With cloud computing and IT as a Service opening new doors, IT organizations are becoming more nimble in meeting the needs of the business units they serve by leveraging a more standardized, highly automated and agile infrastructure. This evolution provides an opportunity for IT to forge a new, more open dialogue with its business customers in determining how best to use these new capabilities.
Since IT as a Service is based on supply and demand, this new dialogue with the business needs to start with an emphasis on financial transparency. It is essential that the CIO and his or her team build a system that shows the true usage and cost breakdown of the IT services to be able to ‘showback’ and even chargeback the business for what they consume.
After all, continuing to operate IT services under a lump-sum budget without sharing expenses and options with the users is like running a household on a chunk of money without knowing what the individual bills cost. You can’t make informed choices about increasing your home’s energy efficiency if you have no sense of the monthly electric and heating bills. And how can you weigh the value you are getting from cable television, internet services, and cell phone contracts if those expenditures are melded with other utilities, trash pickup and snow plowing costs?
Managing IT costs out of one big spend-bucket may be a traditional corporate approach, but it has never been a particularly effective one in delivering efficiency and value for IT users or the providers. Actually sharing cost and usage details with users gives them a seat at the table in determining how the new IT as a Service model will take shape and evolve in the future—much like knowing the details of your household bills lets you decide how best to run your own home. With ITaaS, business units will have more of a share in the responsibility for IT expenditures.
Through cost transparency, both IT and the business will gain details of what goes into determining actual costs to deliver services, accurate details of what services are delivered, and the resulting business performance and value. Business units will have clarity they’ve never had before and will be able make real-time decisions based on their changing business needs.
IT, in turn, will have a higher stake in ensuring that services are delivered properly and can even “sell” competitive service offerings to the business.
And both IT and the business can be more prudent in reducing over-allocation of resources – in other words reducing over-spending – granted the resulting dialogue between IT and business is bound to raise some challenges. But we’ll accept it and work through it. And we will actually be on the same side of the table for a change. We’ll both be looking at IT from a cost and delivery perspective as opposed to the business units saying they need something and IT reacting to it.
It’s really about trying to create logical conversations with the business units on what they are consuming and what alternatives they have. There may not be immediate alternative choices for users on some core IT services which are governed by licensing agreements or contracts or which pose internal security restrictions, but at least we can begin talking about user preferences on these services for future dialogues when opportunities for change arise.
I expect we will learn a lot from this more open process. The insights and exchanges we gain will help us on our Journey to the Cloud.
At EMC, we have built a set of financial transparency processes to capture the true usage and costs to showback or chargeback the business units for the services consumed. We’ll soon be publishing more information on this…but would love to hear your thoughts. Is your organization heading toward a financial transparency and chargeback model? Have you hit any speed bumps along the way?