Demand and spending on IT have increased dramatically in the last 50 years—but the resources, skills, and methodologies that are needed so that IT can manage itself effectively and deliver more business value simply haven’t occurred. According to CIO Magazine’s “State of the CIO” survey, less than half of IT departments are perceived as a business partner or better.
If IT is going to manage itself like a business, it needs to raise its game—not an easy task, given it’s probably the most complex business function:
- IT controls a myriad of assets, applications, technologies, and skills
- IT provides complex products, services, and projects to a multitude of business users
- There is a large amount of indirect costs, such as supervision, infrastructure, and security, that’s hard to track
IT also struggles with costs across a number of areas:
- Reducing costs without compromising service levels
- Determining the total cost of projects, applications, and services once IT support is factored in
- Resolving internal dissent around cross charging
- Providing the right information to business units so they can make informed decisions about their consumption of IT services
- Identifying pockets of excess capacity within IT, if any
- Demonstrating to the business that costs are under control
Unless organizations understand how business needs drive IT expense and business users are given detailed invoices showing how cross charges are driven by their IT usage, then IT expenditure has a tendency to get out of control.
What Do Cost-Effective IT Organizations Do?
Typically, effective IT departments address cost challenges in three ways:
- Equitable cross charging of business units for their resource usage
- Monitoring of key metrics to show effectiveness and value
- Modeling and simulation to predict resource impact based on change (which is becoming more relevant with the advent of cloud services)
In turn, business units expect IT to make improvements in terms of transparency, focusing on the applications and services that provide efficient business value and optimize available resources.
Performance management applications help IT better prioritize and manage processes resources in the same way the business does. The challenge is closing the gap between where IT is today and where it must be to be a true business partner. Getting a handle on costs is a journey that requires reliable information and partnering with business users so the information is used for decision support. But you won’t get there overnight; you have to systematically work towards it!
So why bother?
The Benefits of a Systematic Approach to IT Cost Management
- Ability to identify and eradicate non-value-adding activities
- Action orientated information to better manage resources
- More complete information for making investment decisions—particularly for often-overlooked indirect costs associated with major projects
- Quick and accurate planning and budgeting visibility to help determine future resource requirements and funding
- Ability to identify excess capacity, eradicate it, or re-price services to make better use of it
For business users:
- Invoices that detail usage and charges for IT services, from which more informed decisions can be made to limit consumption of IT and eradicate unnecessary waste
- IT costs factored into business decisions
- Less unproductive bickering about cross charges
From an overall business perspective, these benefits mean a quick improvement in the bottom line through reduced IT spend and better support of business objectives.