CIOs seek IT cost transparency in 2010

Economic recession or not, senior IT executives agree the time has come for more comprehensive IT cost management practices across enterprise companies.

IT service management vendor Digital Fuel finds high-tech leaders ready to revamp processes and get IT cost management best practices in place.

Cost-cutting measures in 2009 forced many companies to take a hard look at how they spend money on technology, and that experience continues to drive several high-tech leaders to transform muddy IT departments into financially transparent organizations.

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Despite speculation that the economy will recover in 2010 and IT budgets will rebound, many high-tech executives recognize they won’t be returning to business as usual. But the new economic reality has pushed technology projects such as IT cost management, IT chargeback and IT financial management from the back burner to front and center for many CIOs. That is, according to IT service management vendor Digital Fuel, which conducted surveys and roundtable discussions with CIO-level executives throughout the latter part of 2009 to learn what would drive their IT budgets in 2010.

“When we surveyed our customers and IT executives, we saw that there is a big shift under way in how IT organizations approach financial transparency,” says Yisrael Dancziger, president and CEO of Digital Fuel. “IT organizations want to see what the costs are and find ways to reduce the cost of IT. Some have been doing this manually, but now many are formalizing the process, using tools and presenting costs to business units.”

Part of the goal is to find where IT departments are delivering value and determine what services are most consumed and in demand by business units. One approach to understanding what the business unit wants and how much it costs to deliver that IT service could be to establish an IT service catalog, Dancziger says. IT leaders can also begin a cost transparency project with an application such as SAP that is widely consumed by the business, dissecting how budget dollars are devoted to keeping it running smoothly.

“It doesn’t make sense to see, for instance, the cost of a Wintel server. Instead companies need to focus on the type of IT service that the business is actually consuming and really dig in to what the cost to IT and the company is to support that business service. Then the idea of chargeback can begin to take form,” he says.

While IT chargeback practices could cause a cultural backlash, industry watchers say knowing how much IT services truly cost will enable more responsible consumption and requests for services to the technology groups within a company. Other benefits that can be derived from an IT cost management initiative is cost optimization, which means ongoing improvements in the amount of budget dedicated to resources.

“Companies can get an understanding of the best candidates for virtualization or consolidation, for instance, and further reduce the cost of resources. IT organizations consistently try to become more efficient, and this type of detailed information enables visibility, billing and chargeback in the future,” Dancziger says. “Digital Fuel was impressed with the consistency of opinion and priorities discovered in our IT Cost Visibility study. Clearly IT cost management has become a high priority among senior IT executives.”

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