Time To Shine A Light On IT Costs
Monday 16th May, 2016
There was recently a fantastic viral internet cartoon featuring a teenage duck yelling to its parents that it “can’t find it anywhere!”, with ‘it’ being a ball positioned right next to the teenager and clearly labelled “IT”. But whilst Brian Gordon (the creator of the cartoon) was targeting his humour at his parents, what he may or may not have realised is that his labelling of the ball “IT” is a beautifully observed satire of IT departments of many organisations.
IT departments that have created full visibility of their estate are rare beasts indeed. I am no longer surprised when clients tell me they don’t have a list of the applications they support, or are unable to identify the businesses that are impacted by server xyz, or can’t align their IT components to Business Services. It’s disappointing, yes, but so prevalent that I consider that the ‘norm’ and am now pleasantly surprised when good operational MI exists.
The IT Cost Conundrum
But despite this, I still can’t quite fathom why IT organisations can’t get visibility of their costs. Even though IT budgets are showing signs of recovery (40% of organisations have seen an increase in their IT budget over the last year) and CIOs are reporting their focus is moving from cost saving & commoditisation to business transformation (Source: Coeus Consulting CIO and IT Leadership Survey 2016), IT budgets are still under massive pressure – in fact, that pressure has increased with the need to deliver on digital, big data and other key business imperatives.
CIO's, like never before, are having to find ways to shift their focus (and funding) from running the business to growing the business, giving rise to concepts like Two Speed IT and IT as a Business.
This requires hard decision making on investments and cost rationalisation opportunities – but how can the CIO make meaningful decisions without understanding the full picture?
The Pursuit of Transparency
IT financial transparency is, however, still a mythical beast to many organisations, meaning even simple requests can result in a chase around for information.
For example, I was recently asked to model the impact of a repeated service failure against some proposed contractual service credits. The credits were easy enough to calculate – with one exception. They relied on knowing the cost of providing WAN to the site that was affected. Without exaggeration, this needed 102 (one hundred and two) reports from the supplier, plus a suite of work to identify collate, interpret, and understand them. And then it was to imperfect results.
This pursuit of transparency has a number of classic ingredients that many organisations will find painfully familiar:
- Chasing Tails: Circular chasing for information on the promise that the next person referred to definitely knows how to get that information
- The Literal Response: Eventually receiving the promised information to find it only covered part of the story, resulting in the need for further requests until you actually learn exactly how to ask for the information you need
- Data Despair: Realising (often late in the process) that the information promised has gaps and quality issues
- Seeing Double: Multiple versions of the truth (e.g. finance and the supplier extracts differ)
So what can be done?
The good news is plenty. Key activities of successful cost transparency programmes are:
- Create the case for Transparency, including objectives (what are you trying to achieve? E.g. improved cost information; improved pricing, benchmarking) and use cases. Make sure you put someone on the hook to deliver it, and preferably someone in IT. Don’t just throw it over the Finance fence and expect that the resultant reports will align directly to your issues
- Create the Transparency Roadmap – it’s not going to all happen at once. Prioritise where to focus first (is it a sector of your spend – e.g. Infrastructure, projects, applications? Is it improved pricing to the business? Cost efficiency of today’s run spend, either to reduce total spend or free up resources for new investment elsewhere?)
- Identify Data Requirements – what information is needed to support the objectives? This is going to include financial data and operational data needed to make sense of the costs, such as service, asset, consumption and performance information
- Create a data model – this is the set of rules that will help you understand relationships between data – e.g. if spend is incurred by your Networks supplier, how does it relate to services, business units, programmes, locations or any other component required to support your objectives?
- You will also need to consider the tooling required to support the data model and the ongoing objectives. There’s likely to be lots of data and lots of relationships between the datasets. Excel is workable for smaller organisations or for one-off exercises – but considerations to dedicated toolsets should be given to help you manage it all
- The data quality is unlikely to be adequate to support all your needs – there may be gaps or inconsistencies that will need to be fixed, but don’t let this be a blocker
- Identify the critical elements that need to be fixed to support the model and focus your resources there, make them visible to ensure that sufficient focus is put on them
- Establish a business change capability – you may not realise it, but creating ongoing cost transparency will need new processes, new behaviours and a significant amount of communications and training. Otherwise, this becomes a one-time activity – handy for the here and now, but in a year you’ll be back to where you started
I’m not going to tell you it’s easy. You’ll need to prioritise resources and a level of investment to get there; the benefits may be intangible or at least, difficult to attribute directly to your investment in transparency; you’ll need to embed appropriate roles and culture to maintain the ongoing dataset and you’ll need to convince internal and external stakeholders to improve their input data to support your objectives.
But achieving cost transparency will provide a real platform for effective decision making that will help CIOs identify and drive cost optimisation opportunities, remove the guesswork from business cases, remove time and effort to identify and rework costs and, most importantly, ensure IT can support the growth and change objectives of the organisation.
The question is – can you afford to remain in the dark?