Technology Business Management (TBM) is changing the business view of ICT from ‘cost sink’ to accountable business partner and value provider, according to CSC Consulting’s Jonathan Jones and Harold Petersen.
The concept of running the enterprise ITO as a business-within-a-business is not new. Back in the 1990s, several large organisations hived off their IT departments altogether as separate new entities: think Melbourne Water (MITS, since acquired by Logica) and Amcor (Ferntree). Various State Governments have tried to centralise the ICT function across agencies over recent decades – with the NSW Department of Finance & Innovation currently leading with its NSW GovDC initiative, five years in development and launched this month.
Neither is the concept of chargeback for ICT services delivered to the business new. Over several decades, CIOs have struggled to account for the money poured into IT by allocating it against cost centres – from the detailed accounting of mainframe MIPS consumed by user, department and business units in the 1980s, to attempts to calculate the telephony costs of divisions that proved so challenging in the 00s, pre-VoIP.
Typical indicators of the need for change include:
- Business Units seeing IT as a cost sink, rather than a value provider
- Business Units consuming IT as though it's ‘free’, because they’re not accountable for what they use
- Organisations are unable to innovate, because their budget is trapped in ‘keeping the lights on’
- Too many fixed costs removing the agility to change course when needed
- Business Units’ adopt shadow or ‘credit card IT’ – just to get BusTech initiatives happening
- IT finding it difficult to speak the language of finance and business – and vice versa
- Difficulty in justifying the rationalisation of application portfolios, and hence their associated BAU costs and locked in support resources
If you can manage IT like a business – offering choices of services and clear trade-offs between cost and performance – then your customers will not only see the value of what you offer; they will naturally optimise cost and increase business alignment through prioritised strategic investments and the levers of supply and demand.
Creating transparency and enabling supply and demand levers is key to aligning your IT services to business requirements. When Business Units understand the true cost of what they’re using, they can optimise their IT cost allocation by reducing the demand for costly services they don’t need.
Technology Business Management or TBM has been around a number of years, as a discipline led by the TBM Council, an independently governed peer community of IT leaders who share a common goal of improving IT business management and delivering value to the business. The Council’s Board of directors includes the CIOs of Cisco, Microsoft, Nike, ExxonMobil and AON, among many others.
The principle of TBM is turning the CIO of an organisation into the ‘CEO of a technology business’. This is an agenda-changing transformation that, we firmly believe, will help firmly establish the ITO as a ‘value provider’ instead of a business overhead.
TBM is best known as a way to optimise the balance of ‘running the business of IT’ and ‘changing the business of IT’. Identified opportunities to reduce OpEx by 5% are a typical result of implementing TBM – with reductions in the region of 10% also experienced. An extreme example is an engineering firm that slashed its IT budget from $210m in 2014 to $170m in 2016.
Understand & communicate IT value
TBM enables ICT departments to transparently and fully understand their costs: such as cost per service and how they’re accrued by each business unit. It enables the ITO to clearly communicate these costs to the business in a language they understand.
Plan efficiently & productively
Based on that, the business can be better engaged to strategically plan their investment in IT, ensuring the applications and services provided are in sync with business priorities. A TBM capability subsequently enables the establishment of business aligned and prioritised Digital Strategies and ICT Strategies as well as subsequent monitoring and control of strategy implementation and ROI.
Optimise cost & investment
TBM is an important enabler to measure and benchmark operating models in different parts of the ITO. For example, it can be used to analyse the cost of service providers in a SIAM operating model. This assists in assessment and comparison of existing internal and external providers’ service levels; their contributions to end-to-end services versus their costs. Similarly, it can support transparent evaluation and selection of new providers or consolidation of existing suppliers. TBM can also help measure the success of new and potentially disruptive approaches and processes such as agile and DevOps.
Is TBM for you?
One way to think about TBM is ‘analytics for the CIO’ – an essential ingredient for any technology leader who wants (or needs) to move from being a cost centre to being recognised and measured for the value IT delivers the business. This is increasingly critical, with a recent CIO survey in the US finding that 54% of business executives feel IT is a ‘blocker’ to achieve business objectives. In Australia, Telsyte found two-thirds believe ‘hidden IT’ will soon outpace central IT services in terms of expenditure – with 5% reckoning it’s already higher.
The insights that come from TBM deliver the ability to overcome this dangerous state of affairs. For example, when reckless ‘credit card IT’ by business units where so-called ‘inexpensive quick-fixes’ become a costly service delivery or integration nightmare. In this situation TBM can show the true cost of credit card IT and how it compares to what is delivered in house. Conversely, analytics from TBM can also call out areas (engagement/delivery models, systems or locations) where the ITO has failed to meet the needs of the business in a timely and cost-effective manner and present options to improve this through optimisation or alternative sourcing.
Another way to think about TBM is ‘ERP for the CIO’, as it provides financial transparency over IT service models and detailed cost breakdowns across the organisation. In this role, TBM can be a door-opener for strategic direction – justifying and enabling rationalisation, optimisation and digital transformation.
Everyone in our industry agrees that the ITO must transform to better serve the organisation, regain control over indiscriminate and risky technology purchases outside its realm, and get on the front foot to lead – rather than merely react to – strategies for digital transformation of business operations. TBM has become the essential pre-requisite: what CIO wouldn’t want it?
In a future article, we’ll outline the steps to making TBM happen in your organisation…
CSC Australia has embedded TBM within its Digital Strategy and Digital Transformation practices. We offer strategic consulting and planning services for enterprises wishing to explore or implement TBM.
About the Authors
Based in Sydney, Jonathan Jones is a Principal Consultant with CSC Consulting and product manager of the CSC TBM offering. His 15 years industry experience includes consulting and developing new offerings in IT cost management. He has extensive experience in helping clients optimise and transform their businesses through the power of Technology Business Management (TBM) and Telecommunications Expense Management.
Based in Canberra, Harold Petersen is Director Advisory for CSC Consulting, responsible for overseeing ten National Practices in a consulting force of over 700. Specialising in SIAM, PPM, ITSM, Lean IT, ICT Strategy & Governance implementation projects and programs, his 25+ years’ industry experience includes Director for CSC Consulting in Singapore and Malaysia, Founding director of an IT Consulting firm, IT Service Delivery Manager for a major Australian bank and IT Service Executive for Asia Pacific accounts within a global outsourced services.