For many companies, information technology (IT) is a mysterious black box. It’s easier to quantify what goes in than what comes out. And as far as tracing IT costs back to individual business units or their services or functions, the struggle intensifies exponentially.
While achieving effective IT financial management remains elusive for most organizations, continued pressure on revenue and margins has made the need for effective management of what is one of an organization’s largest expenditures more important now than at any point in history. The traditional approach to providing IT cost transparency has been the smearing of IT expenditures across the organization or to base costs on IT services, which the business rarely identifies with or accepts as accurate. IT Cost Transparency (ICT) is a new way to achieve accurate and business oriented IT cost transparency that transforms the relationship between IT and the business into a mutually beneficial partnership.
ICT manages IT services, assets, resources, and activities in a manner that allows the IT function to track and model the total cost of these correlated activities back to specific business functions or activities; enabling the business to answer questions such as these:
- What are the IT costs for my day-to-day business operations?
- How will those costs be affected by introducing a new product or service?
- What business services or functions are actually achieving a return on investment?
ICT can also help clarify how IT and the business align, eliminate the mystery around what is a service, and ensure meaningful and accurate chargeback or cost allocation to the business.
The foundation of effective ICT
What is required to achieve effective ICT? The maturation and integration of Information Technology Service Management (ITSM), Information Technology Asset Management (ITAM), and Project and Portfolio Management (PPM) frameworks all provide critical foundational metrics and analytics that are necessary to achieve ICT. Where ITSM defines the costs of IT services, ITAM defines the costs of IT assets, and PPM provides program, project, and human resource costs. While this foundational information is critical, it is not aligned and there often is no common lexicon between ITSM, ITAM, and PPM to allow the convergence of these frameworks. This is accomplished through Service Blueprints.
Service Blueprints are a logical association, grouping, or mapping of assets and their interrelationships and dependencies in a way that has relevance to an organization and enable business recognizable activities or functions. They also provide the ability to view IT expenditures and investments through the lens of business activities and enable the organization to understand and predict the effect of business behavior on these costs.
IT Cost Transparency is truly transformative and provides both IT and the business the information, processes, and tools required to form a partnership for effective IT financial management.