Technology and finance are often intrinsically at odds. In an enterprise, while IT focuses on keeping the business running and digital transformation efforts, finance is all about the bottom line, concerned with the cost center of an organization.
If something is going well in IT, or a project has a lot of added value to the business, it can skirt under the radar. So if a company renegotiates a contract and improves the cost of laptops, or delivers a storage solution that has a better cost per customer and lets a company scale faster, it remains below the surface.
But some tools allow for more visibility about what's happening with IT costing, such as products from Apptio, ServiceNow or Spiceworks. But more so than other products on the market, Apptio has helped create a movement.
"As these budgets get bigger, you want to have your decisions be based on data and facts about what's going on in the environment," said Ed Smith, CIO at Cox Automotive. "You want to manage by that. As companies become smarter, they need a tool like an Apptio to help us manage with leveraging that data."
In September, technology business management (TBM) software company Apptio went public, highlighting the growth potential of the TBM market. Its software helps a company's IT staff better manage business infrastructure technology and track costs.
"In many ways the CIO today has been relegated, in the enterprise environment, as a function that supports core lines of business."
Chris Pick
CMO of Apptio and president of the TBM Council
"What Apptio fundamentally did was create a software solution to do IT costing," said Alex-Paul Manders, TBM Practice Lead at ISG. "A lot of the old ways of doing IT costing was done with spreadsheets."
Apptio has had a big year and its technology is gaining traction. Part of that has to do with the methodology it helped create through the TBM Council, called the TBM Framework, which creates discipline where CIOs can run IT with business acumen.
The new model means that some CIOs are even starting to regard themselves as CEO of an IT services company within a company.
"In many ways the CIO today has been relegated, in the enterprise environment, as a function that supports core lines of business," said Chris Pick, CMO of Apptio and president of the TBM Council. "If I'm being provocative, the CIO and their IT teams are around changing the toner and the foundational things in your computer. We fundamentally believe that CIOs have real opportunity to change the business."
An origin story
When Pick joined Apptio in 2010, he inherited a CIO advisory board, which worked with the young company assessing its IT costing software application. The board helped inform the organization about what the product should do, how it should handle data and work in the enterprise.
About a year into Pick's tenure at Apptio, the conversation shifted to asking, "what if we could derive standards for the industry that would almost produce a generally accepted accounting framework for cost, and then later around value," Pick said.
In 2012 Apptio funded the creation of the TBM Council, a nonprofit established to help drive the mission of running IT as a business, creating a new way for enterprises to approach IT costing.
"With IT costing, you can drive any sort of transformational change from a technology perspective, but you can't do it just with technology," said Manders. "You actually need the alignment of your people, you need processes in place, you need some sort of vision from a strategic perspective."
The council sought to drive standards, educate the market on the principles of running IT with business acumen, and provide a way for CIOs and other IT leaders to learn.
"With IT costing, you can drive any sort of transformational change from a technology perspective, but you can't do it just with technology."
Alex-Paul Manders
TBM Practice Lead at ISG
Now, the TBM Council has more than 3,100 members, all of which have a budget and accountability for at least $10 million in IT spend. Its board of directors includes some of the leading CIOs in the industry, including Guillermo Diaz, SVP and CIO of IT at Cisco, Jim DuBois, CIO of Microsoft, and Jim Scholefield, the global CIO at Nike.
"Our fundamental belief is that there should be a CIO in every board room and why wouldn't that be the case?" Pick asked. "Every business today sees digital or digital transformation as a way to be more competitive, to increase margin, to launch new products and services."
TBM in action
When Smith joined Cox five years ago, one of the first things he did was start using Apptio and following the TBM methodology to help get a handle on Cox's IT spending, tracking which products a company is using and what comes out of them.
"Instead of just peanut-buttering our data center costs, I know which servers support which applications that represent which portions of the data center costs," Smith said. "If I really want to look at what are the speed bumps or the things that would prevent some of our technologies from scaling more effectively, you can't see that in the financials."
Recently, Manders worked with a multinational bank based in Mexico City, which was trying to drive its digital strategy. To fully execute its transformation, Manders helped them understand what they need to do from a cost transparency perspective with TBM as broader framework to support the CIO's digital initiatives.
"Technology is rapidly becoming the fabric of most industries and everybody expects it to work really smoothly and everything to kind of connect. They expect their CIOs and CTOs to not only make really good tech decisions, but good business decisions."
Ed Smith
CIO at Cox Automotive
Without understanding the cost structure in an IT department, CFOs can struggle with accepting IT costs.
"CFOs, a lot of times, when they lose confidence in their CIOs or CTOs, it's because they think that they could manage the technology investment better than the CIO," Smith said."Well, that's because they have a different angle on it. If the CIOs not watching the cash register and making decisions that are based on utilization of services and can answer sort of the basic questions about how technology is being used, they're just going to assume you're not doing it."
Sometimes there is a justified credibility gap in how CIOs are running an IT organization, because they don't necessarily have the data to make sure their organization is not doing wasteful things. But if the CIO gains more transparency on how costs operate within the IT unit, it can help stop departments from spending unnecessarily.
"Technology is rapidly becoming the fabric of most industries and everybody expects it to work really smoothly and everything to kind of connect," Smith said. "They expect their CIOs and CTOs to not only make really good tech decisions, but good business decisions."
