1. Technology Business Management
TECHNOLOGY BUSINESS MANAGEMENT
EXECUTIVE SUMMARY
This management summary condenses the first part of
chapter two of Technology Business Management: How
Innovative Technology Leaders Apply Business Acumen
to Drive Value, an eBook published by the Technology
Business Management (TBM) Council. It examines how
the implementation of TBM often accompanies a broader
transformation of an IT organization, positioning it to be a
better business partner. This requires the organization to
define a unique value proposition, deliver services aligned
to that value proposition, and manage those services as
an investment portfolio.
Build Your Foundation Based on Value
Technology Business Management (TBM) is a practical,
applied approach for maximizing the value received from
every dollar invested in IT. At the core of TBM is the TBM
Framework, a decision-making methodology that helps
technology leaders and their business partners collaborate
on optimizing how IT dollars are spent. Relying on
transparency in cost, quality, and demand for technology
services, the TBM Framework enables key stakeholders
to “speak the same language” in determining the tradeoffs
needed to optimize run-the-business spending and
change-the-business investments.
The TBM Framework is built on a foundation that defines
our technology business model, the services we provide,
and the roles and responsibilities essential to optimizing
value. But to define any of these, we must first define
our value proposition. This is essential because the value
we promise to deliver drives our technology business
model and how we define our services, refines what we
should expect from our TBM-related decision making,
and determines what constitutes success or failure for our
technology organizations.
Many technology leaders, corporate leaders, and
business partners mistakenly assume that their
technology organization’s value proposition should mirror
their corporate strategy. Such thinking stems from failing
to understand or communicate how technology will help
the business succeed. Instead, your value proposition
must clearly articulate how you will enable your business
to execute on its corporate strategy.
Your value proposition must also be truly unique. You
may possess strengths in safeguarding customer
data, be in a position to deliver end-to-end services
needed by the business, or be able to deliver
custom business applications based on an intimate
knowledge of your business and customers. If you
have such advantages, you should use them to
define your unique value proposition. Asking your
business partners the following questions can provide
additional insights:
• Why do you source services from my organization
and not a third party? Why not build or source
your own technology-enabled services and
applications?
• What do we provide that you cannot get elsewhere?
What is unique about the services we deliver?
• How do we help you execute on your corporate
strategy? Do you consider us a business partner or a
service provider?
Your Technology Business Model Depends on
Your Value Chain
TBM identifies four technology business model archetypes
based on organizational focus and business value. These
elements are highly correlated: an internal focus with
an emphasis on assets and costs creates little unique
business value, whereas an external focus with an
emphasis on delivering business services and capabilities
creates substantial unique business value.
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Build Your Foundation Based on Value
management summary

2. Technology Business Management
Consider a simplistic value chain for a technology-enabled
business process, as shown in the center of Figure 1. In
this value chain, business value is created in four layers:
• We start with resources that we procure, such as
hardware, software, labor, and facilities.
• We deliver technology services by using our expertise
to combine and deliver these resources.
• We deliver business services by adding value to these
technology services through consulting, training,
custom development, and so on.
• Finally, we deliver business capabilities by using
these business services to generate revenue, reduce
costs, increase productivity, or otherwise improve
corporate performance.
Along the left side of the graphic, you’ll find the
corresponding technology business model archetypes:
• ExpenseCenter.Thismodelischaracterizedbyafocus
on cost containment and a lack of service orientation.
It is the least connected to business demand and is
usually funded as a percentage of revenues, based on
headcount, or through a baseline budget adjustment.
• Service Provider. This model is characterized by the
introduction of a services portfolio and is well suited
for shared services organizations that must serve the
needs of multiple business constituencies. Service
providers are often funded through chargebacks for
services (or centralized budgets) that are based on the
amounts and qualities consumed by business partners.
• Value Partner. This model is characterized by an
external focus. It requires becoming a trusted business
partner, which can be achieved by establishing a
governance program that enables alignment of your
IT investment portfolio to business goals; conducting
regular reviews that differentiate your services and
articulate their unique value; delivering complementary
services (such as business process analysis) that
demonstrate your organization knows the business
and not just its technology; and meeting agreed-upon
service levels and other core requirements.
