Digital Fuel- Achieving IT cost visibility-Id gresearch cio_study_1009

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Market Pulse The situation has only become more daunting in recent years. As information technology has turned both ubiqui- tous and mission-critical, the need to support current and future expenditures has risen dramatically. And as recent economic cycles have proven, matters get even more difficult during downturns. It’s been estimated by leading analysts that with the proper visibility into IT spending, 20 percent of the mil- lions of dollars spent by individual businesses each year on IT could be invested more effectively. The question, therefore, on every executive’s mind is, How can I know how to better spend our organization’s IT dollars in sup- port of business goals? Folded into this question are other unknowns. How do I know if there are inefficiencies in our spend? How do we compare to similar organizations? How can we better invest our limited resources in the future? How can we reduce IT spend in ways that actually help our business? IT Cost Visibility: The Universal Concern Recent research by IDG Research Services brings the drive for better IT visibility into sharp focus. The study examined the needs and priorities for IT Cost Management among more than 130 respondents who have direct involvement with the management of IT costs at their organizations. recent IDG research substantiates the need for far greater visibility into It spending. at the same time, a discipline that supports better It decision-making is emerging. Historically, IT spending has been viewed—fairly or unfairly—as little more than a cost of doing business. Productivity and even profitability gains accrue from IT, to be sure. But because no comprehensive, credible system has been in place to accurately capture and analyze IT costs against the IT services they provide, it’s been difficult for CIOs and their staffs to uncover the insights that support wise decision-making aligned with business goals. achieving It Cost Visibility: today’s Challenges and Solutions Among the study’s key findings: A huge gap exists between the crucial importance of getting better cost visibility and respondents’ ability to achieve it. More than eight in ten respondents (84%) said that having detailed visibility into IT cost and drivers—by service organization, geography, product or other dimension— was important. Yet over half are less than happy with their current level of visibility, and almost 20% would rate their level as “poor” or “terrible”. Why is cost visibility so important? Seven in ten IT re- spondents report the need for identifying inefficiencies, while nearly as many say they need to give their orga- nization’s business units more information in order to better control IT demand. Respondents cite IT projects (57%), business applications (52%), application develop- ment (47%), storage (44%), and servers (38%) as the top five places where greater visibility is needed. The challenge many IT cost managers face, however, is the lack of an explicitly defined IT cost model—a prob- lem cited by 49% of respondents. Other major factors include difficulties obtaining a detailed breakdown of costs by service, business unit or geography (47%); diffi- culty mapping IT assets to services (46%) and overcom- ing data spread across multiple systems (46%).

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Transcript of Digital Fuel- Achieving IT cost visibility-Id gresearch cio_study_1009

Page 1: Digital Fuel- Achieving IT cost visibility-Id gresearch cio_study_1009

Market Pulse

The situation has only become more daunting in recent

years. As information technology has turned both ubiqui-

tous and mission-critical, the need to support current

and future expenditures has risen dramatically. And as

recent economic cycles have proven, matters get even

more diffi cult during downturns.

It’s been estimated by leading analysts that with the

proper visibility into IT spending, 20 percent of the mil-

lions of dollars spent by individual businesses each year

on IT could be invested more effectively. The question,

therefore, on every executive’s mind is, How can I know

how to better spend our organization’s IT dollars in sup-

port of business goals?

Folded into this question are other unknowns. How do I

know if there are ineffi ciencies in our spend? How do we

compare to similar organizations? How can we better

invest our limited resources in the future? How can we

reduce IT spend in ways that actually help our business?

IT Cost Visibility: The Universal ConcernRecent research by IDG Research Services brings the

drive for better IT visibility into sharp focus.

The study examined the needs and priorities for IT Cost

Management among more than 130 respondents who

have direct involvement with the management of IT

costs at their organizations.

recent IDG research substantiates the need for far greater visibility into It spending. at the same time, a discipline that supports better It decision-making is emerging.Historically, IT spending has been viewed—fairly or unfairly—as little more than

a cost of doing business. Productivity and even profi tability gains accrue from IT,

to be sure. But because no comprehensive, credible system has been in place to

accurately capture and analyze IT costs against the IT services they provide, it’s

been diffi cult for CIOs and their staffs to uncover the insights that support wise

decision-making aligned with business goals.

achieving It Cost Visibility: today’s Challenges and Solutions

Among the study’s key fi ndings: A huge gap exists

between the crucial importance of getting better cost

visibility and respondents’ ability to achieve it. More

than eight in ten respondents (84%) said that having

detailed visibility into IT cost and drivers—by service

organization, geography, product or other dimension—

was important. Yet over half are less than happy with

their current level of visibility, and almost 20% would

rate their level as “poor” or “terrible”.

Why is cost visibility so important? Seven in ten IT re-

spondents report the need for identifying ineffi ciencies,

while nearly as many say they need to give their orga-

nization’s business units more information in order to

better control IT demand. Respondents cite IT projects

(57%), business applications (52%), application develop-

ment (47%), storage (44%), and servers (38%) as the top

fi ve places where greater visibility is needed.

