IT cost management through transparency

Most IT organizations don’t struggle with coming up with ideas. Indeed, most IT managers have strong “hunches” on where they are spending too much and good ideas on how to fix the problem. The difficulty often lies in proving a hunch with real data, quantifying the potential ROI including project investment and impact to other areas in IT and evaluating that against other potential cost saving projects.

As IT has become a sizeable and increasingly strategic spend for companies worldwide, understanding the IT service cost-to-value relationship has become critical. By establishing an IT Cost Transparency initiative, IT can improve the accuracy of service pricing and chargeback, establish greater visibility into the total cost of ownership of IT services, make better IT decisions and lay the foundation for more effectively communicating the value of IT to the business.

Cost & Financial Management is about understanding the cost-to-value relationship that is at the very core of the definition of a service.

IT Costs don’t just revolve around the initial cost of buying equipment, or even the subsequent maintenance contracts. IT managers need to effectively factor in costs of infrastructure, labour, facilities and overhead costs.

Establishing Cost Transparency within IT enables organizations to quantify both cost and value. It empowers decision makers to make hard, quantifiable decisions about the services they provide to minimize IT costs and maximize IT business value. By tracking cost information over time, service portfolio decisions can be easily made and quickly adjusted for optimal performance.

Many of our clients begin the process with us with a difficult challenge in clearly and easily articulating where their IT spend is going how it correlates to the services they are delivering or what value the business is realizing from the services. In order to stay competitive, businesses are seeking ways to optimize and align future IT investment decisions with the strategic direction of the company.

Unfortunately, most organizations today still view IT as a cost center and really do not have the capability to clearly and easily articulate where their IT spend is going, how it correlates to the services they are delivering and what value the business is realizing from these services.

IT Cost Transparency has the following advantages

• Facilitate collaboration between IT, Finance & Procurement to increase visibility into the costs, utilization and operations of all IT Services
• Leverage a deep understanding of what drives IT costs and performance to improve scenario planning capabilities and make better IT decisions
• Provide IT cost and consumption data to business owners in the form of a “Bill of IT” to more effectively communicate the value of IT to the business

IT is becoming either an increasingly strategic component or actually core to the business. IT is the driving force behind both revenue generating and customer facing applications – the services that power top line growth and directly impact the relationship that a business has with its customers.

With a baseline of understanding that has the true cost of running IT baselined in your business, instead of asking yourself, “Why are my workstations so expensive?”, ask yourself “What technology do we need over the next 12 to 24 months to maintain our competitive edge?”

The goal is to be able to plan and manage ‘what if’ scenario modelling: “How would my costs be impacted next year if two business units added 250 people?” “How are my costs impacted when 50% of business users upgrade from Windows XP to Windows Vista on their desktops or laptops?”