Cost transparency unlocked
Technology Business Management provides the foundation on which enterprises can craft a solution that will deliver significant returns on their shared services investments.
Innovation and disruption are occurring more rapidly than ever today, meaning that both technology capabilities and costs continue to grow.
This makes it imperative for enterprises to understand whether they are achieving a return on their investments, and this means they need to create transparency concerning the cost, quality and value of shared services.
Perhaps the most obvious area of focus is that of IT, where there is a noticeable shift from the concept of 'doing more with less' to one focused on improved management of the consumption of IT services. IT needs to be able to defend the cost of its services and be in a position to make better value-based decisions. The critical barrier preventing IT from achieving this is the lack of cost transparency into the delivery of IT services.
Without clarity or structure to provide a clear view of IT consumption, it becomes difficult to identify inefficiencies, business constraints which impact on costs, and whether unique services deliver value.
Technology Business Management (TBM) is a framework that has been created in order to assist CIOs in managing their IT operations as a business in its own right and helping them to manage conflicting priorities by creating and automating IT cost transparency.
TBM itself is focused on the process of managing technology costs within large enterprises. These costs are allocated to a catalogue of products and services produced by IT, for consumption by other business units. However, the principles of TBM can be applied to the entire continuum of shared services, placing TBM front and centre when it comes to improving cost transparency within a business.
The idea behind shared services is to allow for costs to be reduced through economies of scale by means of centralisation of services. Naturally, such centralisation and distribution of services can make both the cost allocation and the deeper understanding of how these costs apply quite difficult and confusing.
When it comes to understanding costs, the shared services environment is extremely complex. For example, in a financial services organisation, how does one cost something like the contribution of IT or HR to enabling the business to offer a particular product, such as a home loan? Yet, in providing products like this, it is vital the company knows it is done profitably, which means it is critical to understand these expenses.
What is really needed if an organisation is to obtain a better handle on these costs is the implementation of a new framework within which to operate. The TBM Council promotes the adoption of Technology Business Management as a discipline, and this offers a proven framework that has already delivered significant value to those organisations that have adopted it.
TBM assists in the adoption of a common language across enterprises and vertical markets, standardising the terms and understanding of the discipline. Furthermore, it also facilitates benchmarking, enabling those organisations that adopt its principles to compare their performance more easily with that of peers and competitors.
The larger the enterprise, the more significant the scale of costs involved. Naturally, because of how massive these numbers can be, attempting to obtain transparency of such costs can seem overwhelming. This is why the TBM framework is so beneficial, it facilitates true cost visibility, which, because of the large financial figures involved, delivers significant cost savings to the business.
For TBM to be adopted as the framework of choice, it is important to provide education concerning the benefits it offers at the highest levels within the business. This means ensuring senior business leaders are made aware of the positive impact it can have on the company, so they are more likely to be comfortable adopting this as the new set of standards for the management of shared services costs. Remember, while TBM itself is very technology focused, the principles it utilises are quite easily applied across all areas of shared services.
Due to the importance of cost transparency to enterprises, Magic Orange has been championing the principles of Technology Business Management since early 2000, which positions the Magic Orange solution at the forefront of TBM thought and implementation practices in South Africa.
TBM provides the framework on which organisations can craft a complete and effective cost transparency discipline with which to transform its strategy for creating value. Adopting this framework will deliver the same benefits to the broader shared services structure as it does to the IT department. Furthermore, it serves as a springboard to accelerate the enterprise's understanding of what is possible with regard to cost transparency, and how to achieve this. Utilising the TBM framework will provide companies with the conceptual tools they require to embark on a journey towards true cost transparency.