I recently did a roundtable breakfast with 13 IT leaders across various industries. In the software business, we are always focused on talking about the things that are going great. We rarely talk about the issues that are holding back greater market adoption.
So, I asked this group of veteran IT leaders--many of them are our existing customers and some are investigating Apptio--as to what initial misconceptions they had about IT Cost Transparency before they adopted Apptio and what can we do to help others see the light.
On the positive side, everybody said that the role of IT leadership is changing. We are now talking about how it's no longer possible to run IT without understanding the cost of services, providing transparency of cost, quality and usage to business leadership, the ability to drive cost-based decisions across the IT ranks, and enabling IT decision makers at all levels with the tools to run IT more efficiently and aligned to business priorities.
But amongst the group of 13, two misconceptions came up more than others:
Misconception #1. “We need a full blown service catalog before we can move forward with services costing.”
Once our customers starting discussing, they all agreed this is a big misconception. One of the CIOs said, “a service catalog without accurate cost does not serve much good.” You need accurate service costing in order for the business to make value-based decisions on the services they choose to consume. Another CIO agreed and said, “I will never be done with my services catalog and I don't want to fly blind (with respect to cost management) for the next 3 years while I wait.”
You don't really need a fully defined services catalog to achieve IT Cost Transparency. You can pick your top 10 IT products like storage, servers, applications, end user–desktop, end user – mobile, etc. and start understanding the cost of these products in order to improve the cost efficiency of IT operations. Pick the products where you have big spend and the least transparency. The key here is that any product like Apptio needs to support the ability to create/add adhoc product and service definitions so you can start creating the cost models.
Misconception #2. ”We don’t have the right data or our data isn’t complete for service costing.”
This comment was from some of the smaller companies that are just beginning to think about service costing. "We don't have data sources or our data may not be clean.” One CIO who has been using Apptio for last 12 months said that she also had the same objection, at first. Once they were able to leverage Apptio's unique approach and methodology which combines existing bottom-up (raw data) and top-down (assumptions or benchmarks) into a single cost model, they realized that they had more data than they thought, and that they could get a lot of value analyzing the data they had. In fact, Apptio provides the insight into which data sources to improve next. Their initial model revealed that they had about 50% data from raw, systems management-based sources and that the cost model was 85% accurate. Over time, by replacing assumptions with raw data, they increased the data accuracy and improved their ability to identify cost optimization opportunities. One VP of IT said that the bottom line for her was that they were more knowledgeable now than they were before because they were able to measure and understand their costs much better than they previously had been able to.
So, no more excuses. It is possible to achieve IT Cost Transparency today, even if you have a partial service catalogue and raw data. Only by implementing IT Cost Transparency can CIOs drive towards a new era for IT leadership.