Achieving IT Financial Transparency: Simple Is Better

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Sometimes simple is just better, even when complex financial and IT strategies are at stake. So it wasn’t totally surprising that EMC IT’s simple approach to creating financial transparency for its transformation to IT-as-a-Service (ITaaS) struck a positive note with financial leaders at two recent conferences where I gave presentations last month.

The first was a Finance Management Board meeting of The Research Board Inc. in late January, where I got to discuss EMC’s financial transparency program with some 15 IT finance leaders from other Fortune 500 companies. The following week, I gave a presentation on “The End of Flat-Tax Funded IT” to CFOs and other financial leaders from a cross-section of industries at the Corporate Performance Management Conference.

Attendees at both were extremely interested in our simplicity-first approach to making the shift from a traditional lump-sum IT service budget to a financial transparency system that shares with users the true costs of IT services they consume. Leaders whose organizations are in the throes of transformation to ITaaS wanted to hear more about how  we  created five broad “buckets” of services from which to allocate costs and establish a chargeback system to our IT users. Some admitted that when their IT Finance organizations tried a more complex approach—attempting to set up cost transparency with more than one hundred service categories out of the gate—they got so bogged down in the details that they never got the transformation off the ground.

The feedback I received highlights the fact that our experience in achieving financial transparency, and our ongoing efforts to refine the resulting collaboration between IT and the business units, can be applied to similar ITaaS projects across many industries. The basic steps we took can be found in IT-as-a-Service: Guiding Principles for Achieving Financial Transparency.

The positive response from conference-goers also validates the fact that we did it right when we decided to stick to the basics to start our transition and then determine later what areas to do deeper cost-structure dives. For example, our initial approach to apportion service support costs was on a per-head basis. After looking at our service support details, however, we decided to set up a system to improve cost efficiencies by channeling calls to the most efficient and least costly service channel for resolution.

Organizations working toward financial transparency need to look at which aspects of their particular cost model warrant a more detailed cost strategy. The idea is to get the first chunk done and then start probing and seeing what other data sets are available to you to address cost challenges.

Other key points that I was able to share with financial leaders are the importance of data quality in establishing a chargeback system for ITaaS, insights on how we provide our business units the total cost of ownership for each application they use, and the details of our hosting model.

Perhaps the most important advice I am able to offer to my fellow finance leaders is more spiritual than structural: Be passionate about your transformation effort, be persistent and keep driving forward. Transforming IT operations is possible and is a necessary step in delivering more value to the business.

 

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