data journey

3 Conversations to Kick Start the Data Quality Journey

Guest Author: Jonathan Walls, Principal Consultant, Upland Software

One of the most common obstacles I encounter at the start of a cost transparency initiative is a concern about data quality. It’s an area with a lot of common misconceptions, and can stop IT from even getting started down the road to improved cost efficiency. The most common mistake I see is to think that it is a lack of data that causes the problem. Usually, the issues start with multiple data sources.

There’s an old saying that if you have a watch, you always know what time it is – but if you have two watches, you’re never quite sure. In my experience, large IT departments usually have a lot of watches. In other words, they have a number of systems of record, which don’t agree with each other all the time.

As a result, most managers have had bad experiences trying to pull together reports and spreadsheets in the past. They’ve sat in meetings where conflicting Excel information prevented a decision being made. Maybe they tried to build a chargeback process from scratch, but stopped after it was taking up too much of their time. It’s easy to just settle in to the belief that because the data isn’t good enough, a disciplined approach to strategic cost management isn’t possible.

As a result, a CIO or IT Finance Director can encounter heartfelt resistance to plans to make cost transparency a reality. There are two things to remember at this point. First, if you let the current state of your data be the problem, you’ll never get started. You need to plan forwards to what you can achieve as your data continually improves over time. Second, you should engage with the concerns that cause the resistance. Here’s are three meeting topics that should get the project moving:

 

  1. Explain WHY a healthy financial management process is important
  2. Show HOW their data contributes to the process
  3. Detail WHAT steps they need to take to improve data quality over time

 

The WHY

Everybody understands that financial discipline is part of running a business. Somehow we often manage to forget this is the very moment our finance team asks us to devote some time to producing a report. For development or operational teams, requests from finance can appear to be a drain on resources. Therefore, it’s important to explain why a healthy financial management process is good for them, too.

There are two common outcomes from implementing an effective ITFM process:

Savings: A 5 – 10% reduction in costs is very achievable. Under-utilized servers; mis-aligned storage tiers; poorly negotiated telecoms bills; multiple overlapping applications – these all present savings opportunities that can be identified and driven home by a solid financial process. Savings can relieve the pressure of a tight budget, or be re-invested in new or improved IT services.

Agility : Most IT departments are not able to deliver the breadth and depth of services they would like. ITFM helps organizations move faster by making it easier to make good decisions – we often hear that after implementing Upland’s ComSci, we reduced the time to produce financial reports by weeks or even months. That is time that can be used to plan your next move instead.

 

The HOW

Finance is often a black art to technologists. An enterprise architect might be able to design a data centre or plan an ERP upgrade, but struggle to build a solid business case. On one occasion, I saw an IT department engage an external boutique consultancy to assess cost savings from server consolidation, only for the analysis to be thrown out by the accounting team because the cost assumptions (based on price lists) didn’t match up to what was on the books (based on negotiated purchases and depreciation policies). These communications gaps between experts can carry a hard cost.

Understand your cost drivers

One of the great strengths of building a visual cost model is that it helps the technology experts collaborate with their finance counterparts to really understand the cost drivers in their organization. They can see how much a GB of Tier 1 storage impacts an application, how much it costs to give an employee a tablet with a wireless data subscription, or how much it costs to run a particular enterprise application in the data center. A set of clear reports and graphical model can reveal just how their own particular system relates to the corporate financials.

On several occasions it’s been a genuine pleasure to see people engage with their own data in a way they’ve never seen before. Without a good cost model, for instance, it is impossible to compare the fully loaded cost of running an application in the corporate server farm versus renting compute capacity from Amazon. This new understanding makes it much easier to identify savings opportunities, and to present new proposals with a strong financial business case.

 

The WHAT

Assuming everyone buys in to the potential of improved cost transparency – what practical steps can you take? There isn’t a quick and easy answer to this, of course. Data quality is something that improves over time.

The most common data issue we see at ComSci is incorrect Cost Center Assignment. For example, HR might say that Jonathan is in Cost Center 1234, but the CMDB has me listed under Cost Center 5678, while the Wireless Support Team puts me in Cost Center 91011. These data conflicts arise because as organizations grow, and implement or acquire new systems, moves and changes aren’t consistently applied across all the affected systems.

