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7/18/2012
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How To Explain IT Value To Business Leaders

Many IT leaders struggle to justify the cost of IT services and products to business leaders. The Technology Business Management Council has a framework to help CIOs to make the case.

Many CIOs struggle to communicate the high cost of IT products and services to a company's senior-level executives. The Technology Business Management Council (TBMC) has come up with an innovative framework to guide the conversation.

The TBMC is a new, non-profit group that grew from a twice-yearly summit by Apptio into a 400-member consortium that includes Cisco CIO Rebecca Jacoby as its co-chair, as well as Facebook's Tim Campos and Xerox's Carol Zierhoffer. The group's mandate is to create and promote best practices for running IT as a business by encouraging collaboration and sharing among distinguished IT leaders.

One of the first projects completed by TBMC is a "Bill of IT"--a process that instructs IT professionals on how to communicate the costs of IT products and services to various business lines.

"It's the whole notion of taking the raw supply of labor, servers, storage, and networks, and composing a bill of materials that offers the business a service or capability that they understand," said Chris Pick, president of the Council and chief marketing officer at Apptio.

[ When the business wants change so much that it's willing to go rogue on IT, is it misinformed, or justified? See The Rise Of Shadow IT. ]

For example, Pick said rather than simply providing a company's employees with access to a top-grade server, a Bill of IT can help IT professionals communicate to business line users that they're receiving a gold email service at a reasonable price.

According to the TBMC, Bill of IT projects can be based on one of four variables: cost, price, budget, or hybrid.

"You can create a bill based on costs. You can create a bill based on price. You can create a bill based on plans and how you forecast demand for the business. And you can also create a bill based on a hybrid composition," said Pick.

Whereas the Bill of IT defines costs as the actual expenses by each service, price entails setting a predefined unit rate for services (price x quantity) that allows business line leaders to better understand the company's consumption of IT services.

Communicating the costs of IT services and products in budgetary terms, however, helps business units know ahead of time what costs will be for a whole year. And finally, the hybrid model, which includes a combination of costs, price, and budgetary measures, is the most flexible and the easiest for business units to understand.

It's a multifaceted framework for communicating the costs of IT products and services that extends far beyond IT's standard chargeback model. "What Gartner has done somewhat incorrectly in the market is defined the process for financial transparency solely based upon chargeback," said Pick.

However, the TBMC's Bill of IT goes a step further to recognize that the process of billing can be based on the consumption of IT products and services (showback), consumption at a particular unit rate or price (chargeback), or linking consumption back to the overall expenses by service and product (automated reconciliation).

By creating best practices around how to communicate the cost of IT products and services, TBMC hopes to help IT departments everywhere accomplish a number of feats. For one, by relying on "a decision-making framework that allows them to have visibility into the cost structure," Pick said IT professionals will be better able to cut costs and recognize how these measures will impact service delivery and quality.

A Bill of IT framework also "allows IT professionals to optimize toward funding the products and services that really make a difference strategically for the business," adds Pick.

But that's not all. By creating and encouraging a Bill of IT framework, the TBMC hopes to foster greater communication between business units and IT and drive greater business unit accountability across an organization.

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