Technology Business Management: Nail Down Costs, Find Value - InformationWeek
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David F Carr
David F Carr
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Technology Business Management: Nail Down Costs, Find Value

Technology and business leaders from Goldman Sachs, Kaiser Permanente, and other heavyweights gather at the Apptio-sponsored Technology Business Management Conference in Miami Beach to trade ideas.

A CIO rarely becomes a CIO because of a passion for budgeting and cost accounting.

Big, ambitious digital projects are more exciting, and maintaining a safe and secure technical foundation for the business seems like the biggest necessity. A CIO who invests in cost transparency might even feel he is providing the knife that the CFO will cut him with.

Yet precisely understanding costs, tracing them to business requirements, and building trust with other members of the executive team is being recognized as a necessity by top-performing tech teams. At the TBM Conference in Miami Beach, HP CIO Ramon Baez said there is a simple reason for learning the discipline of Technology Business Management. His message to the CIO who is not willing to provide that transparency: "Don't worry, if you don't do it, your successor will."

This quip from a keynote speech is one I heard repeated verbatim and in dozens of conversations throughout this recent event, which attracted a blue-chip list of companies including Goldman Sachs, Kaiser Permanente, Coca-Cola, Dupont, Ebay, and Time Warner. IT leaders, finance leaders, and those who bridge the two worlds talked about using IT cost transparency to build trust that makes room for innovations, to better execute the merger or separation of systems as part of mergers and acquisitions, and to eliminate waste in IT operations.

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Kaiser Permamente senior VP and chief infrastructure executive Mike Brady said TBM is part of the story of why the highly respected healthcare nonprofit is "starting to reduce the spend on some of the brick and mortar and extend the IT." Through initiatives such as using telepresence to speed the diagnosis of stroke, even when an onsite specialist is not available -- allowing clinicians to act within the life-saving window of opportunity when treatment is most effective -- the board of directors is starting to clearly see the impact of IT on the core mission of the institution.

Business leaders might still start with the chart of accounts, but now they are looking at the expenses compared with the outcomes, Brady said. "We're able to show the efficiency we've been able to achieve with year after year of progressive benchmarking." Also, if the discussion turns to cutting the IT budget, it's easier to show which business services will also have to be cut back.

"The path to credibility is very much earned," Brady said. "You build credibility by coming back every six months with progress reports."

"Boards are starting to understand what they don't know," said Howard Rubin, president and CEO of Rubin Worldwide and an expert on the economics of IT. "A lot of these people don't understand the rules of the technology economy," he said, but now they're motivated to learn and they're starting to invite more technological leadership onto the board. Along with that comes a demand for more and better data about which technology investments are really worthwhile, he said.

EBay and PayPal are using TBM techniques in the separation of their organizations. (EBay slide via Apptio blog)
EBay and PayPal are using TBM techniques in the separation of their organizations. (EBay slide via Apptio blog)

The TBM Conference is partly a users conference for Apptio, maker of a SaaS application for CIOs, born out of the logic that IT executive teams have as much or more of a need for analytics and purpose-built applications as any of the business units they serve. The conference is put on by the TBM Council, which has an independent board of directors. Although there is not much daylight between Apptio and the council, the product demos and vendor news were very much in the background compared with strategy for more effective management and segmentation of IT costs.

Although Apptio added technology business management to the industry's jargon, making TBM akin to mainstays like CRM or ERP, the activity is one that well-managed IT shops probably have been engaging in all along -- studying their costs and making sure they are being invested where they will do the most good for the business. Having software that specifically supports the task makes it possible to pursue TBM more methodically, however.

John Jarvis, director of technology financial business management at Molina Healthcare, said TBM is a methodology Molina is using to "understand our technology costs in a way that allows us to understand the impact for our members." Molina already had been working toward that goal for years

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David F. Carr oversees InformationWeek's coverage of government and healthcare IT. He previously led coverage of social business and education technologies and continues to contribute in those areas. He is the editor of Social Collaboration for Dummies (Wiley, Oct. 2013) and ... View Full Bio
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User Rank: Apprentice
11/24/2014 | 8:26:14 AM
Re: Income/expendeture ratio
I am more interested in historical ratios, rather than projected.  Thank you
User Rank: Ninja
11/19/2014 | 11:30:24 AM
Re: Income/expendeture ratio
@Allan: That is very difficult to determine because in the end, several things like cost estimates, budget crash, unforeseen expenditures in IT aquiring takes a toll on the budget and therefore quarterly calculation is necessary for a good profit against assests ratio.
User Rank: Apprentice
11/18/2014 | 2:10:47 PM
Income/expendeture ratio
I've seen a lot of possibilities on this but haven't found a good answer - what would a healthy ratio of total income/IT expenditure be?
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