This presents an obvious challenge to billing my department correctly for the services I use. Similar data gaps will be found between a number of different data sources. Potentially, we could see some tension if this is allowed to become a source of organizational conflict, too.

Implement a unified process

Here at Upland, we’re proud that in addition to providing customers with software, we provide a full monthly service to run the IT financial process. This gives our customers the single most important solution to the data quality challenge: a unified process across all internal platforms. This ensures a single source system of record is identified for each domain, and that each system has the proper controls in place to consume, manage and identify gaps in that data.

The heart of this process is building in controls that call out the data anomalies for our client base. Reports easily call out data issues, which the IT department can use to address the discrepancies in their internal systems. To use the example above, for instance, the first incremental improvement might be to update the CMDB and the Wireless Billing system to use HR as the single source of truth for employee details.

Ultimately, the solution to improving your data quality lies in a better understanding of your current systems:  so start today, start with a unified process – and let the data guide you to an efficient, accurate outcome.

 

 

 

Photo credit: jhcblog.juliehuntconsulting.com

excel budget

Still Budgeting in Excel?

Guest Author: Brian Stedman, VP of Product Management, ComSci at Upland Software

 

Budgeting in excel for mid to large IT departments is tedious, time-consuming and error-prone. Yet why are so many still doing it? There are several reasons, but none are good and sound more like excuses.  The ones we hear most are, “This is the way we always did it,” and “Everyone knows how to use excel.”  I can imagine many of you are giving similar excuses as well; however, do you realize there’s a much better alternative?

Solutions that provide budgeting beyond the spreadsheets are available to help. Today’s IT environment can use these to gain greater insight into their management team about unit cost, capital versus operating expense and fixed versus variable cost,  just to name a few. Organizations are able to provide an easy to use forecasting capability that reduces the time it takes each month for financial analysts to create new forecasts for their management team. Adding a solid robust analytical tool on top of the budgeting solution makes it even better. This combination is usually found as part of an overall IT Financial Management Solution. According to Gartner, “Tools designed to enhance the effectiveness of IT financial management have evolved significantly in the past few years, making them a sound investment for organizations that need better IT cost transparency.”[1]

Graphic analytics from an ITFM solution provide a clear picture of gaps between budget and actual costs, which drives better business decisions and better accountability throughout an enterprise.  The information is relevant, accurate and up to date as it comes directly from the corporate ERP or Ledger systems. This can be designed for either a standard view or customized reporting to adapt to changing needs. It empowers managers to investigate on their own and drill down to more detail making the entire process completely seamless and self-serving. Most importantly, graphic analytics removes the reliance on excel spreadsheets and the inherent issues that trying to manage spreadsheets on a single desktop can bring.

The other great benefit that deploying a better budgeting and forecasting solution brings to your organization is that it informs those team members in non-financial roles about the importance of managing and understanding the numbers. Better factual decisions can be made due to the nature of the insightful information being presented.

Another challenge to using excel-only processes comes alive during the inevitable end of year planning process.  At this particular time of year, you may be in the midst of your twenty-seventh or some number of iterations to your planning process for those managing to a calendar year budgeting cycle.  I can almost hear your CIO claim, “When are we going to improve this process?” IT departments most certainly are experiencing added anxiety. In order for the rest of the business to plan, the various departments need to know what IT costs will be trickled down to them or in more mature organizations who are using a chargeback approach, what will be their exact consumption costs.  By using a financial management solution that has a strong budgeting and forecasting capability, the planning process becomes streamlined and more inclusive to the IT managers and their consumers.  Everyone benefits.  We can show you how.

Mature IT financial management firms – those who build a solid baseline of their costs that are easily shared among their IT managers and are updated monthly with actual costs in order to track the progress of one’s plans – better map costs to the IT resources their business units consume. This is the most critical data gathering step in the process of transforming your IT financial process from an IT peanut butter spread allocation to one that is more consumption and cost-based.  While it takes hard work and a thorough understanding to do this, it’s much easier to accomplish once you have a solid foundation of your IT costs.

With the right IT financial management software, your IT organization can replace an error-prone excel process with one that is efficient and offers greater line of sight to unit-costs, IT spend, cost reduction plans and project costs.  IT becomes a collaborative partner throughout the planning and budgeting process.

 

 

[1] Gartner, “Best Practices in Implementing IT Financial Management Tools.” January 27, 2012.

