What is Technology Business Management (TBM)?

Every corporate function— sales, manufacturing, human resources — has a business management solution today except for IT. Sales executives have a Customer Relationship Management solution from Siebel or Salesforce. Manufacturing executives have an Enterprise Resource Planning solution from SAP or Oracle. Human resources executives have a Human Resources Management solution. Given the strategic impact of IT to both the top and bottom line of a company, the time has come for a solution to help CIO’s and IT executives run IT like a business.

Technology Business Management is an emerging category of software solutions designed to help CIOs and IT executives manage and communicate the cost, quality and value of IT Services.  TBM brings the best practices of financial and performance management evolved for sales and manufacturing and applies those to the complex environment of IT.

The Core Principles of Technology Business Management

The core principles of TBM are very similar to core principles of manufacturing or sales. IT is responsible for delivering to the business units a core set of IT products or services.

Cost Transparency

IT leadership must drive transparency into the total cost of delivering each IT product or service. This includes defining and identifying the core cost drivers of the IT service or product. The TCO of each service is highly analogous to a cost of goods sold (COGS) in a manufacturing environment. This deep understanding of unit costs and cost drivers empowers IT managers to make better cost-based decisions and surgically reduce cost while improving service quality.

IT must establish transparency with their business units by delivering a Bill of IT or “pro forma invoice” on a regular basis. This Bill of IT should make clear to the business unit what IT services they consume and the cost and quality of those services.

Manage Performance, Make Trade-Offs

IT leadership must marry the TCO of IT products with deep utilization and quality of Service information. This is the best practice of Performance Management from supply chains.  This helps IT drive up the return on existing assets and drive down unit rates to business units. It also lays the foundation for a robust dialogue with the business units on cost and quality of IT services that drives trade-offs based on business priorities.

IT must benchmark the TCO of their IT products and services rigorously against industry peers, similar size organizations and internally between and across business units. This process establishes both an objective measure of IT efficiency and effectiveness and identifies opportunities for focus.

Continuous Improvement and Planning

IT must continuously identify opportunities for operational optimization. This includes leveraging third party services and cloud services, ongoing labor management and service innovation, consolidation and retirement. After a decision, IT must track the cost and performance results to ensure projected ROI is achieved.

IT must become more agile by automating and continuously managing the budget, forecast and plan of IT. This allows for rapid response to changes in company strategy or economic climate. It also cements the alignment of IT with the business on an ongoing basis.

Why TBM - The Business Pressure to Transform IT

Today IT Leaders have to do much more than manage technology. They must transform their organization and run IT as the business critical organization that it has become. Tighter budgets, increasing competition and the shift to shared services models, accelerated by technologies like cloud computing, virtualization and SaaS have made it more complex for IT to manage the cost, utilization and performance of IT Services needed to make and communicate sound business decisions.

The end result of all these changes is a new economic reality for IT. Yesterday’s IT cost structure was highly fixed and capital intensive. Most business units owned and operated their own IT, so cost allocation and performance management were not an issue.  IT spend was relatively small.

Tomorrow’s IT economic environment couldn’t be more different. It is moving to a highly centralized, virtualized infrastructure with high return on capital and a fundamentally indirect cost structure. IT will leverage infrastructure as a service and cloud providers for surge capacity shifting IT into a much more variable cost structure that must be planned and managed. IT services and products all leverage shared services making costing and allocation much more difficult. As demand scales monthly and seasonally with consumer behavior, IT billing can shift month to month and requires constant management of costing.

Technology Business Management –Managing the Business of IT

To meet these demands head on and successfully transform IT into a well managed, world class service provider, CIOs must move beyond managing their organization via spreadsheets and ad-hoc reports. 
A comprehensive Technology Business Management (TBM) solution achieves just that.  It gives IT and the Business visibility into the cost and performance characteristics of IT Services and the organization that delivers them.  It enables IT leaders to make more effective ROI based decisions and it gives CIOs the ability to articulate IT value in the business language which their peers understand.

Now is the time for CIOs to lead this IT transformation and a comprehensive TBM solution is the business management system they need to enable their organizations to follow.