In a previous post, we discussed why cloud costs are a growing problem for organizations of all sizes. Various surveys have shown that organizations are spending more than they anticipated on cloud services. However, a lack of understanding of cloud costs, coupled with confusing invoices from cloud service providers, make it difficult for organizations to analyze and optimize their cloud spend.
From an IT perspective, this is an old problem moved to a new platform. Organizations have long struggled to get a handle on IT costs, and to relate those costs back to the business. A discipline known as IT financial management (ITFM) has traditionally been used to integrate IT costs with financial and operational systems, develop service-based costing models, and better understand business demand. According to Gartner, ITFM generally includes four practice areas — budgeting, forecasting, variance analysis and cost optimization.
One of the principal challenges with ITFM is translating the data in accounting and ERP systems into an IT context. Financial systems that are concerned with general ledger entries and apportioning expenses across cost centers simply do not align with an IT-centric view of resources, services, projects and teams. It’s hard to get various stakeholders to agree on a common terminology much less the complex calculations required to determine IT costs.
Technology business management (TBM) is a newer concept that is designed to overcome these obstacles. Forrester Research defines TBM as “the adoption of tools and processes to shift the management of technology costs to technology value, enabling and supporting the acceleration of the business technology (BT) agenda.” TBM is much further along the maturity curve than ITFM, giving IT leaders granular transparency into technology costs so they can make investment decisions within the context of broader business goals.
Deloitte defines TBM as the intersection between ITFM, IT service management, application portfolio management and project portfolio management. In a recent report, the global consulting firm noted that “TBM encompasses a broad set of processes and application areas that when properly integrated can create a whole that is greater than the sum of its parts.”
The TBM Council has developed a taxonomy that includes a standard set of categories for IT costs and other metrics. It provides a framework for mapping the costs of IT hardware, software, facilities and personnel to the IT services the business consumes and the business capabilities those services enable. This ensures that IT and non-IT stakeholders are speaking the same language and calculating costs the same way. It also enables IT leaders to compare existing technologies and services to third-party options such as the cloud.
All of this can be accomplished with advanced spreadsheets, accounting or ERP systems, or business intelligence tools. There are also software tools on the market that facilitate the implementation of the TBM model by aggregating and normalizing data from a variety of sources and automating cost analysis. Some are specifically designed to analyze cloud billing, using machine learning to identify opportunities to reduce costs and rein in usage.
Understanding the IT spend isn’t as simple as pulling the relevant data from the corporate accounting system. The TBM model can give organizations greater visibility into IT costs and the value technology provides to the business. Learn more from Technologent's in-house financial services team today!