• Business Driver. This model could be considered the
one that is not IT. Instead, these organizations truly
are the business—that is, the products or services
delivered to external customers are largely based on
business technologies (think Facebook, Google, and
Salesforce.com).
Which Model Is Right for You?
The expense center model is from an era when technology
was less crucial to corporate strategy, and is inappropriate
for any organization that desires to be a valued part of the
business. For leaders of such organizations, the service
provider model is an excellent start toward the delivery of
greater value. However, this may only be a step in the right
direction, as service providers are increasingly at risk of
being replaced in whole or in part by external providers.
Value partner is the least dispensable model for a traditional
IT organization. At this level, you have earned a seat at the
table alongside your business partners by demonstrating
customer intimacy and business acumen that, in turn,
enable you to deliver substantial unique business value.
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Build Your Foundation Based on Value
Figure 1. Simplistic value chain for a technology-enabled business process.

3. Technology Business Management
TBM is equally applicable to the business driver model,
even though it falls outside the domain of traditional IT
organizations. Many TBM Council members represent
such organizations, which still provide excellent examples
of practices that should be applied by more traditional IT
organizations, such as a services orientation and a clearly
defined unique value proposition.
The TBM eBook provides an interactive tool to help you
decide which technology business model applies to your
organization, along with the ability to compare your answers
to those of your industry peers. It can also help identify
potential issues that may prevent you from being effective in
your chosen model.
Maximize Business Value with Your Services
All of the “appropriate” technology business models—
service provider, value partner, and business driver—dictate
a services-based approach, which begins with carefully
defining a portfolio of services. This is important because
the services we provide and the way we deliver and support
them determine our value to the business, drive our resource
and skillset requirements, and dictate our cost structure.
Does this mean that Technology Business Management
relies on defining our services? Not entirely. The disciplines
of TBM, such as understanding and managing true cost and
quality, have been adopted by organizations that have not
developed a service catalog. However, it is often difficult
to link those technology decisions to business outcomes
without a services orientation.
Defining Your Services
In our simplistic value chain, we differentiate technology
services from business services. But what’s the difference?
Delivering a business service is characterized by collaborating
with business partners to improve a business process. It
depends on a degree of business intimacy that is not required
for delivering technology services. Delivery of a business
application is a good example. Almost any technology
provider, with little or no knowledge of our business
processes, can deliver and support a business application
as a technology service. However, by collaborating with
business partners to understand their processes and drive
continuous improvement as an integral part of delivering and
supporting the application, we can deliver a higher-value
business service.
Regardless of whether a service falls into one category or the
other, we can add value to it in several ways:
• Designing and packaging the service, including
negotiating and documenting service levels.
• Sourcing the required resources in a manner that
balances cost, quality, and sourcing-related risks.
• Costing and pricing the service, which enables you
to optimize unit costs and advertise your rates to your
business partners to influence demand.
• Assessing demand by collaborating with business
partners to translate business plans into resource
requirements.
• Supporting and monitoring the service to ensure that
business partners and end users receive the agreed-
upon value and thus remain satisfied.
• Billing or charging for the service based upon negotiated
rates, consumption, or other factors.
The TBM eBook provides an interactive tool to help you
clarify which services your organization provides and the
activities you perform to add value for each service. You
can use the tool to evaluate how your services map to your
technology business model, identify discrepancies that may
inhibit value delivery, and compare your answers to those of
your industry peers.
Assessing Service Value Based on Business Strategy
After you’ve defined your services, you should assess them
based on their value—that is, based on how well they help
your business partners execute on their business strategies.
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4. Technology Business Management
We recommend a qualitative approach, in which your services
fall into one of three business value categories:
• Differentiator.Theservicesupportsbusinesscapabilities
that significantly contribute to a competitive advantage.
The service itself is unique and is difficult for competitors
or external service providers to replicate.
• Advantageous. The service supports business
capabilities that provide a competitive advantage, but
the service itself is not unique or difficult for others to
replicate.
• Essential. The service supports needed business
capabilities that do not provide a competitive advantage.
