What Does it Mean to Run IT Like a Business?

Run IT like a business. We’ve all heard this phrase numerous times. I can imagine all of your heads nodding as you once again hear this phrase. I know most of you are already are familiar with it, but do you really know what it means?

Run IT like a business sure sounds important. It easily rolls of the tongue and sounds logical. As with many catchphrases in the past though, IT professionals may fear this is simply just another short-term trend. Like it or not though, run IT like a business is here to stay as it’s a mandate directly from today’s CEOs. Running IT like a business transforms IT from simply a cost center to a strategic business partner. But do all IT leaders understand exactly what this means?

Just like every business is unique, every IT leader needs to develop their own answer. A good place to start is with the fundamentals. Think of it as building a business plan. Here are a few simple questions to lay the foundation:

  • Who are my customers?
  • What services do they buy from me today?
  • What services will they want tomorrow?
  • Who is my competition?
  • Am I getting good value from my suppliers?

CIOs today operate in a tough market. CIO.com recently shared, “it’s not just the magnitude of the budget, but the influence that IT has throughout today’s enterprise that demands a new way of operating. CEOs and boards of directors have taken note of their dependence on IT, and they will no longer tolerate IT operating by its own set of rules, as a mysterious black box with no apparent business discipline or accountability.”[1] Running IT like a business enables IT organizations to demonstrate that they can drive down costs while simultaneously driving high performance – and ultimately own the process of mapping all transactions and activities to the IT resources they consume. It takes hard work and a thorough understanding to do this, but anything less is considered a failure.

Running IT like a business doesn’t happen overnight. This transformational journey will be difficult as it requires a cultural and mindset change – starting with the CIO. Running a successful business is nothing new though and you can easily start with the fundamentals we included above. The heart of a sound business strategy will remain the same for IT as well – strategic planning meetings, thorough project management practices, customer satisfaction surveys, financial audits, etc. The key is to not just implement a few sporadic pieces of a well-run business. Even if you build on different parts over time – it’s critical to not lose sight of the big picture and the end goal of running the entire IT organization as a business. IT needs to manage this business process in a rigorous and methodical way. IT teams must hold themselves accountable to reaching this goal.

So what’s in it for IT if they run it like a business? One of the biggest perks of running IT like a business is enabling IT teams to drive decisions based on financial metrics. In the words of Peter F. Drucker, “what’s measured improves.” You will now be empowered to not only see but also measure and ultimately improve the dollar value of IT. Running IT like a business forces you to take a step back and recognize the overall goals of the business, thereby making IT a true business partner that knows how to positively impact the bottom line. Decisions will now be driven by full visibility into each and every IT cost. You can stand confidently behind your data-driven decisions.

The quickest way to run IT like a business is through the right IT financial management software. The right software gives you line of sight to unit-costs, IT spend, cost reductions and future technology goals. Business and IT will be brought into a fully collaborative planning and budgeting process that drives efficiency and promotes innovation. If you don’t have insight into the cost of IT services and the effects of business consumption on your budget, then you’ll be relegated to reacting to requests in a tactical and spontaneous manner – and quite frankly, you’ll be a thing of the past in the minds of today’s C-level executives. Taking a more strategic approach is crucial to driving value and effectively running IT like a business. Money, time and resources will be saved – which is at the end of the day is exactly what running IT like a business is all about.

 

 

[1] CIO.com, “What it Means to Run IT Like a Business.” May 2014. Accessed on October 16, 2014. http://www.cio.com/article/2439675/business-alignment/what-it-means-to-run-it-like-a-business.html

 

 

Top Lessons from the Gartner IT Financial, Procurement & Asset Management Summit

For organizations to remain sustainable in an increasing complex and competitive environment, it is essential that they gain greater control and visibility of their IT costs. Today’s IT executives are faced with more challenges than ever before, from rising business demands, growing pressure to keep costs down and greater need to show the ROI on technology investments. At the same time, they face the paradox of having to optimize their IT costs, while ensuring the company continues to leverage the latest technologies that can help them innovate and remain ahead of the competition.

So what can they do to overcome these challenges and drive the right strategies that lead to improvement? The first step is to ensure the company has full insight into the spend and utilization of the various systems and technologies in use across the enterprise. When equipped with the right IT Financial Management (ITFM) solution, business and IT can be brought into a fully collaborative planning and budgeting process that drives efficiency and promotes innovation.