Photo credit: www.georgesbudget.com

Getting Answers to the Technology Question of “What If?”

Let’s face it, IT professionals have a tough job. We are well aware you hold many responsibilities, not just “keeping the lights on” but also supplying your organization with the technology needed to continuously innovate and remain ahead of the competition, while minimizing costs. But the challenges in achieving this are numerous, from understanding the total cost of ownership of the applications and solutions you deliver and identifying areas for cost savings, to ensuring your organization’s overall technology platform is fully optimized.

So what can you do to ensure your IT Financial Management (ITFM) is successful? For one, the ability to predict how different scenarios and circumstances impact unit costs will enable your organization to operate more effectively and better understand the cost drivers associated with delivering IT products and services. But to get to this state, your organization must be able to leverage the actionable metrics and analytics that can lead to cost reduction opportunities. Do you have visibility access to actionable metrics? Equipped with this level of insight, IT professionals like you can gain the crucial information needed to perform “what if?” analysis and modeling that will lead to cost optimization.

Essential to the success of this strategy is having multi-version capabilities for budgeting and forecasting service costing and chargeback models. This enables you to perform multiple “what if?” analyses to assess the impact that different objectives and business requirements have on costing models, unit rates and on the overall line of business. With this ability, you and your IT team can better understand the unit costs of your solutions and benchmark those against industry peers and emerging technologies. As such, you can make better informed and more strategic decisions about your company’s technology portfolio.

ComSci, Upland Software’s IT Financial Management solution, fully understands the need to be able to perform extensive “what if?” analyses to ensure technology optimization. For many organizations, the ability to perform “what if?” analysis and compare different scenarios can only be performed as a separate activity to service costing and billing. ComSci built the necessary tools directly into its core technology, enabling you to start “what if?” analysis as soon as your monthly financial process has started. Our comprehensive ITFM solutions give you the capability to run a “production version” of the chargeback processing based on planned product rates. At the same time, you can benefit from maintaining a shadow process to better understand the chargeback impacts on actual unit costs. Moreover, with real-time benchmarking and fixed vs. variable cost analytics, you will be able to compare the total cost of ownership (TCO) of your current infrastructure costs compared to alternative solutions, like cloud computing or virtualization, to achieve ongoing cost optimization for the long term.

As the challenges of conducting successful ITFM continue, you must be able to accurately forecast and budget technology expenses, and ensure your organization invests in solutions that help drive profitable growth. Integral to meeting this goal is the ability to perform comprehensive “what if?” modeling that enables you to see how different scenarios will impact costs. ComSci provides the tools that facilitate this process, helping you not only find answers to your biggest technology questions but also see exactly what you need to update or change. In the end, transparency is ultimately what drives profitability. ComSci ensures you have the right technology and services at the right cost at the right time.

 

 

Top Lessons learned at the 2014 Gartner CIO Leadership Forum

Today’s CIOs face more challenges than ever before, from rising pressure to drive innovation under tighter budgets and the need to keep up with a rapidly changing digital landscape, to increasing instances of business units acting alone to make key technology decisions.  As a result, the CIO must figure out how to best leverage technology and encourage their teams to work collaboratively across the enterprise in order to transform their organizations and deliver successful business outcomes.

 

Last month, hundreds of CIOs and senior IT leaders gathered in Phoenix at the 2014 Gartner CIO Leadership Forum to discuss these challenges and learn how they can overcome them. From high-level discussions with their peers, Gartner experts, industry thought leaders and executives from leading technology providers, attendees learned about the new ideas, solutions and proven strategies to help develop a viable plan for the future. ComSci had a front seat for many of these discussions, and it is our pleasure to share some of the biggest lessons we learned at the conference:

 

The Need for Digital Transformation: In his keynote presentation, “The 2014 CIO Agenda,” Dave Aron, Vice President and Gartner Fellow, Gartner Research discussed how organizations often struggle to respond in a timely fashion to the torrent of digital opportunities, which can threaten the success of the business and the credibility of the IT organization. Yet, Aron asserts that we are on the cusp of the era of digitalization, where digital business innovation will be the main driver of value. In this age of digital transformation, the CIO must be able to utilize technology to radically improve performance. Much like the caterpillar transforms itself into a butterfly, Aron contended that CIOs must be able to transform as well, moving from an order-taker type of relationship with the business to one where they lead the charge on the use of technology to drive success.

