Showback or Chargeback Like a Pro 2019 ITFM Week, Chicago
Today’s Presenter Rob Mischianti Chief Evangelist
Focus on value
Enable transparency
Provide a positive customer experience
Executive Summary Key Outcomes: • • Demonstrate the Value of IT (IT spend is not clearly aligned with business outcomes) • Drive Cost Optimization (the business consumes IT like it's free) • Enable Informed Decision-making (Inaccurate or missing data drives uninformed, emotional decisions) After this session, you’ll be able to: • Understand and communicate the value of IT transparency • • Assemble the right people, tools, and processes for successful showback or chargeback Limit complexity in your showback or chargeback processes • • Provide an ideal customer experience to cultivate trust and shared accountability Utilize transparency to become a trusted advisor to the business •
Transparency + Insight = Value Creating transparency and providing visibility • Translating and delivering insight • Teaching and educating stakeholders • Value = Informed decisions = Optimized costs •
Common Challenges & Business Outcomes
Common Challenges & Initiatives Challenges – Common challenges for IT & IT Finance • Initiatives – Business & IT initiatives supported by ITFM • Challenges Initiatives • Uncontrolled run costs – need to shift to • Cost Optimization innovation • Cost Transparency • Rising IT costs – not clearly aligned with • Digital Transformation business value • Service Transformation • Unplanned, unbudgeted spend • Hybrid IT • IT has a poor reputation with the business • Multi-Cloud • Perpetual reactive mode • DevOps • Endless questions about costs • Agile • Moving too slowly • Benchmarking • Manually translating between Finance & IT • ITFM Process Automation • Inaccurate data • Uninformed, emotional decisions • Time wasted on ad-hoc analysis • Business consumes IT like it's free • Comparisons to cloud vendors • Pressure to do more with less
Start with Desired Business Outcomes Cost Transparency • Elevate IT by partnering with the business • Demonstrate IT value in a common language the business understands • Optimize costs by improving management of IT usage and consumption • Enable informed decision-making by delivering tailored insights • Shift run-to-change by redirecting optimization savings toward future digital business innovation • Provide a deep understanding of infrastructure usage and costs • Get deeper visibility into consolidated cloud costs (inside and outside IT) • Better align resources to business priorities • Enable application rationalization • Promote shared accountability of IT costs
A Value Focused Approach
How IT Dollars are Spent: Optimize & Maximize Cap spend is generally focused on grow and transform the (GTB) activities, so the ITFM focus is: Maximize Revenue Impact Projects Cap (20-30%) Risk Mitigation Projects Maximize (Cap) Cap to Opex IT Budget Transition Optimize (Op) Opex (70-80%) Optimization Opex spend is generally focused on run the business (RTB) activities, so the ITFM focus is to: Optimize “Most CEOs and CFOs do not understand IT operating expenses and believe, on average, that 20% of the IT operating budget is wasted money” – Gartner 2018
Visibility into Key Spend Viewpoints CONSUMERS & BUSINESS CAPABILITIES SERVICES GL ACCOUNTS APPLICATIONS ▪ Apps grouped and allocated ▪ GL & AP Data ▪ Compute, Servers, Storage, ▪ Consumers (100%) to business services ▪ Cost Center / Account AD, Desktops, Laptops, etc. ▪ Application or End User ▪ Business Service Metrics
Multi-Dimensional Views of Transparency View Services Consumer Application Business Capability Allocates GL costs to IT Service Allocates service costs to Allocates Service costs to Total Application costs are grouped consumers based on usage Applications based on usage and allocated to Business Services. Example • Compute power • End User • On premises • Marketing Servers Business Partner Hosting Applications Sales • • • • • Storage • Cost Center • Cloud Hosting • Billing • Application Development • Department • Storage • Desktop/Laptop How much are we spending to Which business partners What is the total cost of my What are the technology costs Answers • • • • deliver each service? consume IT resources? (% and $) applications? associated with enabling my What items and services are in Why is my IT bill going up? How much are we spending Business Capabilities ? • • • my IT bill? • What do I get for my IT internally vs hosted? What are our unit costs and how expenditure? • do they compare? • How do my expenses compare to What costs and services are other business partners? • included in the unit rate? • How/where can I impact my budget and corporate profits? Stakeholder Executives IT IT IT Business Partners Executives Executives Executives IT CIO CIO CIO Business Partners Understand the cost of services Insight into which business Application Rationalization Business Service Metrics The Value/Payoff • • • • and components partners benefit from IT exercises • Align new investments more (the data provided Understand and drive down unit Transparent view of consumption directly to business functions • • enables): rates rates Benchmark against third-parties Helps show value • • and peers
Stakeholder Value Matrix Business Stakeholder Planning Services View Consumer View Application TCO Capabilities View CIO Drive down unit Demonstrates Aligns IT spend • • • rates value of IT to business Benchmarking value • CFO Faster and more • detailed analysis • Better control Business Leader • Understands • Aligns IT spend value of IT to business Gains control of value • consumption Service Owner • Drive down unit rates • Benchmarking Application Owner • Application rationalization
Keys to Success
Keys to Success Define Your Mission • Drive Business Outcomes • • Align with CIO Initiatives Engage ITFM Stakeholders • CIO • CFO • Service/Product Owners • • Application Owners • Business Leaders Corporate FP&A • Provide Insights: Offer relevant, actionable analysis; go beyond • basic transparency; marry data with context and narrative
Build the Foundation
Build the Foundation Executive Support • Quality Staff • Analysts + • Critical thinkers • Data and process expertise • • Advanced communication skills Engage leadership (in the business & IT) • • Be analysts and educators… Quality Process, Policy, Tools, and Data •
Modernize IT Finance
How to Modernize IT Financial Management Analyze Analyze Results Leverage analytics, dashboards, and detail content to improve value and enable decision making. Plan Measure IT Finance Establish Strong IT Planning Process Measure, Allocate, Optimize Know spend Gain detail changes in real- Automate transparency into how time . Align spend to Optimize all of your IT services are business value and being consumed by initiatives. applications, projects, and end users. Automate ITFM Processes: Transition IT Finance team from processing data to analyzing results .
Measuring & Communicating Success Measuring success – Stakeholder feedback and use cases • Communicating success – Promote your program •
The Transparency Journey
3 Phases of Transparency Enabled Challenge Black Hole Decision Phase Making Challenge Phase: • Educate – Be prepared to educate your consumer on the insights the data provides. Defend - Be prepared to defend your model – this will require accuracy & detail. •
Answer Questions & Gain Trust Superior Level of Detail • Thorough Answers • Rapid Response •
Building and Managing Cost Models
Key Capabilities Create multi-dimensional views • Include budget, actuals, and forecast • Trace forward and backward •
Key Challenges Iterate – Limit initial scope: define and refine, address data • gaps over time Limit Complexity • Service Catalog Size – Cost & measure • Avoid Precision Traps • “Directionally Correct” •
Tiered & Layered Model
Tiered Model and Allocation Methodologies Challenge of external market comparison Governance Run IT like a business Service contract Challenge of choice IT pricing Operational Challenge of fairness service levels Flat rate tiered negotiated Challenge of accountability Service level IT domain cost allocation objectives Subscription Measured/ Direct cost fee resource usage High-level allocation – hybrid chargeback - showback
Cost Model: Budget, Actuals, Forecast Cost of Services Forecast (Forecast) Service Cost of Services Budget Costing (Budget) Cost of Services Actuals (Actuals)
Building and Managing Cost Models: Managing Complexity
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