Still, organizations are apt to find numerous challenges when making any change to company processes, especially those that focus on the financial aspects. These challenges were brought front and center at the recent Gartner IT Financial, Procurement & Asset Management Summit, which aimed to highlight the best tools and strategies for optimizing IT costs, enhancing the state of IT asset management and ensuring compliance. From highly engaging sessions lead by Gartner’s analysts, the summit brought to light many of the obstacles and opportunities in ITFM. Some of the highlights include:

The right technology and business plan are the keys to ITFM success: In the session, “IT Financial Management Tools of the Trade,” Gartner Research Director Robert Naegle explored the growing need for better financial accountability as a way to develop business trust, build spending confidence, enable better decisions, drive financial responsibility and encourage efficiency.[1] And with more organizations recognizing the need for ITFM, it is important that they understand how they can achieve the desired results. Having a solution that can deliver the needed services, such as chargeback, service costing or budgeting, is only part of the equation. Also necessary is to understand the goals of the initiative, create a business plan and continuously review and improve delivery processes.

To drive the most value from IT, define outcomes first: To get the most value from a company’s technology investments, it is crucial to define the desired outcome in terms of where the business is now and where it wants to be. This point was brought up during the keynote session, “The Real Business of IT,” delivered by Vice President & Gartner Fellow Richard Hunter. As Hunter pointed out, “If project outcomes aren’t defined in material, quantified and baselined terms, you will never know whether you got what you wanted.”[2]

Gain needed visibility through budget planning: In the workshop session, “IT Budgeting DO’s and DON’Ts,” Rob Shaefer explored ways to streamline the IT budgeting processes in order to  minimize time spent on this activity and maximize the value of IT. The session highlighted the reward for effective budgeting as “less time spent on a more effective budgeting process that can add value by allowing IT leaders and business partners to set priorities and manage spending.”[3] When budgeting is done correctly, organizations benefit from greater visibility into the total cost of ownership for their technology solutions, and that insight enables IT executives to run IT like a business.

As organizations continue to face significant challenges in optimizing their IT portfolios and budgeting processes, the ability to understand control and consumption – and plan accordingly – can make all the difference. Many of the sessions at the Gartner IT Financial, Procurement & Asset Management Summit explored this in-depth, providing attendees with insight into the steps they can take to improve their ITFM processes and ensure a successful strategy for the future.


[1] Naegle, Robert. “IT Financial Management Tools of the Trade.” Gartner IT Financial, Procurement & Asset Management Summit. 8 September 2014.

[2] Hunter, Richard. “The Real Business of IT.” Gartner IT Financial, Procurement & Asset Management Summit. 8 September 2014.

[3] McGittigan, Jim. “IT Budgeting DO’s and DON’Ts.” Gartner IT Financial, Procurement & Asset Management Summit. 7 September 2014.

 

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

The New Reality: Doing Less with Less

Technology plays a vital role for organizations looking to bring innovative services to customers. But, with continued pressures placed on lowering IT budgets, how can organizations optimize technology investments and ensure they have the funding needed to do more than just “keep the lights on?”

Dramatic cost-cutting is a natural response during an economic downturn to minimize non-essential spending and uncover budget availability to support growth initiatives. Over the next three to five years, business leaders will continue to use the same recession-based guiding principles they used for the last four years, to identify revenue streams that will fund future technology investments through savings derived from existing “run the business” IT expenses.

Industry analysts indicate that most organizations actually spend less on IT today than they did five years ago and that CFOs now have greater input into IT decisions. Conversely, while less money is allocated to the IT budget, technology plays a more prominent role in maintaining a competitive advantage. This requires CIOs and their leadership teams to restructure their processes and methodologies to include a cost optimization discipline across their technology delivery framework.

This is the new reality, and for organizations, it means figuring out how to do less with less. Businesses need to get better at understanding their IT investments and the value they bring to the business. They also need data-driven insight to identify opportunities to optimize costs and create a sustainable cost structure that enables them to effectively plan for any new demand.

An information technology, finance and business management (ITFBM) solution increases visibility into IT investments and can help organizations impart a best-practices approach to IT financial management. How can an ITFBM solution uncover savings opportunities and help CIOs ensure IT investments align with current and future business goals?

