IT Financial Transparency: Eyes Wide Open to Opportunity

EMC IT’s evolving financial transparency model is letting IT users see more than costs and billing details for the IT services they use. It is also opening their eyes to the opportunity to take control of those costs and free up funds for more strategic IT investments that will result in operating efficiencies, increase profitability and enhanced growth.

For nearly four years, EMC IT has been transitioning our IT operation from a traditional centralized, cost-center based IT budget— where users had little or no information on the cost and value of what they consumed—to a financially transparent one providing increased detail on users’ IT spend. It is a crucial part of our transformation to an IT-as-a-Service model. I’m happy to say our IT customers—the business units— are beginning to use that information to take control of their IT investments as we had hoped they would.

I say “beginning” because making this shift takes time. We first started establishing a financial transparency process by tackling the high-level IT services and detailing those costs in a simple chargeback system. That got the ball rolling on our goal to provide our IT customers with an increasing level of transparency that would ultimately help them decide where their IT spend should be.

It is important to get the financial transparency message out with a simple approach initially and let your organization’s culture adjust before doing the hard work of including more cost detail. (Check out our white paper to learn more about how we achieved enterprise chargeback for ITaaS)

Over the years, we have increasingly refined our costing model as well as provided more clarity on how our services stack up with competitors—a key concern for today’s corporate IT operations including ours.

As we began the 2014 IT planning process with our business units, we began to see an encouraging change in our customers’ approach to their IT investments.  In Q1, our business users began asking lots of questions about why they were spending this on that or why a certain service was costing X.  These are questions they couldn’t ask before financial transparency because they didn’t have the cost information in front of them.

While it might put IT in an uncomfortable position to answer some of these questions at first, it is the right thing to do. It led us to just the kind of conversations with the business units that we wanted to facilitate around financial transparency: “If my total spend is X and I want to invest in these IT projects that will potentially improve my business performance, then what current expenditures can I shrink so I can make these other investments?”

A good example is a break-fix expenditure our business customers are beginning to scrutinize to find savings in what they spend on Production Support Services. Before financial transparency, business units had no idea what support service tickets were costing them. They just opened a ticket when an issue arose and then IT closed it when it was resolved.  But now that we are using a unit-based pricing model, they are questioning how much tickets are costing them and looking for ways to reduce the frequency of tickets and their individual costs.

We still have a way to go before our IT customers are able to maximize cost savings and channel their IT investments. Just because they are asking questions doesn’t mean you can flip a switch and suddenly move that money.  Right now such efforts are still in the conversation stage—something we in IT are working to facilitate in a formalized process.

We’re still evolving, but the onslaught of questions from users is a good sign we are moving in the right direction.

In the meantime, EMC IT is continuing to improve the quality of the financial transparency information we provide to customers and expand the amount of detail included. That means less “peanut butter spread”— or spreading the cost of a service between business units using a head count method — and more specific costing geared to each individual user. We always have to weigh the amount of effort in providing that sort of detail against what conversations we are trying to create around adding value for the business.

We are currently working to allow business units to access their IT invoices directly, rather than having to go through an IT representative. Ultimately we would like to present them with not just a bill, but a summary of all the services they consumed, how they consumed them, and even include some suggestions to help them reduce their costs.

There remains huge opportunity to communicate with our customers using financial transparency to maximize the business value we provide. It is all part of IT’s transformation to think more like a business than a monopoly and to really design and deliver the services our customers are asking for.

About the Author: Neil Thibodeau