What’s in your Wallet: Defining costs inspires IT conversations

Creating a financially transparent IT delivery system, in which business units can see—and potentially pay for—the amount of services they consume, isn’t just about costs. It’s about new conversations and choices.

In fact, showing back and charging back IT service costs is a crucial component to restructuring EMC IT operations to an IT as a Service model.

Up until now, business units at EMC had little break down of what they spend on IT services. The email services, desktops, collaborative tools and test environments used were, for the most part, funded through a non-specific IT budget. Even in cases where business units were aware of certain costs associated with certain applications they owned, they did not have visibility into the cost break down of such services. Expenses for things like labor, telecom, software, licensing, or depreciation were not included.

While that may have meant that business units didn’t have to concern themselves about the details of IT investments, it also meant that they often lacked control over their access to IT resources that could potentially benefit their operations. That access was indirectly limited by the CIO office, which in traditional fashion, sought to keep the IT budget from increasing. In turn, EMC IT was focused on meeting growing IT demands from business units with a limited budget rather than responding to the business’ needs.

Like most corporate IT operations, IT investment at EMC tended to be dictated by constraints and not by conversations.
EMC’s transition to cloud computing has paved the way for a major shift in IT delivery. It has made it possible for EMC IT and the business units it serves to be much more agile and flexible in providing/consuming IT. And that has given rise to the concept of IT as a Service.

The premise of ITaaS is that customers—i.e. the business units—will drive the company’s IT service offerings with their consumption choices. EMC IT will respond much like a service provider in a private enterprise.

It is financial transparency that will drive that new model. Sharing the actual cost of IT services with business units will start new conversations about what they consume and whether the value they are getting is worth the price. In some cases, business units may not even realize the expense of a particular IT service.

Financial transparency will also provide IT with a new way to communicate to corporate officials regarding IT investment. Rather than just holding the line on the overall IT budget, EMC’s finance office will gain an unprecedented view into what services are being consumed and what’s important to the business.

We are developing a simple and fair chargeback system that captures the true costs of IT services. This will help Finance to eliminate waste in IT infrastructure spending and let EMC IT be more responsive to its users who, in turn, can be more responsive to market shifts and opportunities.

Cost transparency isn’t a new idea. EMC IT has been working on it for more than a year. It is a crucial step in improving the way that we run our operations in an increasingly competitive and changing IT market.

After all, the more insights business units, IT and corporate leadership have into what services are in demand, how much value they deliver for the company and how they stack up with competitors, the better able they will be to make informed choices about IT investment.
What new conversations will financial transparency inspire you to have?

About the Author: Neil Thibodeau