The challenge many IT cost managers face, however, is

the lack of an explicitly defi ned IT cost model—a prob-

lem cited by 49% of respondents. Other major factors

include diffi culties obtaining a detailed breakdown of

costs by service, business unit or geography (47%); diffi -

culty mapping IT assets to services (46%) and overcom-

ing data spread across multiple systems (46%).

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Market Pulse

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The messages from respondents make it easy to

understand the potential for improvement in cost

visibility—as well as the frustrations that are present.

Among the comments:

n “One area [where cost management is lacking] is in

predictability models for business software applica-

tions —so if we’re going to grow, what it will cost [in

software licensing, maintenance, consulting] in three

years, five years, seven years out to upgrade versus

buying new.”

—CIO of a major wines and spirits distribution company

n “I use a lot of Excel. I just take raw info out of our

financial system as well as out of our time tracking

system. I had to set up a number of processes with my

staff so they could track their activities by various levels

or category. It took some development and training…If

I had the right tool I could really get down to each one

of the business units because it’s their decisions that

drive my costs.”

—Director/CIO for a large Canadian non-profit

n “Within this economic downturn and these market

conditions, [cost control] is an extremely high priority—

connecting time, goals and budget! We’re always open

to how we can better this process and make it more

real time. For example, it would be nice to have a red

light, yellow light, green light heads-up display with a

trending component.”

—VP/Information Technology for an international

child care and education company

What Has Been The Challenge? Almost since microprocessors generated their very first

bit of business data, companies have sought to justify

their information technology expenditures. But as with

many other complex business systems, it’s notoriously

difficult to achieve true visibility into the cost to deliver

IT services based on all the hardware, software, com-

munications, security and other services needed.

Many organizations mistakenly assume that if they

track their spending on hardware, software and related

direct expenses, they have the information they need

to make good IT decisions. Yet true visibility requires

new activities and processes for assessing and ap-

portioning indirect or even hidden costs. Consulting

fees, shared services, maintenance, server/storage

virtualization, security software, energy costs, com-

munications, as well as many other components, are all

relevant; these must be compiled and allocated to the

appropriate IT services.

As the normal course of business occurs, visibility is fur-

ther diminished by change. Products, services, business

units and even whole divisions get phased in or out; IT

technology evolves; competitive pressures generate

abrupt new corporate opportunities or shifts in strategy;

and new governmental regulations are instituted. All

these factors, and many more, can suddenly re-define IT

services and/or those who consume them, both inside

and outside the organization.

Of course, many IT organizations use ad hoc approaches

to help track IT expenses—and often with tools in-

tended for other purposes. At one end of the spectrum

are general software tools like spreadsheets, project

management, and various general ledger accounting

packages; at the other end are highly specialized IT sys-

tem management tools that include Business Service

Management (BSM), IT Asset Management (ITAM), and

Project Portfolio Management (PPM).

These classes of software, and many others, are good

at fulfilling their intended purposes. However none are

designed to capture, track, assess, allocate and analyze

all of the direct and indirect costs related to the full

range of IT services.

Yet the data in these software tools, if leveraged ap-

propriately, can indeed have enhanced value when

combined with other pertinent data by a dedicated IT

Cost Management solution. Such information can, in

effect, be liberated to provide the powerful insights

The challenge many IT cost managers face

is the lack of an explicitly defined IT cost

model—a problem that was cited by 49%

of survey respondents.

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Market Pulse

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Yisrael Dancziger, President and CEO of IT Cost Manage-

ment solution provider Digital Fuel, notes that IT Cost

Management can also give IT executives the tools they

need to rationalize the use of IT services. “You can be

efficient at delivering services, but if a business unit is

using more than it needs, you still end up spending more

on IT than the business actually requires,” he said. “IT

Cost Management lets you collaborate meaningfully

with business users to both reduce cost and optimize

service delivery.”

As an organization’s use of IT Cost Management

expands, it can achieve even greater returns. Manag-

ers can model and allocate service costs effectively

between cost pools including general ledger, IT assets,

projects, technical and business services, as well as to

each business unit based on IT service consumption.

They can also prepare billing and chargeback strategies,

including detailed breakdown of charges and identify-

ing top spenders by geography and/or business unit.

This capability leads to better decision making even if

formal chargeback is not yet applied to the P&L of each

business unit.

Real-World Results Digital Fuel’s SaaS IT Cost Management solution

has been instrumental in achieving major financial

and performance gains at companies with budgets

ranging from large to small. Nationwide Mutual Insur-

ance, one of the nation’s largest full-service financial

services and insurance companies, has not only

realized more than $20 million yearly in savings, but

also reduced IT unit costs by at least 6% annually using

Digital Fuel IT Cost Management.

“By modeling IT costs and cost drivers by business ser-

IT cost managers require to answer their toughest IT

spending questions.

IT Cost Management: Accurate, Proven Visibility When IT departments have the right facts and figures

at their fingertips, they can make much more informed

spending decisions. This is the goal, and the value, of IT

Cost Management software.