 

Importance of Bimodal Governance: To ensure organizational transformation, CIOs must embrace the idea of bimodal capability, whereby the company operates at two speeds: a traditional mode for conventional IT implementations and management, and a nonlinear method, consisting of high speed activities and lightweight architecture, for more innovative measures. The concept is to run operational and business technology at a different pace, in a  different set of time lines than innovative technology activities and with multiple teams managing the different projects. As a  result, the company will be better equipped to take necessary risks that spur change, while ensuring priorities continue to be run effectively.

 

Being More Proactive: In the ongoing digital industrial revolution, it is crucial that businesses strive to be proactive. With exponential growth, in terms of the expanding capacity and capability of technology, organizations must be able to figure out how to adapt now, rather than be left behind. This concept was explored in a presentation by Gene Alvarez, Vice President and Distinguished Analyst, Gartner Research, who proclaimed that the last ten years have been the reactive years, with planning being linear and in response to biggest changes of the past decade, from the rise of the cloud and social media to mobile and Big Data. To be successful, CIOs must be proactive in identifying trends, building alignment and adapting the company’s technology usage to prepare for the future.

 

Greater Emphasis on Collaboration: With business unit management and CMOs increasingly bypassing the CIO and IT department to make their technology acquisitions, organizations lose control of their total technology spend and their ability to forecast and budget IT/digital technology utilization. As such, the ability to create strong alignment between the CIO and the CMO and other business units is essential to fully capitalize on the intersection of technology and business opportunity. This was further explored by Diane Morello, Managing Vice President, Gartner Research in her presentation, “Talent on the Digital Frontier: Building the Digital Business Dream Team.” She suggested that in order to best succeed in the digital frontier, it is crucial to align talent with business technology needs, while tapping into relevant expertise insight and outside the company.

 

Given the rapid change occurring in the world of business technology, the CIO must be able to adopt the best practices that ensure a successful strategy for today and into the future. At the same time, they need to respond rapidly and proactively to the constantly changing IT landscape. Although the challenges are many, the Gartner CIO Leadership Forum showed that there are just as many strategies CIOs can use to overcome those difficulties and steer their companies toward positive transformation.

Fostering IT Innovation: What CFOs Need to Know

To say that CFOs are pressured to spur growth in the midst of a slow and still uncertain economy is an understatement. As organizations continue to look for ways to tighten their budgets, their technology investments are often one of the first areas to undergo intense scrutiny. As a result, CFOs must figure out how they can guide the innovation that enables the company to achieve sustainable growth and maintain a competitive advantage.

In a recent post on the CFO Journal, Frank Friedman, CFO of Deloitte, addressed this issue head on, offering three tips to drive innovation and growth in a weak economy. From providing greater capital flexibility, leveraging more insight and transparency in decision making, and becoming more optimistic, Friedman asserts that the CFO can help their organizations overcome external challenges and adopt the strategies and best practices that will lead to success.

While these strategies are applicable to the role of the CFO as whole, they can be applied more specifically to the IT function. After all, technology is often the main driver in enabling operational efficiency and facilitating innovation. Fortunately, there are several things CFOs can do to ensure their organization is primed for continued growth and innovation.

Despite lingering economic uncertainty, organizations must still make the right investments to ensure they can continue to operate strategically. Having the financial flexibility to invest in the solutions that can lead to improvement and deliver ROI is essential. But, in order to realize this state, the CFO must be able to identify the products and services that can bring the company to the next level and achieve technology optimization. With a flexible approach to technology spend, the CFO can proactively manage the business of IT, ensuring the company acquires the solutions necessary to bring greater efficiency across the enterprise.

 

Along the lines of increasing capital flexibility, the CFO must also gain insight into their company’s current spend and IT utilization. With real visibility into the costs of supplying IT products and services, and the ability to analyze how they are being used, the CFO is better positioned to make key decisions about the best solutions in which to invest. At the same time, the CFO will also be able to uncover underutilized technologies or instances of duplication, enabling them to be more strategic and avoid those situations. Equipped with the knowledge and clear line of sight into IT consumption, CFOs can act more strategically and ensure they make the right investments that can foster innovation.

