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