How does an organization get started with Technology Business Management? In this interview, Bill the TBM Guy explains how he came in contact with TBM, the results so far and the way forward.
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“Bill, how did your organization come to implement TBM?”
Bill answered: “Five years ago, Jessica Harvey—our CIO—asked IT Finance and some of us in her organization to come up with a better way to allocate IT costs to the business units.”
“What was the driver for that request? Do you know?”
“Although she didn’t say it, for me she wanted to shift the perception that IT is a money pit. A place the company pours lots of money into, while it is unclear what the organization is getting from that.” Said Bill.
“Would you say she wanted to turn IT from a cost to a profit center?”
“Maybe there was some of that. For some time, I thought so.” Answered Bill. “Later on, we discovered that such a transition would be unfeasible, as corporate finance specifically forbids cross-company invoicing.”
“And why is that?”
“Taxes.” Said Bill. “If IT were to have revenue stemming from other parts of the company, tax authorities would have an entry point for further taxation. Our CFO would never allow something like that. That’s why to this day we do show-back, as opposed to charge-back.”
“So, what did your CIO want?”
“She wanted to highlight the value IT provides to the corporation. We were in a very typical scenario: Finance treated IT as a cost center, expecting little from it, except for requests for additional funds. The business thought we in IT were slow and expensive and considered they could do better themselves.” Said Bill. “Transparency was a keyword she used.”
“How did you go about that?”
Bill said: “Controlling had been doing cost reporting for many years; however, they lacked the IT savvy to put together actionable reports. For example, they used archaic categorization schemes, based on the setup in their ERP platform. This generated a lot of resistance, both in IT and in the business. We needed to go back to the basics and start over.”
“What was your first step?”
“We drew a model on paper, using as a basis the reporting categories that the Finance people were using—minus the obsolete ones, of course!” Answered Bill. “They looked somewhat similar to Cost Pools in TBM.”
“OK, what did you do with that draft model?”
“We sought vendors we thought could provide the required tooling. We prepared a request for proposals (RFP) and sent it to a few providers, some big names, some less so. Some of them declined or failed to respond to the RFP document.” Said Bill.
“How was the vendor selection process?”
Bill said: “We established a proof of value and gave the four selected vendors a sanitized sample of our financial data. They would put together a demo environment that would implement a cost model. We held follow-up meetings and calls to explain to them the context and background behind the data.”
“And then?”
“While they were working, we put together a table with evaluation criteria that would help us decide.” Said Bill. “We tried to make it transparent and aseptic, to prevent personal biases influencing the decisions. There’s a bit of wishful thinking there: you can always skew the criteria or the weights to favor your favorite product.”
“What resulted from the proof of value setups, Bill?”
“We gave the vendors time to put together a demo system and had meetings with them, where they presented the solution. In parallel, we did all the internal paperwork to ensure the required budget would be available. We also put together the project documentation our company requires for such projects.”
“It sounds like a delicate balancing act…”
“Indeed. During this interim period, we worked with the vendors to negotiate the best possible deal from a commercial standpoint. Some of them were eager to get the deal and seemed ready to commit to just about anything we asked. With some others, the negotiations were much harder.”
“So, what happened with the trials?”
Bill said: “We watched the demos, and a few things became apparent quickly.”
· “One solution offered a very open architecture, easy to integrate, especially with other tools of the same vendor. It promised some learning capabilities, so that the system would extract data relationships on a month’s data and apply them to subsequent periods. On the other hand, it lacked proper analysis and reports. We would have had to build that by ourselves.”
· “Another vendor was very close to the ERP world, which meant that the integration with financial data would have been easy. On the downside, we would have to build most rules in the cost model with SQL statements.”
· “The third vendor offered what looked like a powerful solution, based on public standards, with many out-of-the-box tools for proper cost analysis and reporting. However, the project implementation costs they required were much higher than the rest.” Said Bill.
“How did you decide for the most appropriate solution for you?”
“We toyed with the criteria spreadsheet, tweaking the weights according to what each of us thought was most important. Sometimes the results would be different. We discarded one vendor right away: their solution was in the middle, both in terms of price and features. We worried about the difficulties in maintaining the cost model in the long term.”
“And how did you pick your winner, then?”
“We had many conversations in the core team, weighing the pros and cons of the two finalists in an analog fashion, past weights and criteria. Finance favored the solution that offered better modeling and reporting capabilities, while some of us liked the integration capabilities of the other one. As likely project manager, I had to consider cost too.”
“And the result?”
“Finance was our partner in the project, and we needed to listen to them. We have seen other similar projects fail because they were missing the commitment of a key stakeholder. We put a lot of pressure on the vendor to get the commercial offer within the boundaries of the budget we available.”
“So, that’s how you got started with TBM.”
“Yes.” Said Bill. “I hadn’t heard about Technology Business Management before. While we were waiting for the project kick-off on July 1st, we took several online classes from the vendor’s offering. They were fantastic and helped us to understand what we were getting ourselves into.”
“How did the implementation project go, Bill?”
“I have to say that their implementation manager certainly knew how to run these types of projects. They laid out a weekly plan, with milestones for every major building block in the TBM cost model.”
“What do you mean, exactly?”
“We started at the bottom, with the source of financial data. That took us two weeks. Then we split the costs across the various related financial objects: vendors, labor, fixed assets, Cloud, etc.”
“How steep was the learning curve?”
“It wasn’t easy: we had to learn a lot of stuff and the online trainings helped only so much. We made mistakes along the way, of course. The vendor’s consultants were very knowledgeable but building a cost model is a complex matter.”
“From a project perspective, what were your deliverables and exit criteria?”
“We had to allocate 100% of the costs to the business units. Fallout was not an option, as Finance would feed the output of the model into the financial systems for corporate reporting. That created quite a lot of stress, especially as the weeks flew by and we were still halfway through the model in IT Resource Towers.”
“How did you deal with the IT infrastructure layers?”
“We had people in the project’s core team that went out to the CMDB and other data sources to get relevant data. Storage, servers, network devices, even applications and business services. We also got a tailored report that gave us transaction volumes between some applications and business services.”
“How did that help?”
“For starters, the transaction report gave us relationships between apps and business services, plus a quantitative measure that we could use as an allocation key.”
“When did you think it would work?”
“At first, I was dubious about the outcome. We had a tight timeline, and I needed to show results to the steering committee in three months at the latest. Fortunately, by mid-August—six weeks into the project—we started getting costs to the business units. A small percentage at first, but it was a great success for us.”
“What happened then?”
“We kept finding relationships between applications and business services, and by talking to the various application support teams, we kept completing the model. Little by little the percentage of allocated costs grew, and by the end of the three months we had about 98% on business units. The rest was a matter of dotting the i’s and crossing the t’s, as they say.”
“And the result, Bill?”
“This is what I am most proud of our TBM implementation: by January, Finance starting using the data in our system to feed the corporate management tools. We still had a long way to go—TBM-wise—but we had a strong stake in the ground.”
“Any last words of wisdom? What would you do differently now?”
“You really want to have a strong sponsorship. Ours was good, especially during the project, but our organization is complex and only the local Finance team supported TBM. This has proven to be a challenge in subsequent years.” Bill continued: “Also, we spent a long time trying to sell our cost model to the rest of the company. This also relates this to sponsorship and commitment. Over the years, we have improved stakeholder acceptance and adoption, but it is a bit of work in progress. We made a big jump this year when we started offering application optimization insights. This is an avenue we are exploring right now.”
“Thanks for sharing, Bill.”
“Thank you for your interest and attention!”
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