 

Finally, to truly grow their companies, CFOs must look beyond the present situation in order to leverage the opportunities for improvement. As Friedman pointed out, CFOs “have to view the organization through a strategic, not just financial lens.” By moving beyond the “business as usual” approach to managing IT spend and utilization  and thinking about how they can deliver the tools and processes that lead to an improved future state, the company can operate more effectively in today’s challenging business environment. As a result, they can better drive the innovation crucial to staying ahead of the competition.

CIOs and CMOs: Getting Everyone on the Same Page

Creating alignment between the IT department and all business units within the enterprise is essential for any organization to ensure it invests in the right technology, while avoiding instances of duplicated applications or continued support of underutilized technologies. With a singular approach to tracking, forecasting and budgeting technology investments, led by IT, the company gains complete visibility into its application usage and spend. In addition, they can achieve cost optimization and foster more strategic operations, while better monitoring the costs of utilization and understanding how the applications they provide the entire organization are used.

Despite the advantages of such an approach, CIOs often encounter instances in which a particular business unit will bypass the IT department and make its technology decisions and investments on its own. Such instances can lead to several negative impacts, such as duplicate applications, investment in underutilized or outdated technology, and the inability to effectively manage or measure the effectiveness of these solutions. Moreover, while the rush among other business units to invest in new technologies may bring short-term gain, by acting independent of IT leadership, the company loses sight of its investments and won’t be able to operate at an optimal level.

While the disconnect between IT and business unit leaders can occur with any company, it is most prevalent with corporate marketing functions. As marketing personnel are increasingly expected to take a greater role in growing the business, they are often given larger budgets to acquire the technology that can help them put their company front and center. Although the hazards of acting independently to implement new solutions are significant and numerous, the practice is one that continues to grow.

According to Salesforce.com’s visionary CEO, Marc Benioff, the CMO will spend more on technology than the CIO by 2017. This staggering prediction highlights the need for organizations to work with CMOs to end this practice. If not, the disparity between the two will only become greater in the future. As a result, the organization will lose control of its spend and its ability to accurately forecast and budget its technology utilization at a time when, more than ever, cost effectiveness serves as the difference between corporate success and failure.

Fortunately, there are number of methods to help break down the silos separating Marketing’s technology investments from the rest of the organizations. Consider the following best practices for creating alignment between the CMO and CIO:

Collaborate to develop a customer-focused strategy – Too often, discrepancies arise because IT is not tuned into Marketing’s technology needs and strategies. For greatest results, the CMO and CIO must come together to define the plan of action and determine how they can develop a joint customer-focused strategy for technology implementation.
Ensure priorities and goals are understood by both parties – The key to alignment is for the CMO and CIO to align priorities for their teams and ensure they know the project scope, cost and metrics involved in the implementation of all technology solutions.
Invest in a robust ITFBM solution – Such a solution will provide IT with the visibility needed to demonstrate the value of existing technologies used by Marketing, while accurately predicting future technology demand and spending. Moreover, an ITFBM solution will help IT deliver a technology services catalog that will resonate with the CMO, show how they can help Marketing acquire the needed technology and drive home the need to collaborate continually.
The underlying reason for Marketing’s larger role in many organizations and its increasing IT spend is to enhance the top-line growth of the company. However, the impact of lost control and visibility of spending can minimize any perceived benefits of the CMO acting alone to acquire new technologies – and will ultimately have a negative effect on the corporate bottom line. Emphasizing the benefits of building greater alignment between the two functions, from leadership on down, and utilizing the tools and practices that can facilitate this partnership will help the company ensure optimal investment and usage of the best technologies and lead to continued success.
To learn more about how the right ITFBM solution can help strengthen the relationship between the CMO and CIO, click here to download our latest white paper: http://www.comsci.com/whitepaper_1213.php

2013: A Year of Big Change for the CIO

Each year brings a brand new set of opportunities and challenges for the CIO, from advancements in technology to the latest trends impacting how business gets done. Though it is impossible to determine how those changes will influence how CIOs do their jobs, we attempt to do that each year. In our first post of 2013, we discussed how the executive suite will recognize that IT must be the center for corporate innovation and deliver game-changing competitive advantage. So how did the predictions hold up? Let’s take a look:

CIOs will grow their role as agents for innovation

In 2013, CIOs have taken a huge step in moving the IT function beyond simply running the business to one that realizes its role in delivering the technology and services that can lead to greater innovation and increased competitive advantage. Just consider the growing investment in cloud-based technologies, with the global cloud services market estimated to be $131 billion at the end of 2013. However, where there is need for continued improvement is how CIOs are viewed by organizational peers. A study by the Harvard Business Review found that nearly half of CEOs indicated that their CIOs could benefit from improving their understanding of the business and how to better apply IT solutions.

