Technology Business and IT Financial Management: With Cost Transparency to IT Service Agility

Companies need to be able to react quickly and with agility to changing conditions, anticipate customer expectations and adapt their own digital value chains and services accordingly in advance. In this context, we take an in-depth look at corporate IT. Communication between IT and C-levels is often difficult - especially when it comes to cost transparency of the IT services provided. However, all parties are united by the goal of creating cost transparency so that the company can react efficiently and with agility. IT, CFOs and CIOs must share sound information based on a reliable data foundation to accomplish this. To further achieve this goal and a common approach, modern companies today rely on the disciplines: IT Financial Management (ITFM) and Technology Business Management (TBM).

 

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What are the differences between ITFM and TBM?

"IT Financial Management" (ITFM) and "Technology Business Management" (TBM) are two terms that, although closely related and therefore often used interchangeably, have some differences. We explain what is meant by both concepts and how they differ.

The term "IT Financial Business Management" has been around much longer than "Technology Business Management". The following definition is provided by Forrester: "The process and tools necessary to provide IT leaders with the key capabilities to effectively account for, manage, and analyze IT costs and communicate their value to the business." The goal of ITFM is to ensure control and optimization of IT costs based on a "single [data] source of truth." Based on these meaningful facts, CIOs and CFOs can better understand IT investments and actions, and select appropriate services that are best suited to their business.

The concept of Technology Business Management was developed by the TBM Council based on the ITFM approach. The Council defines TBM as follows: "Technology Business Management (TBM) is a discipline that improves business outcomes by giving organizations a consistent way to translate technology investments to business value." The main goal, then, is to make the value of all IT investments measurable and the costs transparent. This will enable CIOs and CFOs to make a data-driven assessment of the value created by IT services and investments.

Up to this point, both approaches sound the same at first glance, because they also both want to achieve the same thing for companies. But the focus is different.

IT Financial Management, as explained by Forrester above, focuses on the cost of IT services, where non-personnel costs and operational costs, such as hardware, software or services, can be effectively allocated to the service in question. This allows IT to quantify the cost per service, for example, to support cost allocations, to further charge for services, or to meet regulatory requirements such as transfer pricing. However, ITFM provides comparatively little concrete guidance in measuring or driving the business value that can be measurably achieved through IT investments.

The Technology Business Management approach focuses not only on costs, but also on the business added value resulting from IT services. To achieve this in a comparable and consistent way, TBM provides a comprehensive taxonomy and action levels. This means that any company can basically get started quickly, since terminology and data models are already predefined.

ITFM can certainly be interpreted as a prerequisite for TBM in this context.

On the other hand, depending on the approach, TBM is not sufficiently adaptive to make possible adjustments to data and process realities that have often grown historically and can thus only be changed gradually. An example of a rather rigid and thus inflexible data model for TBM is ATUM®. The "U" here stands for "Unified" and, in its uniform, closed approach, assumes that the applying company adapts the structure of its service portfolio as well as its data model to the conventions of ATUM® - and not that the model adapts to customer needs or data and process realities. In ATUM®, the data collected is aligned to a standard format and, using established taxonomies, cost data is linked to data on IT and business products and services to describe cost sources, technologies, IT resources (IT towers), applications and services.

Serviceware's Technology Business Management approach consistently implements the advantages of TBM, using among other things the very effective nomenclature, but avoiding the limitations of ATUM®.

 

The Serviceware Approach to Technology Business Management

For Serviceware, a combination of the Technology Business Management method and the IT Financial Management method is the sensible approach to meet each company’s requirements. This is because every organization and every business model is very individual, and consequently so are the requirements for the decision-making levels. For example, it must be possible to implement individualized viewing and reporting levels. This flexibility must not be restricted by standardization, no matter how well-intentioned. After all, the goal is to open up the viewing levels that are best for the respective company and its requirements, not the most standardized ones. For Serviceware, it is therefore essential to develop the TBM from the status quo of the customers. Serviceware offers this approach with the "Digital Value Model" (DVM). The cost model or data structure enables the most flexible and thus best possible implementation of the value proposition of TBM - without being forced by a unified model to be able to represent the perhaps success-critical perspective only inadequately or not at all. Only in this way can maximum success be ensured for each individual company and the idea of TBM be achieved with maximum efficiency.

Peter Schoepf

Written by Peter Schoepf

Peter Schoepf, Vice President Strategic Sales, is responsible for strategic sales in Technology Business Management and IT Financial Management in Central Europe. Together with his team, Peter ensures that Serviceware customers get the maximum return on their TBM initiatives.


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