IT Cost Management can offer the kind of accurate vis-

ibility into IT cost that drives better alignment, greater

collaboration between departments, and maximum

cost reduction. Best of all, it has the potential to do

so very quickly, without significant investment, and

through the use of existing data in its current format.

IT Cost Management is highly adept at advancing the

effectiveness of major IT business processes. Whether

pursuing proactive cost control, budgeting and plan-

ning, continuous cost reduction analysis, business unit

cost visibility and chargeback, executive reporting,

“What ifs”, pricing or other disciplines, IT Cost Manage-

ment gives IT cost managers unprecedented power to

better manage their planning and operations.

Time to insight is very quick. Within a matter of two

to four weeks, users can begin answering questions

about IT infrastructure and business application cat-

egories that were identified in the IDG Research study

as most critical to IT administrators. For example, users

can not only identify business applications that are

overrunning budget, but also determine root causes.

Candidates for reduced service levels, consolidation,

support reduction or end-of-life decisions can be

found, as well as those that are appropriate for SaaS

(Software-as-a-Service) or outsourcing.

Similar visibility and insights can be generated for

servers, storage systems, desktops, even service desk

operations. With IT Cost Management, it’s possible

to make highly informed decisions about licensing

reduction or re-negotiation; virtualizing data services;

outsourcing service desk functions; instituting tiered

storage solutions; or identifying inefficiencies in server

support such as electricity, facilities, support or security.

IT Cost Management software can offer

the kind of accurate visibility into IT cost

that drives better alignment, greater

collaboration between departments,

and maximum cost reduction.

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Market Pulse

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vice and then tying the cost of IT service back

to the business units that consume them, we’ve

been able to systematically reduce IT costs each

year,” said William Miller, Associate Vice President

of Finance for Nationwide.

Cummins, Inc., the Indiana-based power systems

manufacturer, was able to reduce its IT service billing

by $10 million in its first year using Digital Fuel to

manage IT supply and demand with greater collabora-

tion between business units and the IT organization.

“Showing our end users the true cost of their technol-

ogy requirements has been a significant step for-

ward,” commented Floyd Rutan, Executive Director of

Cummins Business Services. Hard dollar savings using

Digital Fuel’s business unit visibility, chargeback and

proactive cost control at Cummins now totals more

than $30 million.

Software-as-a-Service is Easy to Deploy Digital Fuel’s IT Cost Management is an affordable

and proven SaaS solution that is enabling IT organiza-

tions to run their operations like a business. Currently

used by many major enterprises including Cummins,

Nationwide, ThermoFisher, Capital One, Independence

Blue Cross, Global Crossing, BASF, Capgemini, Deutsche

Bank, Nestle, P&G, Volkswagen and more, Digital Fuel

uniquely automates key IT cost management processes

to provide full visibility into the cost of IT services.

Digital Fuel’s ability to drive better IT cost alignment,

collaboration and reduction is enhanced by numerous

out-of-the-box processes, cost models, formulas, re-

ports, metrics and dashboards for key IT solutions areas

such as storage, servers, and business applications. As

a SaaS application, Digital Fuel requires no software

installation. IT organizations simply subscribe to Digital

Fuel and begin using the Web-based application in

minutes. Simply point the application to the appropri-

ate general ledger and other cost data sources using

the pre-defined upload templates, and Digital Fuel will

automatically provide insightful, actionable information

on a daily basis.

Digital Fuel’s SaaS IT Cost Management has received

an overwhelmingly positive response from industry

publications and analysts. According to Gartner, “By pro-

viding real-time visibility into IT spend and cost drivers,

organizations can significantly reduce IT spend by 15%

or more.” Enterprise Management Associates (EMA)

adds, “Digital Fuel is positioned well to help customers

with IT financial management and has proven to be

effective for many customers seeking to provide their

organizations with cost transparency.”

Turning IT Cost into IT Investment Nearly 60 years after the onset of the Information Age,

IT spending is no longer a vague, hard-to-defend topic.

With IT Cost Management, information technology is

transformed from a cost of doing business into a true

corporate investment—even a profit center—that

builds business.

As the need for wise IT decision-making only becomes

more consequential, IT Cost Management is emerg-

ing as a discipline that both reduces costs and aligns

IT with an organization’s broader business objectives.

With rapid deployment, built-in processes for IT

cost visibility, data input, modeling and reporting,

and affordable cost among its strengths, IT Cost

Management is an alternative every IT organization

should consider.

For more information, visit www.digitalfuel.com

CIOs Want Defined IT Cost Model

Source: IDG Research, Sept 2009

Lack of an explicitly defined IT cost model

Difficulty getting detail breakdown of IT costs

Difficulty in mapping IT assets to IT services

Data is spread across multiple systems

Gaining IT cost visibility takes too many man hours

Prevalence of “shadow IT” projects

Difficulty in collecting service usage/demand data

Lack of well-defined list of IT services

Data quality is poor

49%

47%

46%

46%

39%

38%

37%

34%

30%

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