This is a tale of the three-lettered acronym.
It starts with CFO.com, which was kind enough to ask me to join their recent webcast, The CFO Playbook on Performance Management: Realizing ROI with CPM Improvements. As the title suggests, acronyms played a big role. The webcast was a perfect opportunity to discuss how … okay, get ready for them … TBM (Technology Business Management)—the practice of measuring ROI (Return on Investment) on IT spending and tying it to business objectives—serves as a guiding framework for getting the most out of CPM (Corporate Performance Management) and EPM (Enterprise Performance Management), both of which are systems for monitoring KPIs (Key Performance Indicators). The value of the TBM framework, in leveraging CPM and EPM, is the conversation and the convergence it creates between IT and Finance.
In fact, the story of CPM cannot be told without TBM. Historically, CPM monitored KPIs in the Finance department, oftentimes along with business intelligence systems and software that incorporated functions like forecasting, budgeting and planning. The “enterprise” designator came into play as traditional CPM evolved to address functions across the entire enterprise and to incorporate data from multiple sources. When CPM is applied in the right context, it can deliver solid ROI and improved business processes. But at its core, CPM is nothing new.
What’s new is the integration of the different methods, and the addition of TBM to this trinity of acronyms is what brings corporations up to the next level in performance management and gives them much-needed competitive edge. Both CPM and EPM align strategy and frameworks and, like TBM, manage IT costs by incorporating operational data. As is the case with many things, the whole is more than the sum of its parts, and TBM rounds out the entire performance management initiative by bringing a deeper understanding of the connection between IT and the business and by promoting a higher degree of visibility of IT spend.
Despite the fact that Finance, IT Finance and IT are all working toward the same goal, alignment can be slippery. When an enterprise uses TBM with performance management—by aligning stakeholders, bringing IT spending into better focus, reducing duplicated efforts and allowing for better cost management—it can leverage the combination of software, people and process in support of its strategy. Without the clear map for stakeholders to work together that TBM provides, an enterprise will suffer from disconnected silos of information and duplicated efforts that get in the way of its objectives.
According to an ad hoc poll conducted with the audience during the webcast, the majority (44.9 percent) of respondents have no CPM system in place. Almost 43 percent said they have no plans to implement CPM, while 17 percent said they have an implementation underway, and 13 percent said they will implement CPM next year. Despite the tepid results, CPM is here to stay. It has shown again and again it offers a much more holistic approach to the integration of apps and data sources than legacy approaches.
To take full advantage of a CPM system, the CFO and the finance team must first determine how the organization will use business intelligence and analytics, how it will evaluate and implement the CPM system and how it will build a business case for making the CPM investment. For Finance and IT to work toward a common goal, Finance needs a say in what the IT team is doing and how it is producing metrics. Though much of the work needed to align Finance’s figures to IT’s metrics can be done with software apps within the IT organization, implementing TBM as a way to align KPIs, business initiatives and data governance and validation is the best way to bridge the gap.
When it comes time to decide on CPM software, both the CFO and the CIO need to know they can deliver metrics relevant to the company’s operating model. This happens by first realizing the effort is more than simply a software purchase. The multi-dimensional approach of TBM puts in place an effective combination of software, people and processes that begins by outlining a system of KPIs, validating the investment and benchmarking your goals and spending against that of your peers.
These methodologies and the software they incorporate can significantly advance an organization’s efforts to gain control over IT spend visibility. There are some common missteps to watch out for. Don’t assume a piece of software can tell you everything you need to know. People still need to manage and analyze the data and output. And while there are several good software options on the market, it’s important to understand that integration within the context of the software’s processes—and the visibility afforded by TBM—is crucial to positioning an enterprise for a holistic approach to strategic success.
For more insights contact me directly to discuss further.About the author
Alex-Paul works closely with enterprise leaders, IT finance managers and IT business unit leaders to help implement the discipline of Technology Business Management (TBM) into their organizations and optimize their enterprise IT. He advises both commercial and public sector organizations on the adoption of TBM programs, designs fact-based analytical strategies and supports broader IT transformation initiatives. His development of a strategic TBM multi-dimensional framework addressing people, process, data, analytics, technology and strategy is part of ISG’s industry-leading set of market best practices and methodologies. His thought leadership has been featured in CIO Review, MiddleMarket Executive and the TBM Council’s book The Four Value Conversations CIOs Must Have with Their Businesses.