Colin Rowland, VP EMEA at Apptio Software explains in this guest blog. Apptio provides businesses with information about the total cost of IT and outsourcing projects. Its software is often used by businesses to help them decide whether outsourcing is value for money.
Facebook, Microsoft, Cisco, Google and Starbucks are already customers.
Seeing is believing when it comes to IT costs
By Colin Rowland, VP EMEA, Apptio
"Modern business totally depends on technology and so the importance of the IT department has grown rapidly, accounting for more and more of the budget. In IT we are guilty of talking about 'bridging the gap' and 'aligning' business with technology, to 'run IT like a business' - but what exactly does that mean? A traffic light system based on how your technology is running? Not really.
In my opinion a green light is just a way of covering backs or giving a somewhat meaningless reassurance that the system is working, without providing any actionable feedback to the business managers.
In reality, for most businesses I have worked with, making sure they get absolute value from their technology requires much more complex, far reaching analysis than simple traffic lights. With a £7.6bn overspend on NHS IT and HP writing off $8bn as the result of failed contracts by its EDS subsidiary - it's clear how easily IT costs can spiral out of control.
In order for the maximum value to be gained from technology, decision makers need to have access to all the data they can on how their IT is selected, managed and outsourced. Three or four years ago business was solely concerned with the top line but tightening budgets and a focus on cutting expenditure by finance departments has brought welcome scrutiny to line items of cost.
So the next question becomes how do we determine which solutions are of 'real value' to the business? The answer to this is Transparency - the ability to arm decision makers with an understanding of the cost implications, functionality and business value of every scenario. In turn this provides the ability to choose the solutions which are the most suitable, based on a full understanding of not only the cost implications, but the timescale, the skillset and investment required.
By having a comprehensive list of options companies are able to create the IT supply chain which is most suitable for their needs, rather than spending lots on off-the-shelf packages in isolation which in reality are often less cost effective.
For example one of our customers had outsourced a considerable amount of its servers to a third-party provider. However the pricing data and performance metrics were sent to different departments, meaning the company had no transparent view of the service it was receiving. When it was finally able to view the two factors together it discovered it was buying more services than required, in fact the company was only using 15% of its servers. This translated to a waste of $1.6million of capacity each month - accost which has now been avoided thanks to a transparent reporting system.
Having access to the whole picture gives you the ability to weigh up supply versus demand and gain better understanding of which departments need support and which are overspending. The aim of transparency is to change behaviour on a companywide scale, and begin budgeting and forecasting based on actual business demand - enabling business to reduce costs while still being effective.
For those who fear a backlash from their IT departments, rest assured that in my experience IT have been desperate for a change. They want to work with the best and most effective systems but many have been left, over the years, with just a few simple levers to pull. Transparency is not just rewarding for finance, it also arms IT with all the data they need to be able to argue for changes or improvements.
As technology becomes increasingly complex and integrated with core business functions, the need for transparency will grow ever more important if solutions are to remain cost effective. By setting a president of keeping visibility on technology contracts, business can effectively change behaviour for maximum value. Be sure to educate yourself to the options available because when it comes to IT what you don't know can cost you."