IT Economics ISSUE 01: How Do Leading CIOs Measure Their Spend?

Transcription

1 IT Economics R E P O R T ISSUE 01: How Do Leading CIOs Measure Their Spend? IT is one of the largest indirect costs in nearly any business. Because those costs are not directly attributable to the business external product offerings, it s hard to know whether IT is receiving appropriate value from its investment. So how do IT leaders know they re spending wisely? At Apptio, we re pioneering new ways of helping IT leaders answer this question with fact-based analysis of their actual IT costs. This is the first in a series of quarterly reports where we explore the aggregate spend patterns of our customers and uncover new insights to inform the decisions of technology business leaders.

2 IT Economics Report apptio.com/it-economics 2 How Do Leading CIOs Measure Their Spend? Every month, our customers use Apptio Cost Transparency to automate IT cost analytics. Together, we re accumulating a wealth of IT spend knowledge that s grounded in truth because it s based on the actual cost data that CIOs use to run their business.

3 IT Economics Report apptio.com/it-economics 3 The New Era in IT Spend Metrics IT leaders and technology suppliers traditionally measure IT efficiency and make product strategy decisions using IT spend metrics sourced from consultants and benchmark firms. With this report, Apptio introduces a new data-driven approach that aggregates actual IT costs from across our customers, yielding a fresh, accurate perspective on industry trends. Actual costs from general ledger Automated analytics Calculated monthly Standardized & repeatable Enables actionable decisions

4 IT Economics Report apptio.com/it-economics 4 Aligning to a Standard Cost Model In order to analyze our customers aggregate spend data for patterns, costs must be calculated consistently. Apptio customers benefit from a pre-defined cost model and taxonomy that provides standard terms and categories for common IT functions. With costs routed through this taxonomy, organizations know they re following best practices and can compare their costs to their peers. Business Units Describe the consumers of the technology supported by IT spend. Applications & Services Describe the products or output delivered by IT and consumed by business units. IT Towers & Sub-Towers Describe the technology functions supported by IT spend in terms and groupings relevant to the owners and consumers of those functions. Cost Pools & Sub-Pools Describe the type of asset or service purchased using terms and groupings relevant to both IT and Finance. Business Unit 1 Business Unit 2 Business Unit 3 Business Unit 4 Business Unit 5 Individual Apps by Business Capability Line of Business Data Center Computer Storage Network Output Delivery Communication Internal Labor Management & Support External Labor Client Computing End User Hardware End User Services Connectivity Software Application Communication & Collaboration Outside Services Applications & Integration IT Management Facilities & Power Technology Services IT Professional Services Telecom Hosting Security & Compliance Other BUSINESS VIEW IT VIEW FINANCE VIEW Learn more about the Apptio TBM Unified Model (ATUM ) at Apptio.com/ATUM

5 IT Economics Report apptio.com/it-economics 5 Establishing a Baseline By analyzing actual spend data from a sampling of our customers, we calculated the average percentage of IT spend directed through each Cost Pool and IT Resource Tower. Note that these are not based on estimates or survey data, but on actual costs, calculated monthly for these customers by Apptio. Cost Pool When viewing costs through the lens of standard cost pools, it s no surprise that nearly 50% of typical IT spend goes toward people-related costs. Second to that is spending on technology, complemented by services from outside providers. Resource Tower When costs are routed to IT resource towers, we see that IT s businessfacing productivity offerings appropriately receive the lion s share of IT spend. The underlying infrastructure & operations costs round out the major spending areas. Average % of IT Spend by Cost Pool Average % of IT Spend by Resource Tower Real-World Outcomes We looked at our CRM system and said, this costs a whole lot to support. Insourced support to reduce cost by 50% annually. Identified $1M in annual potential savings through anomalies in 3rd party managed Telco billing (FTEs with multiple phones, wrong plans, etc.) Business units agreed to virtualize after seeing high TCO of underused servers, resulting in 10% reduction in physical servers

6 IT Economics Report apptio.com/it-economics 6 Profiling the Outliers Every organization is different, and IT leaders tailor their IT supply chain to the unique needs of their business. In our analysis, we identified 3 groups of companies that deviate from the typical pattern and reflect alternate approaches to sourcing their IT supply chain. Does one of these archetypes align with your strategy? If you can t answer this question, then you need a better approach to IT cost analytics.

7 IT Economics Report apptio.com/it-economics 7 Technology-centric In this category, we found two sub-archetypes of companies that favor spending on either hardware or software.

8 IT Economics Report apptio.com/it-economics 8 Vendor-centric People-centric These companies tend to spend more on outside services, such as consultants, managed service providers, and cloud service providers, instead of on labor or technology. These companies favor spending more on internal labor, and less on contractors and software.

9 IT Economics Report apptio.com/it-economics 9 Key Takeaways Modern IT leaders manage their IT business with detailed financial views for supply, demand and consumption. Standardization enables a new approach to IT industry spend analytics based on actual costs. IT leaders can use standard IT cost analytics to frequently compare their actual costs to peers and industry averages. IT leaders should seek out IT cost analytics solutions that provide granular analytics of the entire IT supply chain. IT leaders should adopt a standardized, automated, best practice approach to IT cost analytics. IT leaders should incorporate actual costs into their benchmarking and peer comparison efforts.

10 IT Economics Report apptio.com/it-economics 10 Leading CIOs Use Apptio to Manage the Business of IT Every IT leader should manage their technology business using the IT cost analytics outlined in this report, but most struggle to do so, because they re trapped in a bygone era of spreadsheet-based manual reporting. If this is you, take heart! Hundreds of companies use Apptio to automate these analytics every month. With Apptio, IT Leaders: Contact us to join the movement at Apptio.com/Get-Started

11 IT Economics Report apptio.com/it-economics 11 Topics for Future Reports This is just a taste of what s possible by analyzing the rich repository of IT spend data that Apptio customers calculate on a monthly basis. We look forward to providing visibility into new facets of IT spend patterns. In future quarters, we plan to explore new spending insights such as: How are leading organizations optimizing run costs in order to fund innovation? How do organizations differ on vendor spend? Which vendors are rising & falling? How effective is each archetype in terms of IT efficiency, revenue growth and other factors? How do patterns shift over time? Do they exhibit seasonality or react to world events? How do cost pool allocations vary by archetype, revenue size or other factors? Tell us what you d like to see at info@apptio.com Understand Costs & KPIs to Drive Value with Your Technology Business Learn more at Apptio.com/Applications/Cost-Transparency