If the last two years have taught us anything about the intersection of technology and business, it’s that:
- Smart technology investments are crucial to long-term competitive advantage.
- The ability to pivot quickly—while making data-driven decisions—is critical.
An article from Harvard Business Review found that 82% of companies surveyed had increased their spending on digital initiatives as a result of the coronavirus pandemic. In many cases, these investments were made when budgets were cut significantly as the organizations responded to changing customer needs and a shift to remote work.
These changes were significant, and they were abrupt. And they came with risks like:
- Not reacting quickly enough
- Not choosing the right technology solution
- Over-committing scarce resources as revenues potentially shrank
As we move past the initial reaction to the pandemic and into a new normal, the swift pace of technological adoption—and the need for business agility—has continued. When making technology investment decisions, the margin for error can be slim. However, Technology Business Management (TBM) is designed to make the most of your technology investments and enable you to pivot quickly in response to a changing marketplace.
You need to move quickly and confidently when making technology investment decisions to stay ahead of the competition. These three steps can create the ongoing cycle to deliver real business value from your TBM implementation.
1. Know your business
This is less about understanding the details of how your broader organization makes money (which you most certainly should!) and more about understanding the goals of the IT organization and how they accelerate the strategy of the overall business. This means being able to clearly articulate what services your IT organization provides into the organization, the value these services bring to the organization, and their underlying cost structure.
The cornerstone of TBM is that you can make better business decisions about technology when IT can speak a common language with both the finance organization and the business units. This changes the conversation from “SAN capacity” and “number of laptops deployed” to “the most efficient ways to accelerate revenue generation” and “increasing workforce efficacy from any location.” The challenge is that many large enterprises aren’t able to definitively speak to the products and services (including applications) in their portfolio—let alone the business efficacy of that portfolio or the associated costs.
TBM changes this narrative by starting with a cost model built on the TBM taxonomy to organize all costs into industry-standard categories. It then allocates these costs from one layer to the next to generate meaningful views for not just IT, but also for the finance organization and the business units. While the taxonomy is an open-sourced industry standard maintained by the TBM Council, Apptio employs a proprietary implementation called the Apptio TBM Unified Model (ATUM). The taxonomy supports the creation of a cost model that can highlight the products and services most critical to the organization as well as their consumption by the business units and their underlying cost structures.
This level of fidelity allows for business conversations on various technology investment decisions and sheds light on the opportunities to redirect funding to more productive activities (as detailed in the next section).
2. Self-fund growth initiatives
A perennial challenge of any organization is how to get the most value out of their ongoing operational expenses while also adequately funding new growth initiatives. While investing in the right technology can be critical, many CIOs have difficulty showing the ROI on these investments to help justify the commitment of resources.
This is where self-funding of growth initiatives can pay off. It’s not uncommon for technology budgets to attribute 85%, 90%, or even 95% of their spend toward current operations and only 5 to 15% toward growth and transformation initiatives. On a budget of $100 million with 90% spent on ongoing operations, a 5% shift from operations to growth investments would mean a 45% increase to that budget of $10 million.
Of course, making these shifts can be difficult without the level of visibility afforded by the first step in this checklist. Here are a few examples of the ways TBM has helped unlock resources that could be used to self-fund these growth initiatives:
- Marshfield Clinic is an integrated health system that was affected by the increased consolidation of the healthcare industry, as this made it difficult for entities without a strong hospital presence to remain in operation. When they decided to begin acquiring other hospitals, they needed to develop an understanding of their IT costs and create a process that allowed them to integrate different hospital systems into one cohesive operation. By implementing Apptio, Marshfield was able to accurately apportion costs across hospital systems, streamline its M&A activities, and deepen relationships with business partners.
- Hermes Group used ATUM to create a forecast for project and budget planning and see how IT costs developed in certain areas of their business. The clarity provided through Apptio reports empowered Hermes Group to identify initiatives with lower priority or performance and reallocate those funds to investments with higher priority and opportunity. Additionally, Apptio enabled their IT department to synchronize with finance for precise planning.
This step is also your opportunity to deepen partnerships with the business units, as the new growth initiatives should be tightly correlated to the strategic priorities laid out by the business.
After deciding on your new investments, it’s important to lock them into an updated forecast. For many organizations, the act of “planning and budgeting” is an annual (perhaps semi-annual or quarterly for more sophisticated organizations) exercise led by the finance team. This exercise is typically not designed with technology investments in mind, and typical tools like spreadsheets can’t showcase insights in real time.
Most product organizations we work with at Apptio have actually moved to continuous forecasting (about once per month) and use their streamlined process as an extension of the optimization initiatives they regularly undertake in their TBM practice. This underscores the value of having planning and forecasting capabilities tightly integrated with spend analytics functionality and enables this cycle to be completed in the third step.
3. Measure and adjust
Being able to measure efficacy in a timely manner is the key to knowing whether your bet is paying off or whether you should change course. This is especially true in agile organizations who have built their development model around rapid response to customer input and changing market dynamics to decide on the next investments. However, in the Harvard Business Review study cited earlier, over half of the respondents didn’t measure the business value of technology investments at all or did so only on an ad hoc basis.
This underscores the value of engaging in a more frequent but lightweight reforecasting process that is tightly connected to actual spend and analytics. This process takes hours—not days or weeks—but still allows you to understand the performance of specific IT initiatives relative to projected expectations. This variance analysis is what allows you to make data-driven decisions about what to continue and where to pivot to something new, which starts the cycle over again.
The ApptioOne Plus difference
Apptio created TBM nearly 15 years ago and remains the market leader today, serving over 1,800 customers, including 60% of the Fortune 100. The new ApptioOne Plus was purpose-built to support the complete cycle laid out above. This solution can automatically ingest data from virtually any source and model it with the level of sophistication that meets your specific needs. ApptioOne Plus is the one tool that effectively combines detailed analytics with a streamlined forecasting process to help you make technology investment decisions that are both smarter and faster.
Schedule a demo to learn more.