framework 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 (e.g., 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.
  • 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 general ledger 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 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, 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.

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