Better IT Cost TransparencyConnecting IT, business performance and value are a key to optimizing costs and building a sustainable cost structure. An ITFBM solution can connect the dots between cost and consumption and help organizations determine where there are savings opportunities and where they need to invest. Transparency is critical for fact-based decision-making and can demonstrate effectiveness of spending or where there is room for improvement.

Look at Demand and Cost-effective Ways to Deliver IT Services- Doing less with less means stripping out any unnecessary expenses and identifying revenue streams that can be allocated to more mission-critical activities. To reduce costs, most organizations will first look to data center consolidation, reducing contract labor or renegotiating software contracts. For greater savings opportunities, better demand management and IT performance management will enable organizations to run IT like other parts of the business. Putting your finger on demand and being able to track consumption to cost will enable organizations to decrease the services they have in house and transition to commodity brokers.

Commit to Doing Less with Less – While many organizations look at implementation costs when considering a solution, it’s important to take a wide-range view to understand the total cost of ownership over a solution’s lifecycle. An ITFBM solution can provide costs of the lifecycle of the application – not just the implementation costs. This total cost of ownership perspective helps organizations understand the long-term investment so they can effectively determine if they are getting the right value and return on their technology investment.

In good times or bad times, having better information for decision-making purposes is critical to ensure investments align with business priorities and long-term goals. Organizations that commit to doing less with less and use technology to identify potential cost savings can actually do more – whether that’s grow the business or transform the business.

With budget shortfalls a reality for many organizations, closing the gap requires implementing a cost optimization discipline across the technology delivery framework. For IT leaders working with fewer resources and less budget, what’s your plan to optimize costs and create a sustainable future?

Saving Business Users from Disaster

Are technology-savvy, empowered and informed business managers potentially dangerous to your business? It might sound counterintuitive, but more informed business consumers with the power to purchase technology solutions may wreak havoc on more than just the IT budget – they can place your entire business in jeopardy.

Some industry analysts predict that this is the era of IT decentralization, particularly as the consumerization of technology has created an era of empowered IT business users. Cloud technology, social media, and the sheer volume and velocity of information are creating control challenges for the IT organization because more educated business consumers no longer need to rely on the IT organization to contextualize technology solutions. As a result, more IT expenditures are managed outside the IT budget.

While CIOs make a strong argument to have a centralized structure, business unit managers often attempt to derail centralized IT by conducting their own research and purchasing technology solutions without any input from corporate IT teams. Without centralized control and rigor around IT financial and business management, organizations can overspend or under-invest and not have complete and accurate data around technology investments. Unless the central IT organization can change its relationship with the enterprise and communicate the value of technology to the business, centralized control may be more than a relic of the past, but a recipe for disaster.

To run IT like the rest of the business, minimize chaos and save business consumers from disaster, IT must take steps now to prevent disaster from occurring in the first place. It requires a more disciplined approach to IT financial and business management and understanding the needs of the business technology consumer; then providing them with proactive ways to  be more engaged in saving opportunities, resource allocation and even consolidation efforts.

Increasing IT financial transparency and making IT financial and business management a mission-critical component of the IT business strategy helps the entire organization understand where they need to invest and be able to align costs with consumption. Whether providing technology to external customers or automating internal business processes, today more than ever, technology is a prominent part of success in nearly every business in every industry.

Helping the organization gain a better handle on the value of IT products and services provided to the business and a greater sense of urgency toward IT financial and business management is essential. A focused IT financial and business management solution organizes critical data that  gives organizations the power to drill  into the cost of IT to a level that has actionable consequences, increases financial transparency to both the producers and consumers of IT services and ensures the organization has complete information into total cost of ownership to drive more productive conversations and better decisions.

If IT leaders are going to redefine the relationship with the enterprise and engage their business colleagues more, they need facts and actionable data to drive informed decisions. A fully automated IT financial and business management solution provides insight into true total costs and technology utilization, allowing organizations to communicate the value of IT. As a result, IT can centralize control, effectively monitor costs, measure cost savings, uncover additional savings opportunities and gain efficiencies in accounting and planning.  After all, aren’t these the core functions of any well run business?

