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How Technology Business Management Enables...

TCM Articles
May 13, 2021

How Technology Business Management Enables Businesses to Identify Measurable Outcomes

Summary

Technology permutates through nearly every aspect of business, yet it still is seen as either a back-room function or cost centre and as such, is not afforded the same level of representation at board level. However, digital disruption and technology innovation is undeniably reshaping business models in nearly every sector.

Gartner[1] is predicting a 6.2% growth in IT spending in 2021.  Simply put, digitally adept companies are more profitable.

[1] Gartner Forecasts Worldwide IT Spending to Grow 6.2% in 2021, 25 Jan 21

This is why Technology Business Management (TBM) is now a key factor as it is a proven framework that defines the tools, processes, data, and people needed to manage the business of technology. As a result, it enables organisations to fuel competitive advantage and their consumption of cloud, as well as manage risk and make better decisions for technology investments.

What is TBM?

TBM is a value management framework that provides technology and finance leaders with standards and validated good practices to communicate the cost, quality and value of IT investments to their business partners.

In turn, IT is able to drive innovation for their organisation.

If implemented well, it offers accurate, near real-time reporting through automation, improves decision making for key IT initiatives, helps executives manage the cost and quality of the services they consume, allocates IT resources to the most relevant business priorities and transforms IT from a cost-centre to a profitability-enabler.

Why is it important?

Even before the pandemic, most organisations found technology and digital channels were critical to survival and those that had already prioritised digital transformation performed better, leaving the rest to try and follow their example.

CEOs will always be scrutinised by their Boards and shareholders to ensure that investments do become “regret spend” and they face a huge challenge to invest in-line with expectations for growth, not current levels of revenue.

To do their job, board members want to make simple, clear decisions centred on the three factors that matter – adherence to the strategy, maintaining compliance and managing risk.

All three of these decision factors need clear data to inform what choices to make and how much exposure it gives the business.

However, without representation or sufficient knowledge of technology at this level means that often the value of these type of investments are not clearly articulated in business language terms.  This presents hidden risks to quality decision making – something board members do not like.

Perhaps a greater reason why TBM is important is that the majority of capital spending worldwide goes to IT, yet most non-technical leaders remain sceptical about the cost-benefit of their IT investments. Indeed, they often do the opposite and respond by putting pressure on IT costs.

To address this, C-Suite executives must be able to describe value across the dimensions of governance, finance, business and technology in a concise and coherent way to allow board members to understand what decisions they are being asked to make or inform. In other words, TBM improves decision making for key IT initiatives.

According to PWC, 86% of CEOs are concerned about uncertain economic growth as they seek to recover their business and must make the right investment decisions to make their organisations more resilient.

[1] PWC, 24th Annual CEO Survey

This is especially pertinent to technology given that the litany of “regret spend “investments associated with this discipline are the ones most publicised as to why they have cost C-Suite executives their jobs.

By measuring IT in terms of metrics that matter (i.e., those that have relevance to business and not just to technology), the conversation changes from a defensive one where “scrapping” for budget just to keep the lights on is shifted to informed choices about trade-offs, innovation and, most essentially, value.

TBM maps costs directly from the General Ledger through the technology organisation to outcomes in business functions such as sales, products and services. This means that the unit economics of each area can be understood.  

Whilst not immediately apparent to those new to TBM, unit economics enables businesses to determine the revenue they gain from a single unit of the business and the cost associated with servicing it—ultimately revealing the business value of spend.

This is something CEOs and Board members can understand. It almost makes the selection of what technology irrelevant, but the need for the investment and its impact on how it can positively affect the business can be placed front and centre.

There is a cautionary note that must be stated. It is acknowledged that once TBM is adopted and operationalised, it must not become a heavyweight, burdensome set of processes and a drain on resources. Automation is absolutely vital and using professional services to enable, educate and empower the organisation to adopt TBM is a quicker route to value and wider business success. 

Summary

Making sound business decisions for technology investments can be a tightrope for senior members of the business unless they have business aligned metrics underpinned by reliable data that can be mapped from the General Ledger to each product or service.

 

Driving unit economics enables value based conversations centred on outcomes rather than the style and types of technology is much more likely to create sound technology investments and avoiding “regret spend”.  It also creates business cases that board members can understand and make better decisions with.

Technology Business Management, supported by automated tooling, is the only practical way of achieving this consistently. As such, it should now be on the lips of board members asking CIOs why it is not being used, not whether it should be adopted.

Jez Back

Consulting Director – Thebes Cloud Management

Jez joins the Thebes Group family to lead our new subsidiary business, Thebes Cloud Management. He has previously worked at Deloitte, HP & EDS and has spent 14 years in the technology sector, mainly focused on cloud technology.

On Thebes Cost Management, he says, “I am thrilled to be leading this new subsidiary in the Thebes Group family. My ‘why’ is about helping others realise their ambitions so that they can make their mark on the world – this is what I want to take to clients and partners.

By using FinOps, Technology Business Management, and the partnerships we are already growing, we can fix our clients’ costs at pace. The time to do this is now. We are not just about helping our clients save money on cloud costs, we are obsessed about helping them to maximise value, make money and create transparency.”

 

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