The End of Flat Tax Funded IT

I head up the EMC IT Finance group at what is an extremely critical junction in the history of our IT operations as well as the industry in general. Namely, as part of EMC’s third phase of our journey to the private cloud, we are switching from a traditional, centralized IT operation to IT-as-a-Service.

The idea behind ITaaS is to work toward tailoring IT services to the needs and demands of the business groups that use them rather than relying on IT-generated priorities based on a lump-sum budget. It is a transition that many in the industry are making and that many of our customers are considering. It was a hot topic at EMC World last May as well as at a recent IT Leadership Council, EMC’s premier program to help customers accelerate their IT transformation. I have also been fielding customer questions about cost transparency around ITaaS during EMC Executive Briefing Center presentations and calls over the past several months.

EMC IT ProvenTo make the shift to financial transparency, we are building a system that shows the true usage and costs for IT services so that users can decide which to consume based on transparent prices and service levels. We’re about a year into the process and just hit a key milestone: transferring most of the budgeted monies previously allotted for core IT services in our centralized EMC IT budget to each individual business unit so that they can understand the cost of IT services being provided to them.

At the same time, we will begin charging back each business unit against the returned monies for about 89 percent of the IT services they consume, including application, end user and hosting services.

While ITaaS models can be based on merely showing IT costs to users, we have chosen to use a chargeback process to help put urgency around establishing IT service priorities. After all, it’s hard to get solid feedback on the value of our IT services if those choices aren’t affecting a business group’s budget.

The successful agreementSo here goes. Our chargeback is getting underway after many steps to create financial transparency around IT. Underlying all of our work is effective communications. We’ve leveraged our good relationship with business unit controllers. Their trust and collaboration is essential. Crucial, too, is the quality of our IT cost information as well as a commitment to make sure that that data doesn’t deteriorate going forward.

Getting to financial transparency and chargeback has certainly been a departure for IT Finance. Not that our old work has gone away. We are still taking care of all the dollars-and-cents IT details. But now, we are also interacting with IT service managers to evaluate the financial viability of services.

The conversations we’re having with service managers have matured compared to where things were a year ago. Today, we talk more and more about unit costs, future consumption and make comparisons to external benchmarks before a budget request is made.

It is all part of an IT delivery model that gives users a seat at the table when it comes to shaping the future of your company’s IT operations. Business units have a hand in determining the value of the applications and tools they use. They can reduce support costs by aligning IT support tiers to business value. Even more beneficial is that by being more responsive to the needs of the business, ITaaS reduces risks and run-time costs from business units setting up their own IT infrastructure in the form of shadow IT.

And, of course, your IT operations gain efficiencies from defining and standardizing service offerings, automating back-end operations, and providing a higher level of service management for its internal customers. The result is the elimination of waste in IT infrastructure spending and a more agile delivery model. For insights on how to get started in transforming your IT operations, read IT-as-a-Service: Guiding Principles for Achieving Financial Transparency.

To that end, our intent at EMC IT for the rest of the year is to create further granularity around the value of our IT offerings and eventually use it to really determine what services customers want and are willing to pay for.

About the Author: Paulo Prazeres