The discussion of infrastructure commoditization will be elevated

Multiple resources had labeled 2013 as the “Year of Big Data,” recognizing how more organizations than ever have sought enhanced analytics to better understand their businesses and improve operational efficiencies. While many organizations understand the importance of big data in terms of improving data capture and deploying advanced data analytics engines, there are ongoing conversations about who is responsible for leading those big data initiatives. Research from CIO.com shows that of 86 top executives surveyed, only 31 percent named the CIO as leading their big data initiatives. As such, it should be a top priority for CIOs to focus on taking a more proactive role on articulating and illustrating the business benefits of Big Data, rather than just on the technology itself.

Financial rigor and business acumen around technology deployment will increase in 2013

As investment in cloud services continues to grow, particularly in those applications that enable greater insight into technology spend, it is clear that 2013 was indeed the year for SaaS financial management software. More companies have recognized the benefits of adopting a discipline with the right tools and services that gives them the visibility into their current and forecasted technology spending, such as ComSci’s comprehensive ITFBM solutions, enabling them to operate more cost effectively. At the same time, continued adoption of such technologies will enable CIOs to play a more pivotal role, helping them ensure the company invests in technology that can deliver positive change and greater innovation.

Although 2013 was a year of change, with CIOs making great progress in helping their organizations operate more strategically and increase their value to the entire enterprise, we expect this trend to continue throughout 2014 as well.

What else will this year have in store?

While only time will tell, we can expect CIOs to continue to expand their investment in transformative technologies. A trend that will come to the forefront is the evolving relationship between the CIO and CMO. As Marketing continues to act independently to acquire its ‘digital marketing’ technology solutions, CIOs and their IT departments must take the lead in showing why the two functions need to work together for the greater good of the company.

As the New Year is already shaping up to be another year of change and transformation, what do you think will be the biggest opportunities and challenges for the CIO in 2014?  Let us hear from you with your comments. Remember to subscribe and receive notifications for all ComSci’s 2014 blog posts. Happy New Year from all of us at ComSci by Upland!

Searching for Ways to Increase Accountability?

While smaller budgets are a likely reality for most organizations, increasing technology investments that drive real ROI is a necessity. This paradox requires today’s companies to make judicious decisions when it comes to their technology investments. That means eliminating the silos of IT consumption, usage and cost data, and providing a centralized system that increases IT cost transparency and accountability.

To do that, organizations need to establish the tools, technology and processes that support a transparent approach to IT financial management. Many organizations have managed IT spending either through general ledger accounting platforms or by using disparate systems to track costs and expenses. A general ledger approach may reveal overall costs, but fails to delve deep into the consumption details that comprise a total solution – a key metric in allocating and managing costs.

An IT financial management solution, on the other hand, provides organizations with a centralized line of sight into their own consumption and both macro and micro level details of actual consumption as well as total cost of technology. By presenting costs as a line item via a monthly invoice, for both internally provided services as well as external solutions, business users can begin to fully understand their technology consumption and its associated costs.

This insight enables business users to make decisions or change consumption behavior to deliver increased value to the company. The organization also experiences more productive dialog and organization-wide cost control as a result of increased visibility and accountability. This supports more dynamic forward-facing budgeting, forecasting and planning, enabling business users to make strategic and responsible decisions based on actual data.

A service costing module is critical for technology financial management because it ensures charges are allocated fairly and business users understand what they are paying for, such as the maintenance and support that go with managing an application. Information should be broken down into cost categories and presented in business language so users can process the information and make informed decisions.

By providing insight into complete IT expenses in business language, business managers can better distinguish value-added activities and costs from non-value-added activities and costs. A financial management solution creates a higher level of accountability by delivering the appropriate level of details that enable business managers to make informed decisions, accurately price new offerings and remain competitive in the market.

