2. 3
According to Gartner
Cost Optimization and Cost Cutting
Are Not the Same Thing
Organizations need to build a discipline
around cost optimization that results in
continuous improvement in IT efficiency.
Avoid investing in a tool without a clear
plan as to how the organization’s ITFM
capabilities can evolve over three years
Get the CIO, the IT leadership team and the
finance organization onboard.
5. 6
Cost of Service
Reduce Costs
Wisely
Accountability
Broker of IT
Services
Transparency of
total cost of service
delivered and
underlying drivers
Cost Optimization Cloud Financial Discipline
7. 8
Innovation Ratio
Add Value Governance
Private vs.
Public
The ratio between IT
spend on run the
business vs. change
the business (?)
Cost Optimization Cloud Financial Discipline
8. 9
3 Measures x 3 Perspectives on IT Financial Management
Avoid
Overspend
Predictability
Manage the
“On-Demand”
Effect
Reduce Costs
Wisely
Accountability
Broker of IT
Services
Add Value Governance
Private vs.
Public
Budget
Variance
Cost of
Service
Innovation
Ratio
Cost Optimization Cloud Financial Discipline
Cost pressure is everywhere, IT is not excluded.This drives need for ITFM toolsHowever Gartner advises a clear plan and getting the CIO, IT and Finance on board. But how ?One approach is to consider the significance of key measures to these stakeholders. CFO Advisory: Cost Optimization and Cost Cutting Are Not the Same Thing29 August 2012Best Practices in Implementing IT Financial Management ToolsJanuary 2012
One approach is to consider the significance of key measures to the stakeholders.Just producing a dashboard without having this conversation would be like putting the cart in front of the horse.
For the sake of discussion, let’s consider this as beingthe perspectives of the three key stakeholders
Keywords : transparency and insightCIO – Cost of service, not cost of asset. What are the cost drivers? Where can sensible and appropriate cost changes be made? CTO – Must consider cost comparisons when making changes to service architecture at Infrastructure, application, end-user levels …CFO – Evidence of past spend, where has money been spent===================Biz – Needs to have the right level of transparency that allows them to understand the cost levers, along with what is driving costIT Needs to understand the cost of their internal services and what makes them upAllow them to understand how to provide the right level of flexibility – Car analogyUsing credit card to buy servicesLook to squeeze out cost that’s commoditisedCFO – Needs to ensure that there is accountability/understanding around the costs to provide a service
Keywords : Accuracy and controlCIO – forecast based on understanding of current cost models, strong budget management to avoid overspendCTO – Understand unit costs for highly variable consumption situation. Chargeback to shape demand …CFO – Predictability everywhere, sales forecasts. Zero-variance is mantra=================Biz – Understanding what cheques have been writtenITNeed to understand where the best place is to use on-demand charging that cloud can introduce … i.e transitory projects, BU funded, but avoiding RTBCan use showback as a behaviour shaping toolCFO – Wants predicatability in budget
Keywords : Analysis – InvestmentsCIO – understand spend distribution in all forms. Align budget to value initiatives, change programs, divisional revenue contribution …Note: PPM typically used for investment portfolio planning. PPM does not reveal current spend patterns. CTO – What is commodity, non-differentiating, what will be new IP ? CFO – Governance requires fact based decision making, all stakeholders involved==========Biz – Needs to have the right level of transparency that allows them to understand the cost levers, along with what is driving costIT – Needs to understand the cost of their internal services in a way that allows them to compare them to rate cards of external providersCFO – Needs to ensure that there is accountability/understanding around the costs to provide a service
Recap Gartner advice3 year plan, get team on boardQuestion to audience – where are you today? Where is the need ?