IT Cost Transparency
Encyclopedia
IT cost transparency is a new category of information technology management
software and systems and that enables enterprise IT organizations to model and track the total cost to deliver and maintain the IT Services they provide to the business. It is increasingly a task of management accounting
. IT cost transparency solutions integrate financial information such as labor, software licensing costs, hardware acquisition and depreciation, data center facilities charges, from general ledger systems and combines that with operational data from ticketing, monitoring, asset management, and project portfolio management systems to provide a single, integrated view of IT costs by service, department, GL line item and project. In addition to tracking cost elements, IT Cost Transparency tracks utilization, usage and operational performance metrics in order to provide a measure of value or ROI. Costs, budgets, performance metrics and changes to data points are tracked over time to identify trends and the impact of changes to underlying cost drivers in order to help managers address the key drivers in escalating IT costs and improve planning.
IT cost transparency combines elements of activity based costing, business intelligence, operational monitoring and performance dashboards. It provides the system on which to implement ITIL v3 Financial Management guidelines to assist with Financial Management for IT services and is closely related to IT Service Management
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, new competitors and new service models are radically ‘changing the shape of IT’. IT leaders must develop greater transparency into the costs, utilization and operations of their IT services in order to optimize their IT investments and evolve from being technology managers to being stewards of business technology.” http://www.networkworld.com/news/2008/110308-mgmt-cos.html?page=2 -- Barbara Gomolski, Research Vice President, Gartner
"By making these costs transparent, the IT organization can fundamentally change the way business units consume IT resources, drive down total enterprise IT costs, and focus on IT spending that delivers real business value. The CIO who leads this change can usher in a new era of strategic IT management--and true partnership with the business." http://www.mckinseyquarterly.com/Unraveling_the_mystery_of_IT_costs_1651 --Andrew M. Appel, Neeru Arora, and Raymond Zenkich. McKinsey & Company.
"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," --
Information technology management
IT management is the discipline whereby all of the technology resources of a firm are managed in accordance with its needs and priorities. These resources may include tangible investments like computer hardware, software, data, networks and data centre facilities, as well as the staffs who are...
software and systems and that enables enterprise IT organizations to model and track the total cost to deliver and maintain the IT Services they provide to the business. It is increasingly a task of management accounting
Management accounting
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
. IT cost transparency solutions integrate financial information such as labor, software licensing costs, hardware acquisition and depreciation, data center facilities charges, from general ledger systems and combines that with operational data from ticketing, monitoring, asset management, and project portfolio management systems to provide a single, integrated view of IT costs by service, department, GL line item and project. In addition to tracking cost elements, IT Cost Transparency tracks utilization, usage and operational performance metrics in order to provide a measure of value or ROI. Costs, budgets, performance metrics and changes to data points are tracked over time to identify trends and the impact of changes to underlying cost drivers in order to help managers address the key drivers in escalating IT costs and improve planning.
IT cost transparency combines elements of activity based costing, business intelligence, operational monitoring and performance dashboards. It provides the system on which to implement ITIL v3 Financial Management guidelines to assist with Financial Management for IT services and is closely related to IT Service Management
IT Service Management
IT service management is a discipline for managing information technology systems, philosophically centered on the customer's perspective of IT's contribution to the business. ITSM stands in deliberate contrast to technology-centered approaches to IT management and business interaction...
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Capabilities
While specific solutions vary, capabilities can include:- Simplified or automated collection of key cost driver data
- An allocation or cost modeling interface
- Custom reporting and analysis of unit cost drivers, including CIO dashboards
- Ability to track operational metrics such as utilization, service levels, support tickets along with cost
- Bill of IT reports for chargeback or service allocation to Lines of Business
- Forecast and budget tracking versus actual and over time
- Hypothetical scenario planning for new project ROI analysis
- Cost benchmarking against industry averages or common metrics
Analysts' take
“Globalization, consumerizationConsumerization
Consumerization is a stable neologism that describes the trend for new information technology to emerge first in the consumer market and then spread into business organizations, resulting in the convergence of the IT and consumer electronics industries, and a shift in IT innovation from large...
, new competitors and new service models are radically ‘changing the shape of IT’. IT leaders must develop greater transparency into the costs, utilization and operations of their IT services in order to optimize their IT investments and evolve from being technology managers to being stewards of business technology.” http://www.networkworld.com/news/2008/110308-mgmt-cos.html?page=2 -- Barbara Gomolski, Research Vice President, Gartner
"By making these costs transparent, the IT organization can fundamentally change the way business units consume IT resources, drive down total enterprise IT costs, and focus on IT spending that delivers real business value. The CIO who leads this change can usher in a new era of strategic IT management--and true partnership with the business." http://www.mckinseyquarterly.com/Unraveling_the_mystery_of_IT_costs_1651 --Andrew M. Appel, Neeru Arora, and Raymond Zenkich. McKinsey & Company.
"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," --
See also
- Cost management
- IT Service ManagementIT Service ManagementIT service management is a discipline for managing information technology systems, philosophically centered on the customer's perspective of IT's contribution to the business. ITSM stands in deliberate contrast to technology-centered approaches to IT management and business interaction...
- ITIL v3
- Service level management
- Software as a serviceSoftware as a ServiceSoftware as a service , sometimes referred to as "on-demand software," is a software delivery model in which software and its associated data are hosted centrally and are typically accessed by users using a thin client, normally using a web browser over the Internet.SaaS has become a common...