“I don’t understand. Where is this cost coming from? Why are my costs X when they should be Y?”
That’s probably a comment that’s boggling the minds of most business unit managers–if they haven’t already shared it outright.
Business unit managers who don’t have accurate insight into their technology expenses are not only confused but also hindered in their ability to change, control and manage their technology consumption. A lose/lose situation results for any organization if business unit managers are hindered by this. For example, a business unit manager may see a monthly charge for $200,000 for IT. But, without details into what comprises that cost, they’ll be hard pressed to determine what should and shouldn’t be charged back to their department. Also, how can they determine how to budget resources to support business priorities? How do they know where that $200,000 cost is coming from? How do they know if that charge is accurate? And, if additional services are required, do they have insight into the incremental expense?
Unclear communication is one driver of business unit confusion. Technology is often perceived as too expensive or free, depending on how costs are communicated from IT to the business. Or, in addition to unclear communication or even a lack of communication, outdated allocation processes that peanut-butter spread expenses across departments can contribute to this perception. With a peanut-butter spread methodology, business unit managers will never have accurate insights into their technology spend, which is vital to making technology decisions and forecasting expenses.
In order to alleviate this problem and build a better relationship, IT managers should put on their business manager hat and think like a business manager would. A recent TechTarget article stressed that success in the CIO position is often tied to strong communication skills, knowledge of the business, and putting business before IT. The article’s author and director of the Center for Technology Management and academic director of the executive Masters of Science Program at Columbia University, Arthur M. Langer, shared some excellent advice for CIOs wanting to succeed: “If there are things IT should be giving up for the good of the business, you should be advocating that–not just agreeing to it, not being pushed into it, not necessarily protecting the boundaries of IT.”
Holding business managers accountable for their technology costs and consumption is a critical component of a successful IT financial management (ITFM) strategy. But, you must first provide visibility into what comprises the total cost of IT products and services in order to hold them accountable. As more business unit managers are targeted by third-party infrastructure and Software-as-a-Service (SaaS) providers, it is crucial that they understand the total cost of IT products and services–both those provided internally and externally–and the value derived from them. Having insight into their actual usage via a monthly invoice increases accountability and enables business unit managers to prioritize decisions and make strategic spending decisions.
By thinking like a business manager and providing them with actionable data they can use, the relationship will improve and BUs can then enhance their strategic pricing decisions about the services they provide to their external customers (pricing for check processing fees, online reservations, ATM fees, etc.). When asked how the CIO role will change in 2016, the CIO of CenturyLink shared that, “Regardless of industry, CIOs will have more responsibility directly to the customer.” Actionable data also enables business units to separate the value-added activities and costs from non-value-added ones.
IT leaders, our advice for 2016? Put your business unit manager hat on and think like they would. What will they need to succeed in the New Year? With the right IT financial management solution in place, business managers will have access to the details they need—helping them to make informed decisions, accurately price new offerings, and remain competitive in the market.