IT/Business Cost Transparency – an Emerging Imperative

The idea of IT cost transparency has been a longstanding – if elusive – priority for CIOs.  In the context of enterprise IT operations, “transparency” can be defined as insight into how business usage impacts IT costs and, more specifically, what IT resources are being used by particular business practices.

Today, we see the need for complete cost transparency and business alignment entering a critical phase as businesses struggle with decisions on labor automation, analytics and cloud computing. In this environment, CIOs seek to and understand the underlying opportunities introduced by total cost transparency.

The good news is that multiple vendors are making significant investments to make cost transparency easier. One key area of focus has been to automate the hard work of collecting, normalizing, and reporting the detailed data that enables cost transparency. Organizations are no longer tied to multiple spreadsheets and weeks-long processes to understand the full cost of services. With automated data collection and deep analytics capabilities, organizations spend their time understanding the data, not collecting it.

These innovations are transforming traditional measurement practices.  Rather than taking a static, point-in-time perspective, for example, benchmark analyses can now leverage real-time data on pricing and trends in service delivery for ongoing planning and scenario modeling.

A higher level of cost transparency maturity will enable enterprises to greatly enhance their capabilities around “what if” analyses and gain insight into IT optimization areas that include comparison of revenue and investments in applications, portfolio rationalization, server consolidation and consumption management.   With these tools, organizations can create a common language between the business and IT to enable understanding of cost drivers and develop cutting edge demand and consumption management techniques.

What we see emerging is a “Bill of IT” that includes monthly true-up of IT costs, consumption management, detailed analytics on IT spend, critical insights on IT areas that exceed pre-determined limits, continued enhancements to the Service Catalog and on-going mapping of new IT services into the TBM model.  This makes it possible to clarify the longstanding mystery of chargeback and changes the discussion between the business and IT from, “Why is IT so expensive?” to, “How can IT better enable my business?”

My colleague Kathy Rudy and Chris Pick, CMO of Apptio, will be leading a session on cost transparency considerations and opportunities at ISG’s 2014 Sourcing Industry Conference.

About the author

As a partner and member of the Executive Board, Mr. Hall leads ISG’s Digital Strategy and all ISG Service Lines for the Americas. He also leads ISG’s Alliance group and is ISG’s Executive Sponsor to the TBM Council. During his time with ISG, Mr. Hall has led some of the company’s largest and most complex engagements with clients as diverse as United Airlines, Symantec, BP, World Bank, CEMEX and Motorola. He is a seasoned professional who brings considerable experience in emerging technologies to ISG clients. Prior to his position at ISG, Mr. Hall held senior roles at a number of renowned IT services companies, including Unisys and MCI. He also led large-scale eBusiness initiatives for technology solutions providers C-Bridge and CBSI and gained deep outsourcing and offshore software development experience as a delivery executive with Covansys. Mr. Hall co-authored Managing Global Development Risk: A Guide to Managing Global Software Development. He earned his degree in Computer Science from Regis University.