Buyer Beware: Don’t Lose your Head in the Cloud

Everyone is talking about cloud computing and the benefits it will bring to the enterprise.  Yes, it’s in vogue and it seems like every company is doing it; however, buyer beware! In 2011, CIOs will be receiving increased pressure to move IT and enterprise applications into the cloud because of the perceived cost savings. And that has the potential to disappoint.

Why do we say the savings are perceived and not real? Because – by nature – IT infrastructures are highly fixed costs. Moving to the cloud without the ability to shed the fixed cost business model will actually result in an increase in IT expenses.

From a financial perspective, the cloud parallels the journey of voice over IP (VoIP) technology when it was first introduced 10 plus years ago. VoIP was touted as a low cost solution to deliver voice calls over an existing enterprise data network. The challenge – 10 years later – is that it was not cost effective if the enterprise could not replace their existing voice network infrastructure. As such, VoIP and its appearance of cost savings, did not get fully adopted for years and only so as the voice network infrastructure reached its end of life and needed to be refreshed.

The same scenario is happening with the cloud. Everyone wants the latest and greatest in technology solutions but an investment in the cloud without the ability to shed the current fixed cost infrastructure will cause heartaches for CIOs. They need the ability to articulate the true financial impact of the cloud in contrast to their current infrastructure.

The cloud becomes financially beneficial when and only when it’s time for an enterprise to refresh their server farms. When 100 old servers need to be refreshed, that’s the time to strongly consider the cloud and perform an in-depth financial analysis/ROI comparing the purchase of 100 new servers and/or assessing the movement of applications into the cloud. Odds are, when looking at refreshing those 100 servers, it is a hybrid solution that will make the most business sense: move some applications to the cloud, purchase some new servers, and keep some applications in-house.

Managing the Financials of IT

As President and CEO of ComSci, I wanted to introduce myself and explain why IT Financial and Business Management is more than just putting a slick looking presentation layer on top of existing IT systems and processes.

Prior to acquiring ComSci about 5 years ago with my business partner, Dr. Alan Maltz, I was the CFO of IT at Manufacturers Hanover Trust Company (now part of JPMorganChase.)  Although IT Financial Management offerings are relatively new in the marketplace, the problems of effectively managing the finances of IT date back to my days at “Manny Hanny.”

Simply put, the internal systems that provide IT financial information are outdated, costly to maintain and inefficient at best.  Over the last few years many firms have popped up to develop presentation layers that sit on top of these broken and inefficient systems and processes and claim to be the hottest technology of the day, but the problem still exists: No matter how nice the charts and graphs look, they are still sitting on bad data with broken processes with results that are providing “false transparency.”

After experiencing these challenges firsthand as a CFO of IT and speaking with numerous IT and Finance Executives over the years, Alan and I acquired ComSci and sought out to address the real issue:  Replacing broken financial systems with an efficient, scalable web-based production system that also provides business intelligence (BI) to both IT management and the consumers of IT Services i.e. business managers.

Our customers, specifically our most recent wins, are telling us that ComSci is different than the rest in this marketplace – we are “Financial Management people who build great production-ready software products – not BI software builders who are trying to learn IT Financial Management.”

This means a lot to us. We have sat on your side of the desk and have experienced the pain and frustration of the budgeting, cost modeling, and rate development process as well as the pressures to provide timely and accurate financial reporting and business metrics.  This is why we built a product and deliver a solution that addresses the inefficient and costly in-house production processes and systems while also providing clear, concise and robust metrics around the value of IT services.  We are focused on helping CIOs and CFOs of IT with budgeting/forecasting, service costing, rate development, consumption planning and the monthly production of the CIO Invoice.

We like the recent “buzz” being created in this space as this certainly validates the need in the marketplace and substantiates what we’re doing at ComSci – providing scalable IT Financial Management SaaS-based software solutions to assist our clients in overcoming their challenges to effectively measure and communicate the value of IT to the business. We are unique as we not only deliver excellent financial and business intelligence, our SaaS-based software is a production tool that can replace existing financial costing, budgeting and chargeback systems within the enterprise, thereby increasing efficiencies and reducing support costs.

In future blogs I’ll discuss each of the individual functions within an effective IT Financial Management process (i.e., budgeting/forecasting, service costing/rate development, consumption planning and the production process required to generate a monthly CIO Invoice that feeds the General Ledger process).  I would also enjoy hearing your thoughts about IT Financial Management and learning about those discussions topics that are of interest to you.