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Welcome to the third edition in our series on IT cost optimization. If you haven’t already, be sure to read parts one and two. In this post, we are going to discuss the second principle cited in Gartner’s recent publication “IT Cost Optimization Principles”:

Optimizing costs requires effective financial transparency across all aspects of the IT management lifecycle.

As mentioned in previous posts, the role of IT is changing. There is a pressing need to ensure that IT spending — which on average equals about 4% of top-line revenue — drives business value, financial performance and growth. To do so, IT organizations must support the enterprise’s strategic shift from the traditional mindset of backend cost control to one of collaborative and transparent growth enablement.

The Traditional Method for IT Transparency: The IT Bill of Services

The traditional method for IT to facilitate transparency is through a periodic financial report. The most common document for managing chargebacks is the monthly “IT Bill of Services” (ITBOS). The ITBOS is a financial snapshot of charges, services, and technologies deployed to help the IT service organization satisfy the client’s target service-level agreements. The ITBOS is often designed to address the following types of questions:

• What is the cost of services?
• Who owns each service?
• How much of the service was consumed?

More sophisticated ITBOS may also include insight into questions about where the service is deployed and when it was provisioned.

Why The ITBOS Is No Longer Sufficient

The conventional methodology of relying primarily on a linear financial report is no longer adequate. It fails to provide modern decentralized organizations with the actionable information they need to make timely decisions about technology investments. The typical ITBOS does not provide insight into underlying strategic questions such as “Why is the service required?” or “How effective is the service to enabling the intended outcome?”  The only way to achieve these objectives is to provide information that helps clients correlate ITBOS information with information inherent to their specific business unit.

Today, IT organizations find themselves more directly accountable for business results than they were ten years ago when IT was primarily perceived as a backend support unit responsible for managing technology. Now, IT must be able to help the overall organization understand (among others):

• IT spending % of revenue
• IT spending % of operational expenses
• IT spending per employee
• IT employees % of total employees

Analytics and the New IT Transparency

So what can modern IT organizations do to promote more transparency and help drive business growth and cost optimization? A new type of transparency must be created — one that helps both the IT team and the client consumer understand how each service meets expectations and business requirements.

IT organizations need to provide a range of intuitive and interactive insights that go beyond conventional financial dimensions. Client end-users need more in order to understand the factors affecting service delivery costs. Having accurate, current and actionable data is the key to a collaborative relationship between IT and client cost center managers.

This type of transparency should be considered fundamental to providing the service. Integrating relevant metrics must be considered from the initial service design. A few examples of the types of actionable insights that can help organizations with their IT cost optimization program include:

• How long does it take to process each type of service request?
• What is the cycle time required to provision a service?
• What elements affect the lead time and cycle time to provision a service?
• How do IT costs compare to peer entities across the organization and/or industry?
• What business objectives have been achieved with the deployment of services?
• What business objectives cannot be completed due to insufficient or inadequate services?
• What are the barriers to achieve further savings?
• What are the major opportunities for cost optimization and how should they be prioritized?

This is where best-in-class analytics solutions like Calero Insight Analytics are extremely valuable. Guided analytics can help organizations sift through vast amounts of data to answer questions like these and glean more meaningful insights using rich interactive data exploration and visualization tools. Analytics solutions not only tell the ‘what’, but also the ‘why’ — which is integral to strategic planning and making informed business decisions.

Check out the next edition of our blog series on IT cost optimization, where I discuss the third principle and how IT Financial Management must equal all other IT responsibilities in importance.