Combining the Benefits of Software-as-a-Service with IT Financial Management

As organizations expand their global footprint, the benefits of all SaaS-based applications increase. In addition to moving the technology commitment from a capital to an operational expense, delivery of enterprise applications via the internet enables all users to access the same instance of the application from anywhere they have an internet connection anytime – regardless of what country they reside. Industry analyst and Forrester CEO George Colony has stated that we are entering ‘the age of the app internet’. Marc Benioff, chairman and CEO of Salesforce.com, whose company has helped define the SaaS application delivery model, calls the next phase of technology growth the fourth major innovation in modern technology – after mainframe computing, distributed computing, and the global internet.

The dispersed organization is the future – whether companies operate across multiple shores or various office locations in a particular country. For many, this means IT financial information is stored in disparate systems, business units, or geographies, making it challenging for CIOs and their teams to get a complete, accurate, and timely handle on total enterprise-wide technology costs and usage patterns. Existing corporate finance systems of record cannot come close to providing the level of cost accounting needed to accommodate total technology expenses.

A SaaS-based approach to IT financial management delivers all the benefits associated with SaaS solutions – lower total cost of ownership, no need to invest in additional hardware, vendor-managed maintenance, etc. – but it also opens the door to better business performance by increasing transparency of the total corporate technology expense information or total economic impact to the business.

A SaaS-based IT financial management solution aids organizations with laser-focus on aggregating disparate utilization and cost data from around the globe and can provide an accurate ‘centralized’ view of technology expenses and utilization from all points of corporate operations. This ensures that every business manager has the information needed to understand, analyze and manage IT costs and ensures that technology investments are completely aligned with business strategy. This is the goal for maturing the IT Finance process in organizations. A SaaS-based IT Finance Management solution dramatically shortens the time corporations of all sizes need to gain full maturity for their IT Financial processes.

An on-premise IT financial management solution does provide the benefit of automation, but it doesn’t deliver the added value of better business intelligence delivered dynamically anywhere/anytime. A key challenge for most global organizations is consolidating data from various systems in dispersed locations.

The right SaaS-based IT financial management solution is able to deliver “one version of the truth” by aggregating corporate data behind the client’s firewall, dynamically connecting to disparate sources, whether that’s a mainframe, virtual server environment, a ‘cloud’ third party provider, or a wireless provider who sends an electronic statement of the wireless usage. This eliminates the pitfalls associated with inaccurate or missing data and reduces reliance on manually aggregated static summary data. It also provides more viable business intelligence because it’s not requiring users to make (many times very costly) assumptions based on summary data. Instead, it goes right to the source to get information and presents the accurate technology consumption and cost data needed to make informed business decisions.

SaaS-based IT financial management solutions give corporate IT and business managers a much more complete understanding of the cost of technology and how IT costs are allocated. This information enables the entire corporate management team drive more responsible consumption and make better decisions that support business priorities across the global organization. By having complete insight into total cost of ownership (TCO) of any and all the products and services IT provides, corporate IT and business managers are also able to accurately compare internally provided services with those offered from cloud computing providers and supports the IT organization’s ability to effectively communicate the value of technology.

The inherent benefits of a SaaS-based enterprise application over a premise-based alternative are clear. When applied to IT financial management, it offers a better return on investment and increased business intelligence that is impossible to obtain from manual or disparate processes. Any size organization can take advantage of enterprise application capabilities that were previously only available to large organizations and put rigor around IT financial management to optimize technology investments, control costs and provide technology that enhance business value and corporate ROI.

ITFMA 2012 Conference Attendees Agree: It’s Time to Put Discipline around IT Finance

In the heart of San Francisco, more than 225 IT finance professionals from private-sector companies and government agencies gathered together last week at the ITFMA’s Financial World of Information Technology Conferences. This marks the organization’s 25th year and the event honored industry leaders who have helped advance the field and financial discipline around the delivery of technology.

If you attended the show, you know the event was abuzz with the latest innovations around automation of manual IT finance processes and taking a best-practices approach to IT finance and business management. If you couldn’t attend, we’re excited to share highlights from the five-day event:

Increased  Market Awareness – Overall, the sentiment is that there needs to be greater focus on IT financial transparency– and that new focused technology can bring greater control and visibility to IT finance and business management. Attendees were able to view a live demo of the ComSci solution and learn how it automates the terabytes and petabytes of data that have to be processed for true transactional data layer and for the data repository to be defined.

