The Right Way to do Chargeback

Guest Author: Brian Stedman, Upland Software

 

Do you need a better handle on your technology costs? Or do you want to better understand how technology products and services are consumed by internal business units in order to ensure they’re providing the most cost-effective and value-added services?  Better yet, do you want to transfer the accountability to those who are actually using those IT products and services?

If so, let’s talk of how to define Showback and Chargeback.

An effective Showback process enables you to obtain an accurate snapshot of the technology investments used by each department within your organization. Showback also empowers IT and its customers to not only track spending and consumption, but also to analyze how that technology is used both effectively and efficiently by business units, users and employees. As you can imagine, this information is invaluable. You’ll now be able to know whether or not IT products and services investments are advancing your strategic business goals.

Not every IT Financial Management or Technology Business Management provider views or defines Chargeback the same way though. Transferring the accountability can mean transferring the budget dollars, which requires an accounting acumen, rigor and precise process. Some technology business management vendors casually define the Chargeback process as simply the ability to send a file of allocations to one’s General Ledger system – and then HOPE it balances with the Showback reporting. Two questions additional questions should always be asked in order to gauge future success:

  1. At what level are these allocations?
  2. Does the input to the General Ledger match what’s in the reports pushed out to the departments?

These two questions are important because first, if the allocations are only high-level to the business areas and fail to attribute those allocations with a much-needed line item detail, this is a potentially disastrous attempt to Chargeback.  Showback reporting may then not equate to what customers are actually charged as well. Second, although it really goes without saying, data accuracy is a huge an issue. Imagine the frustration if the numbers from your ITFM application fail to match what’s in the General Ledger. Some ITFM vendors claim they do Chargeback in the right way when in reality you’ll be left with unfulfilled expectations – and reports that don’t match your General Ledger. When the data is not accurate, both you and the data will lose credibility, which is worse than providing the information in the first place. Finally, business units will be far from pleased if your ITFM inaccuracies negatively impact their bottom line.

There’s a better way though. With Upland’s ITFM application, ComSci, you’ll receive a fully hosted production chargeback system with accurate fact-driven transactional consumption information. You’ll have the ability to provide internal customers with insight regarding IT charges without wasting valuable time gathering that information. You can spend your time focusing on strategic, value-added activities instead. Don’t just take our word for it though. One of our current customers, Denise Vay of PPG Industries, boasted about ComSci’s Chargeback capabilities in a recent case study, “The accuracy of our data is now much greater, primarily because of the enhanced visibility provided within the ComSci solution. This allows each department to analyze its utilization of services and track its internal budget. Better visibility also enables managers to control demand, which has resulted in reduced overall spend.”

Give us a call anytime to learn more about the right way to do Chargeback.

 

Start 2015 by Focusing on What’s Important

 

Guest Author: Jonathan Walls, Principal Consultant, Upland Software

 

A change happens in the last few days in December. Some sectors are in the middle of the busiest time of their year, many have just enjoyed a rare few days where the pace of business slackens or even stops, as we remind our families what our faces actually look like in the flesh. Even for the busy ones, the media have been putting out a constant stream of reviews of the best and worst of 2014. We have had a chance to reflect on the year just gone, and now we start gearing up for the year ahead.

I’ve an assortment of projects and planning ideas sketched out in my trusty OneNote notebook. I can also look through the meetings, planning sessions and customer visits already in my diary for January and see there’s plenty of other organizations in the process of settling important decisions that will impact their business for the next year or three.

What is important, though? This brief, annual pause in the business cycle is a perfect time to realize the truth behind Eisenhower’s old maxim: “What is important is seldom urgent and what is urgent is seldom important.” This is often represented as the perennial favorite below, the Eisenhower Matrix:

Matrix

 

An Eisenhower Matrix for IT Financial Management

Your mileage may vary, but I think most will recognize something of their working environment in the way I’ve filled out the matrix from an IT Financial Management perspective. It explains a particular challenge: important work must get done, but urgent work gets in the way. Even in our personal lives, we’re familiar with how paying the bills and hunting for a good deal can distract us from reviewing longer term matters such as savings plans and pension arrangements.

