BlogWhere IT Financial Management (ITFM) and Telecom Expense Management Connect

Where IT Financial Management (ITFM) and Telecom Expense Management Connect

March 2, 2017, Expense Management

Written by Scott Davis, VP of Marketing

In its recently published Market Guide for IT Financial Management, Gartner discusses the benefits of identifying the right ITFM tools to allow leaders to more accurately capture, communicate and manage the total costs of providing IT services. The release of this report creates a great trigger to discuss how IT Financial Management and Telecom Expense Management (TEM) fit together.

The report itself drills into the benefits and the key vendors.  At its core, Gartner notes that ITFM tools enable organizations to increase cost transparency, improve budgeting and forecasting, and ultimately quantify IT business value.  The desire to accomplish these goals is underscored by the fact that IT has a significant amount of pressure pushing on them, but also explains that many IT departments are slow to adopt the myriad of alternatives in the market due to cultural resistance, complexity to set up, cost, and the time and resource-intensive nature of tool implementation.

Let’s simplify it: 

Reasons to do ITFM Why IT Depts. are slow to adopt
Increase cost transparency Cultural resistance
Improve budgeting and forecasting Complexity to set up
Quantify IT business value Investment costs
Time and resources-intensive nature of implementation

There is a push / pull relationship with the desire to create this kind of transparency.  Assuming you can get past cultural resistance, the main drivers behind NOT implementing an ITFM solution focuses around the challenges of getting it up and running.  So this begs the question:  Is there an easier way to start ITFM, without the massive investments of time and resources of pure play vendors?

Gartner mentions that Telecom Expense Management vendors are an option to support IT Financial Management. They accurately call out that Expense Management performs some, but not all the activities that a pure-play ITFM solution would cover. Let’s dissect that further:

Pure-Play ITFM tools accomplish some very specific tasks:  

  • IT budgeting/forecasting/variance analysis
  • Cost optimization
  • IT project financials (business case/tracking costs/benefits)
  • Performance metrics
  • Allocations (or showback) of costs
  • Benchmarking
  • Chargeback to recover funds

Here are the tasks a traditional TEM solution will perform (as it relates to ITFM):

  • Cost optimization
  • Performance metrics
  • Allocations (or showback) of costs
  • Chargeback to recover funds

TEM solutions will do some light budgeting as well, however, more typically they create the source data that is sent to an ERP system that then feeds into an ITFM solution.

Where ITFM and TEM Connect

Pure play ITFM vendors typically pull their data out of the ERP system’s General Ledger. They are able to pull that data because it’s stored there. The GL is like a giant accounting repository for all the source systems that feed data into it. Telecom Expense Management vendors are one of the sources for that data. So what a pure play ITFM solution does is pull the cost data that a TEM vendor has performed all the calculations on, and enter it into their ITFM solution.

While TEM solutions have the ability to go deeper into the data (because they are the source system), they are often looking at very specific IT assets. A TEM solution will cover telecom, mobility, cloud and unified communications. They’re typically strong in the asset management category, and Calero in particular has the ability to manage all kinds of assets (telecom, IT, hardware, cloud, and anything that can be given a unique inventory code).

So why talk about TEM Vendors vs. Pure Play ITFM Vendors?

According to a recent Gartner study, communication services are forecasted to account for roughly 41% of overall IT spend globally in 2017. That’s a fairly large portion of the overall pie. Combine that with the reality that communication services are among the most difficult of the total IT spend to track accurately, and there begins to be a compelling reason to apply financial management practices to communications services first.

If your business is like most enterprises, you likely have a TEM solution in place. If you’re a Calero customer, you’re able to add some ITFM capabilities right now. Calero supports many customers with ITFM capabilities. A great example is The City of Dallas that manages all their IT assets (even those that go beyond traditional communications services like hardware, software licenses, etc.) in their Calero solution today. In fact, the City of Dallas shared their story during a recent Calero World Online session, showcasing how they use TEM to manage finances, control costs, and forecast spend.  You can listen to the whole session here.

Once an enterprise understands whether they can overcome those cultural challenges, and they decide they want to double down on ITFM, it’s easier to get a pure-play ITFM solution up and running. In fact, Calero is a big fan of pure-play ITFM vendors. In addition to the added functionality mentioned earlier, enterprises that use a TEM solution as a direct source to their pure play ITFM solution gain solid benefits including:

  • Continuity of data from their early TEM-only ITFM approach
  • More details and controls to make changes
  • Direct use of data versus a map and un-map process

If you’ve got an existing solution, some of the Calero customers have found it’s a lot easier to add to it than to try to implement something entirely new. By entering ITFM from this angle, they have a lower barrier to cross regarding implementation and labor costs. They have also added the ITFM abilities with relative ease, and are quickly able to understand whether they’re able to get past the cultural challenges some enterprises face.

Scott Davis Bio