IT Leaders Want Ability to Control Multiple Budgets – Attendees revealed the challenges with working with budgets in silos across IT and using manual processes to aggregate IT’s financial and performance information together. In addition to discussing the shortcomings with Excel-based processes that are prone to error and static information, attendees learned how today’s automated ITFBM solutions can dramatically improve budgeting, planning and forecasting processes, as well as cost modeling and showback/chargeback processes.

It Takes a Village – Beyond lectures, workshops and practitioner presentations, IT finance professionals were able to network, share ideas and engage in peer-to-peer discussions to learn how IT industry leaders are increasing discipline around IT finance and business management. Community-building was strong at the show, where attendees could network with peers and their families could enjoy San Francisco’s spectacular amenities and extracurricular activities.

The Great Debate was ….Great – One of the most popular and well-attended sessions was a presidential-style debate where IT financial management thought leaders went head-to-head and discussed topics such as build versus buy, chargeback versus showback versus allocation, and tools versus processes. With time limits on responses and active audience participation, this “must attend” session had fever-pitch excitement and addressed a wide range of today’s IT financial and business management issues.

In addition to regular conference sessions, IT finance professionals wanting more depth were able to attend a number of three-hour pre-conference workshops on topics such as Calculating the True Cost of IT Services. Attendees gained practical hands-on information such as best-practices for cost modeling and why it is better to be approximately right rather than precisely wrong. The workshops also gave participants additional opportunity to network with other senior level IT finance peers and participate in collective sharing of knowledge for ITFM best-practices.

As the next several years will bring great change to IT organizations with wider adoption of cloud services, IT teams will need to be prepared to broker IT services internally versus externally and use newly focused technology applications and tools to make more informed decisions and gain insight into total cost of ownership. The conference proved valuable in preparing IT finance leaders to think differently about IT finance and business management and advance their own organization’s discipline around the delivery of technology.

ComSci will be participating in the ITFMA’s 2012 summer conference to be held in August. If you’re looking to advance the practice of IT financial management at your organization and learn more about ComSci’s award-winning Software-as-a-Service and Business Process-as-a-Service IT finance and business management solutions, consider joining your colleagues and ComSci at the next ITFMA event!

Chargeback – It’s NOT a Four Letter Word Any More

If the notion of chargeback to your business units for IT allocations makes you shudder, it’s probably because your experience with it was a bit ahead of its time. Many early attempts at ‘chargeback’ were ‘homegrown’ and failed because the right technology wasn’t available to aggregate, consolidate, and deliver accurate insight into IT expenses. In some cases, charges were based on a flat rate, such as a business unit’s percentage of revenue, rather than actual usage, putting a bad taste in a business leader’s mouth – particularly those that got the short shrift. Just ten years ago, most all IT utilization and consumption data was stored in ‘silos,’ carefully tended and managed for IT management, making it near impossible to accurately understand who was using what technology and integrate information from disparate systems.

There was also the problem of connecting disparate systems, which required integrations and APIs that were difficult to deploy and faulty at best. Hence the practice of allocations based on headcount for any and all IT expenses. ‘Chargeback’ was heralded as the best practice process that could change ‘peanut-butter spread’ allocations. The trouble was IT teams had to build the ‘chargeback’ system themselves.

Advancements in technology, including greater processor speeds, storage capacity at really inexpensive prices and the ability to have all the connectors to aggregate all of the information needed on consumption and utilization data have paved the way for a better chargeback process. Rather than a concept preceded by a litany of four letter words, today’s chargeback solutions are a different four-letter word: gift.

A SaaS-based technology financial management solution is the gift that keeps on giving because it 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 costs of all technologies deployed across the enterprise. This supports an accurate chargeback process that helps users understand the full cost of technology solutions and the value they deliver.

Chargeback done right offers business benefits to both the IT organization and corporate technology users. Because it provides a great degree of accuracy and a centralized line of sight, chargeback today supports more-informed analysis and decision-making. A significant additional benefit is that the entire IT budget, from both the IT team ‘supplier’ side and the business unit ‘consumer’ side of the IT value chain, can be agile and automated.-

Chargeback is also essential as more organizations opt for cloud computing solutions. Third-party solution providers excel at articulating their costs, making it necessary for internal IT organizations to communicate to their corporate business colleagues in the same manner. An IT technology financial management solution and effective chargeback model give organizations the agility and insight to weigh the value of technology resources and savings from cloud alternatives with information that supports keeping critical systems in-house.  There is even the third choice that can be evaluated, and that is selecting to go with a hybrid technology solution.