There are three main lessons for ITFM that you can take from the matrix above. These revolve around the benefits of moving along the “Process Improvement” arrow I’ve laid over the grid:

  1. A good process will give you more time to focus on better, higher value decisions
  2. Don’t let your team get mired in trivia about specific devices or vendors
  3. Performance at critical moments depends on planning ahead, e.g. for negotiations

2015 will see a number of trends continue in enterprise technology. Lines of business and other corporate functions will continue to grow in confidence that they should own their own budget for technology. CEOs will continue to have rising expectations of what “digital business” means for their company. Pressure will not let up on government departments to be able to track their expenditure on major initiatives.

Just as the heads of other functions are focused on their strategic goals, IT and IT Finance likewise should ensure their team is focused on what is important. Your team’s real priorities aren’t necessarily what they are supposed to be. Based on the matrix, here’s a quick self-assessment you can perform of your organization’s real priorities:

  • How much time does your IT finance team spend on finding value opportunities, compared to simply keeping up with the paperwork for tracking and allocating costs?
  • How much of your relationship with other business units is spent on planning and delivering new capabilities, compared to explaining the details of cross-charges and procurement decisions?
  • When you sit down to review major contracts, re-orgs or the impact of M&A activity, do you feel comfortable that you have a good understanding of your cost structure?

What I often find at the start of an ITFM related initiative is that a financial process is in place, and running smoothly – but that the overall priorities, as measured by where the team spends their time, are as much about Excel maintenance as they are about business improvements.

The regular urgency to perform cost allocations and keep spreadsheets up to date can be a major distraction from actually getting things done. It is deadline-driven and urgent, but it is not important. It has to be done, but it does not have to be done by you.

That’s why at ComSci, we talk a lot about Business Process as a Service. For us, the day-to-day heavy lifting of running an effective, data-driven chargeback or showback process is important. It is our commercial purpose; it is our revenue stream. We work hard to make sure that our processes and technology are scalable. Our dedicated production team can handle significantly more systems and transactions, at lower cost and higher quality, than IT Finance teams that typically have cost allocation as a secondary responsibility.

Our customers enjoy more time to focus on what it is truly important to their company, while ITFM becomes a source of value rather than a sinkhole for time. Easy access to regular, reliable cost and billing information helps manage the challenges specific to their business: big ticket “one-offs”, such as major initiatives or negotiations, and the ongoing improvement of their service portfolio. And with good information being provided on a regular, colleagues are far less likely to start those conversations which devolve in to discussions about relatively trivial technology preferences.

Of course, every business has its own unique requirements. We’d love to help by easing your administrative load and revealing new information about your operations. When you look at the changes to come in your organization in 2015, what’s important to you?

 

Three’s a Charm: Implement Service Catalogs, Service Costing and Unit Cost Management Together

Guest Author: Brian Stedman, Product Management, ComSci by Upland

Three is referred to as the triad, the first prime number and “noblest” of all digits; therefore, it’s often considered a lucky number. Well, three in IT is special too. When IT implements the three activities which this blog is focused on, you’ll know that’s where the real IT magic happens. Each one requires commitment, strategy and collaboration to be done correctly. IT organizations that implement a demand management initiative around their service offerings experience almost twice the level of IT success than those that implement just one alone. When all three are implemented together, IT will center its priorities on cutting IT costs, managing IT spend and enabling cost transparency. Service-based IT maturity level correlates with success in the same way that “running IT like a business” is an attribute of IT leadership. It’s important to do all three activities in tandem for the greatest (and most magical) impact.three-amigos

When defining the service catalog, you can expect to hear one of the following opinions:

  • For some, it is basically a “shopping cart” for service requisition. It is an online application with a list of the IT services that allow users to request each one.  It may also have a capability for approval as well as reports on the status of each requisition. Some may then indeed call it a service request and fulfillment.
  • Others describe it as a way to document information about service performance and service levels. It is a digitized repository of SLAs for each service and tracks service performance against SLAs.  I may also measure the business impact of noncompliance. This is the service level management (SLM).
  • Finally for some, it is the tracking of IT finances. It includes a detailed cost model for each service, monitors consumption by LOB (line of business), offers some demand planning features and provides financial reporting.  This is often referred to as the IT Financial Management approach.

