You can’t run IT like a business without the right framework

No doubt you’ve heard this before, ad nauseam: IT should be run like a business.

Fair enough. But easier said than done, right? Which is why the TBM Council has come up with a framework to help organizations do exactly that. TBM, or technology business management, is a methodology for managing IT like a business, subscribed to by more than 1,300 IT professionals globally.

There are several trends driving this change. The cloud is forcing CIOs to embrace IT-as-a-service; they need to rethink how their IT services are being procured and delivered. Vendor management is becoming more strategic as IT environments become increasingly “hybridized,” and financial transparency is the new lingua franca between IT and the business.

The industries most affected by this — and, indeed, those that can capitalize on it if they embrace TBM — are those that are technology-intensive with a high degree of fragmentation or decentralized cost structure. Like financial services.

The TBM framework is meant to help organizations model IT costs and create metrics, reports and benchmarks. But those best practices will differ by industry, says Renee Boucher Ferguson, researcher and principal analyst with the TBM Council, who spoke during a recent webinar.

That’s why the council has created vertical-specific workgroups to develop best practices. The financial services industry, for example, faces increased and uncertain regulatory controls, necessitating cost efficiencies, as well as the need to reconnect with customers following the last recession, says Boucher Ferguson.

First American Financial Corp. began its foray into TCM during the economic downturn as a quest for IT cost transparency. As described in a case study on the TBM site, its IT portfolio was beginning to swell with redundant systems, but the IT department couldn’t precisely identify which applications weren’t necessary — and therefore couldn’t eliminate any of them.

And that made defending the IT budget particularly challenging.

While best practices will differ among verticals, one commonality they share is an increasing reliance on IT, causing spend to increase as a percentage of revenue. So IT is under pressure to shift from being a cost centre to being a services provider.

But, while business leaders might grasp the promise of new technology, they don’t necessarily understand the challenges inherent in operationalizing that technology. And IT leaders don’t always know how to benchmark their existing infrastructure costs and communicate the benefits and trade-offs of their investments.

TBM is really about changing the conversation; it’s about helping IT collaborate and partner with IT consumers so they can make better decisions. You can’t innovate unless you have transparency and insight.

Through TBM, First American’s CIO, Larry Godec, mandated a double-digit reduction in the corporation’s infrastructure budget, consolidating more than 20 data centres and removing 200 applications.

But perhaps most importantly, he learned the total cost of providing IT services, and how much of that cost is driven by each line of business. As a result, he’s been able to shift more of his budget into strategic initiatives that will help grow the business.

In other words, you could say he’s running IT like a business.