Managing Investments in Services as a Portfolio
Investing in services based on their contribution to business
strategy means that we must manage them as a portfolio—
much in the same manner as an investment portfolio. The
goal is to maximize the collective benefits provided by
your portfolio investments while managing risk through
diversification and tradeoffs. This requires deciding how
to invest and how much to invest in each service, which is
accomplished by working with business partners and other
stakeholders to ask the following questions:
• What business value do we expect from each service?
How does each service fulfill our unique value proposition
and contribute to our corporate strategy?
• For differentiator services, what are the goals of our
continued investments? Should we increase or decrease
our investments in each of them?
• Are our services cost-effective? What changes can we
make to improve the economics of delivering services?
Should we outsource certain services or certain parts of
a service?
• Should we rationalize essential services to free up
investments for new services, improve other services, or
lower the cost of the portfolio?
• What services are needed to satisfy new business
requirements?
TBM uses a service portfolio investment matrix (Figure 2) to
help quickly assess a portfolio, communicate with business
partners, and drive investment decisions. By plotting each
service on the matrix according to its business value and
financial performance, we can place each service into one of
four primary categories: divestment candidates, subsidizers,
loss leaders, and top performers. (Financial performance
can be assessed by using techniques such as activity-
based costing, unit cost benchmarking, cost recovery, and
comparing costs to similar services from external providers.)
The matrix also captures two additional attributes for each
service: demand profile and life-cycle stage. Growing or
declining demand for a service indicates business adoption
and has capacity implications. Similarly, by showing
whether a service is in the process of being developed or
is being retired, the matrix indicates potential changes in
available funds.
By providing this information, the service portfolio
investment matrix intuitively facilitates planning and
decision making. For example, when used during value-
based conversations with business partners, it can
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Build Your Foundation Based on Value
Figure 2. TBM service portfolio investment matrix.

5. Technology Business Management
help identify those services that are consuming large
investments yet are failing to deliver unique business
value. The matrix can also be used to help decide whether
to move services up and to the right in the matrix, reduce
investments in those that cannot be moved, and retire
services that are not driving value.
The service portfolio investment matrix is an important
tool. However, its impact on business value depends on
our ability to make and execute the decisions it helps
facilitate. In other words, properly managing our services
portfolio depends on our people—a subject we’ll cover in
our next management summary.
Next Steps
Using the tools provided in the TBM eBook, work to create
or clarify your unique value proposition and devise a plan
to deliver the right services. Meanwhile, bear in mind that
TBM applies to three of the four technology business
models. The essential ingredient is your services. If you
currently operate as a service provider or are working
to become one, TBM can help you define or refine your
services and deliver greater unique business value.
As Technical Advisor to the TBM Council, Apptio is
committed to the continued development and adoption
of TBM. Apptio has deployed its TBM software at
more than 120 enterprises, including industry leaders
such as Bank of America, Boeing, JPMorgan Chase,
Microsoft, St. Luke’s Health System, and Swiss Re. If
you’re interested in learning more about TBM or Apptio’s
approach, Apptio can:
• Introduce you to the TBM Council and/or connect you
with TBM Council members.
• Provide access to the TBM Index™, an interactive
assessment for comparing your business practices to
those recommended by the TBM Council.
• Review your TBM Index baseline to help you create an
accelerated TBM roadmap.
• Show you how Apptio has helped innovative companies
in your industry automate TBM to manage the cost,
quality, and value of their IT services.
To learn more, contact Apptio by visiting
www.apptio.com/company/contact or sending an
email to info@apptio.com.
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Apptio is the leading independent provider of on-demand Technology
Business Management (TBM) solutions for managing the business of
IT. Apptio enables IT leaders to manage the cost, quality, and value of
IT Services by providing deep visibility into the total cost of IT services,
communicating the value of IT to the business, and strategically aligning
the planning, budgeting, and forecasting processes. Apptio’s TBM solutions
play a critical role in helping companies accelerate IT investment decisions,
cloud initiatives, strategic sourcing improvements, and other key business
initiatives. Global enterprise customers rely on Apptio® products and
services to reduce costs and align IT with business priorities. For more
information, visit the Apptio website or the Apptio blog at www.apptio.com.
Build Your Foundation Based on Value