When implementing service costing, you can expect the following results:

  • Costs are aligned with consumption, enabling better user decisions (aka demand management) and business analysis such as product or business unit profitability.
  • Resources focused on activities valued by the business and wasted spend are eliminated through cost transparency and technical decision support.
  • Standardized solutions and economies of scale are improved as the true costs are identified
  • Processes and measurements assist in prioritizing activities, benchmarking, and managing and sustaining improvement activities.
  • The IT team’s contribution to overall business profitability are improved.
  • Continuous improvement programs enhance service quality and lower unit costs.

Unit Cost Management is a discipline focused on improved operational management. Service Managers can develop a more effective management role over their offering, managing both costs and revenues. There is clear visibility of redundancies and non-valued service. Greater efficiencies are seen in work management and problem resolution leading also to improved customer service. Identification of cost drivers that create a language for interaction between business and IT. Clear and efficient communication leads to improved planning and implementation of offerings aligned with business requirements.

Implementing a service catalog based on service cost modeled services with a disciplined cost management process can foster a clearer understanding within the business of value delivered by IT.  Charges (prices) are aligned to business controllable consumption, resulting in better decisions.

These types of activities provide a thorough examination of all services and functions being delivered. The IT services and functions are then reviewed by the internal consumers to validate the business value received. Non-value-added services are changed or eliminated. An IT Financial Management Program (including a service catalog, service costing, unit cost management and even chargeback, etc.) will offer the customers the opportunity to influence supply (the IT spend) by controlling the demand for the services. Corresponding cost transparency reduces the need for one-time cost reduction initiatives in the future and leads to continuous process.

Cost savings will be generated and available to invest in new projects or improvements and funds will be available for higher value projects and activities. By running IT more like a business, you’ll gain greater cost transparency, understanding, and business alignment to support operational improvements and corporate changes in the future.

Think of the number three today and how you can create your own magic with your IT activities.

 

 

Photo credit: www.rockiesventureclub.org

Customer-Service

Customer Services Best Practices (Don’t overlook your most vital asset – your CUSTOMERS)

Guest Author: Robert Bracco, VP of Client Services for ComSci at Upland Software

 

What can I say about Customer Services Best Practices that has not been said before?  All of us have heard a hundred times how companies are customer focused, care about their customer base and go above and beyond to ensure a customer’s expectations are met.

Establishing Customer Service “Best Practices” is important to every organization. Today’s leaders must realize there is no magic bullet that will solve all of the customer problems / concerns. The key aspect in any good customer facing organization is your ability as a leader to listen to your employees and customers, understand what they are faced with day-in and day-out, and make the necessary adjustments to your operational guidelines to ensure your staff has every available tool to make the customer’s experience (and staff) the best.

All too often, I’ve seen Customer Service Leaders make the mistake of establishing a “one size fits all” Operational Guideline within their organization, assuming it will work for every scenario then turn a blind eye on making refinements to the process by not listening to their most valuable asset, the customer.

As leaders, we are always willing to make adjustments to our policies and procedures based upon market demand but more often than not, leaders make the mistake of not listening to their customers and making the necessary adjustments needed to empower their employees to achieve customer success.

Let’s face it, your customer is your single most important asset and as a leader, you must pay close attention to what they are saying.

Many leaders tend to overlook their Customer Service Teams and not engage with them to solicit input on what the customers are saying and looking to accomplish.  Your team has “heard it all and seen it all” so why wouldn’t you as a leader listen to their input /suggestions to take action, modify policy and procedures with the end goal of achieving customer success? Leaders who engage their teams on a regular basis, work to understand their customer interactions and immediately develop solutions to better aid their Customer Service Staff in achieving success, have a much higher customer satisfaction rate than those who do not.

Good Customer Service Leaders recognize the importance of establishing a solid operational foundation but at the same time remain hyper-focused on constant evolvement of their policies through direct input from customer interaction with the Customer Service Team.  As leaders, it is incumbent upon us to ensure the success of our Customer Service Team through continual communication, feedback and suggestions by the employees on how to improve Customer Service and our ability to provide each team member with the necessary “toolkit” needed to drive success in ever interaction with our customer base.

As a result, your team will not only feel that you as a leader understand their challenges, but they will also see firsthand how their input and suggestions make a difference. This becomes evident in every interaction your team has with your customer base and is ultimately what enhances your Customer Satisfaction moving forward.

 

 

Photo credit: bransononline.com

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

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?