Making the assertion is easy, but backing it up with a detailed breakdown of how the money has been spent is often a lot more difficult. CIOs may be on top of the technology, but they tend to be far less astute when it comes to totting up its cost, says Sunny Gupta, CEO of Apptio, a company specializing in software that aims to bring financial transparency to enterprise IT budgets. In many enterprises, IT is often the last function to invest in tracking its own business metrics, he explains:
The ironic part is the CIO is the one who has put in the business systems for every other function. Their function has become so strategic and is the most complex function, but they did not do anything for themselves. That is the opportunity that Apptio solves.
The vision we have is to industrialize and bring in the discipline of business management for the CIO. And do that across on-premise and cloud workloads.
Change the dialog with business
Understanding where the money is being spent isn’t just a matter of controlling costs, says Gupta. It also helps inform discussions with line-of-business leaders about the true impact of technology investments they may be making.
Cost is only one dimension. The big thing CIOs are looking for is, how do I have that cost and value conversation with the business?
For example, someone may look at the one-off price tag of buying a PC, but overlook the cost of implementing ancillary software, networking, security and so on. When the business can see the full cost of the systems they’re running, they can make more informed choices about where those dollars are best spent, he explains:
When you look at the fully loaded cost, that might be $5k [instead of $2k or $3k], and the business will make different decisions to reinvest those dollars.
Fundamentally people are using this [information] to change the dialog, free up capital from maintenance, and drive it towards more innovation to create more revenue from their organization using technology.
The Apptio software aggregates data to build its analysis of IT spend from a variety of sources, including financial systems as well as IT service management systems such as ServiceNow or BMC. Gupta says this gives a much more complete picture than any of these individual products can provide on their own. It will also bring in cloud provider invoice data from the likes of Amazon Web Services, Microsoft Azure, IBM and others. Although most organizations have a good sense of their overall IT spend, customers are often surprised once they look at the underlying detail of how it all adds up, he says.
The first surprise they tend to have is, we do help customers find what we call unmanaged IT spend — shadow IT spend. Sometimes there’s a lot of technology spend in the business that may not hit the CIO.
Customers also get a better handle on the exact split they’re achieving between maintenance spend versus new innovation. Most usefully, they discover where they can make additional savings by reallocating resources.
Freeing up IT budget
For example, the analysis will usually identify redundant applications that could be retired, as well as excess storage and compute capacity. Across on-premise systems, customers typically are only using 10-12% of their available compute capacity, says Gupta. There’s usually plenty of opportunity to reduce spend by migrating workloads to the cloud. Acting on all of these discoveries can free up a significant slice of budget to invest in new projects:
Typically we help an IT organization shift 3-5% of technology spending from maintenance activities to innovation.
This is just the first step, he adds. Apptio aims to help CIOs and CFOs achieve three main goals:
- Provide deeper transparency into IT spending
- Automate the IT budget process
- Benchmark IT spending against peers
Many different variables
At a time when enterprises are focusing more and more on what they can do with technology, they need to make informed decisions based on the metrics coming out of their own operations, rather than simply following what others are doing. Gupta notes that the analysis sometimes comes down against a move to the cloud for some systems — one large beverage company found that a system that had been earmarked for cloud migration would have cost twice as much than staying on-premise once all the associated costs such as new security measures and bandwidth costs were taken into account.
How are you going to make an effective decision if you do not have transparency into what’s going on in your environment?
The notion of fully loaded cloud cost is very important. You also have the opportunity to re-architect, so there might be reasons of agility — it may be better to have a cloud environment to flex capacity up and down. There are many different variables, and that’s really the crux of where the Apptio value proposition is focused on.
Our platform allows the customer to capture the value metrics by any measure. We can categorize the investments related to business priorities and value metrics, such as agility, time to deploy, utilization, reserve instances, and so on.
The phrase ‘cobbler’s children’ comes to mind. IT is so busy helping other parts of the business improve that it has no time to automate its own budget control processes. Perhaps in some organizations, the IT team is too focused on the technology aspects of their role, and not encouraged to see themselves as contributing to business outcomes. Or there’s a feeling that the information is already there in existing finance or IT service management systems and doesn’t need to be automated to the degree that Apptio offers.
But in a world that is increasingly going digital, technology is becoming such a huge part of what an enterprise does. This makes it essential to keep proper track of what is spent on IT — and what could be spent on it — measured against the results that spend could produce. Later this year, we’ll be talking to some customers of Apptio to get their take on the impact it’s had on how they manage their IT spend.
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Disclosure - ServiceNow is a diginomica premier partner at time of writing.