Management of cost continues to be a challenge for all CIOs, but increasingly the focus is shifting from “doing more for less” to better managing the consumption of IT Services. By identifying the cost of consumed services, IT can support the business make value-based decisions and support comprehensive demand management.
However, the number one barrier for IT in achieving this is the lack of cost transparency into the delivery of IT Services. It is a fact that often, there is no clarity or simple structure providing transparency into how IT is consumed, making it difficult to understand where inefficiency exists in deliver, where business constraints imposed impact cost and whether “unique” services are delivering value. Nowadays, most companies have many different sources of IT costs and lack one true “golden record” and rarely does it provide the necessary insight into the IT Services consumed.
Technology Business Management (TBM) is a framework specifically designed to help CIOs to run their IT structure as a business in its own right, managing conflicting priorities by creating and automating IT cost transparency. Having a clear view of IT systems allows decision-makers to define their needs more effectively, making it easier to manage business demand and sourcing delivery.
At ISG, we work with our customers to help them understand how they can benefit from implementing TBM, and the possible implications of failing to do so. There are several important considerations for CIOs when thinking about how to streamline costs, and TBM has been specifically designed to respond to each of these challenges.
1. Managing business demand for services
In order to effectively manage conflicting demands across your business, a cost transparency model is vital to help you understand the total cost of service, rather than its units. Joining up the process in this way gives you a much more accurate view of your IT outgoings so that you can provide accurate reports to your business and end-users, charging back the costs where appropriate.
2. Reaching your savings goal
Every CIO knows how critical it is to identify new opportunities for cost savings to help reach those all-important targets. Through accurate, automated and up-to-date IT cost data, you can analysis your spending, understand the key cost drivers and the consequence of decisions made in the delivery model, allowing value based decisions on whether “uniqueness” is a differentiating factor or purely a cost burden.
3. Negotiating more effectively with vendors
Having access to accurate cost data will level the playing field between you and your vendor. Being able to track data from each vendor means that you can look at your expenditure versus the market rate, and negotiate more effectively with your vendor once you’ve identified the areas where savings can be made.
4. Realising value from your sourcing agreements
Cost transparency will help you to define the costs of various services and identify the areas which would be suitable for outsourcing. From there, you can also manage your costs by vendor, tower, resource unit or end-to-end service, depending on what works best in line with your operating model.
Implementing this form of framework provides significant opportunities for you to streamline your processes and manage IT as a complete business entity. In order to make this work in reality, buy-in from your stakeholders is vital. Knowing what your customers, end-users and business stakeholders want is key to making sure that your strategy is aligned with their objectives.
An article from Nigel Hughes, Partner at ISG.