An effective chargeback process  gives the gift of corporate technology cost transparency, which is no longer a luxury, but a business necessity. With greater emphasis on the relationship between technology and business success, a chargeback solution can contribute to openness around costs with the IT organization. As a result, it encourages more responsible technology consumption and communication around business priorities from a financial viewpoint.

In an economy rife with uncertainty, organizations need to be nimble and adjust costs as business conditions change. Chargeback enables organizations to make the connection between the costs and value of IT products and services.

There’s no doubt that chargeback has evolved from a four-letter word to a mission-critical tool. With an effective technology chargeback system in place, organizations have the flexibility to meet the needs of the business, deliver optimal technology solutions and achieve the corporate business goals.

What Will CIOs Need to Focus on in 2012?

As we enter a new year, the pressure on CIOs will continue to be heightened as business expectations around doing more for less will not be diminished. With these increased pressures, the CIO should start the year with a continued (or renewed) focus on addressing some key challenges.

IT financial transparency will become more important than ever. IT organizations will face additional pressure to provide business users with information that enables them to make informed technology decisions. However, they’ll need to move away from presenting financials in traditional categories such as hardware and software.  IT organizations will also need to go beyond just knowing what services they offer – they will need to understand the true cost to deliver each of the services and the cost variability associated with each of the services. The ability to provide business management with the necessary metrics and levers to truly impact cost in relationship to the services they receive will be an important indicator on the success of CIOs in 2012. Business management wants to make informed decisions – CIOs must be able to provide them with the metrics and reporting to make such informed decisions.

IT financial transparency is a means toward value demonstration. Although IT financial transparency is a major step in providing business management with key decision making information, it is just a means toward an end – i.e., providing business management with insights into the value of IT. Some important questions the business needs to be able to effectively answer are what levers can I pull to lower cost without impacting performance? What is the most cost effective level of service to meet business needs? Is my current spend and consumption consistent with my business strategy?  By providing the business with insights into the value of the services delivered by IT, the discussions change from “cut your IT budget” to “where do we need to invest in innovation to grow our business and outperform the competition?”

More cloud-based services will require exploring true total cost of ownership (TCO). The days of owning software are changing, especially as the cloud goes from nascent to emerging to mainstream. Industry researchers predict that Software-as-a-Service (SaaS) will account for some 15 percent of enterprise application purchases by 2015, up from 10 percent today. As cloud technology continues to expand, IT organizations will need to be able to better articulate the cost variability around the internally provided services they deliver to the business. Moving services to the cloud without understanding the impact to a heavily fixed cost infrastructure could result in a significant increase in IT costs. Understanding cost variability and the true financial impact of moving to the cloud will be critical to the financial success of the enterprise.

Because of the cost variability of cloud computing services (i.e., based on consumption), it’s also critical to understand how these services are being consumed by individual business units.  As organizations migrate to cloud-based solutions they need to understand the consequences of consumption to effectively control costs, measure cost savings, uncover additional savings opportunities, and gain the expected financial efficiencies.

An influx of personal IT will bring more management challenges. 2011 saw an explosion in the number and types of devices and applications business users are using. Moving forward, this will create new challenges for the CIO, especially because business users aren’t just using company-issued laptops or mobile phones; they’re expecting the organization to allow them to bring their own technology – whether that’s an iPad or smartphone device – and support it and ensure it’s secure.

With the consumerization of IT, forward-thinking organizations need a proactive solution for managing and supporting personal technology while at the same time reducing, controlling or redirecting the company’s mobile spend. Getting accurate, real-time data into the drivers behind mobile costs will be paramount and can help organizations analyze usage patterns, take advantage of economies of scale when standardizing on a device, or manage the vast amount of available rate plans.

Scrutinizing the value of IT, demanding more for less and pressuring IT for enhanced mobility and cloud-based services will continue to challenge CIOs in 2012. Are you prepared to provide the insights into the value your IT organization brings to the business and to your firm?