Jump to content

Large Enterprise Business

Products & Services
Support & Drivers
Solutions

A strategy to solve IT cost mysteries

 
Content starts here Solving IT cost mysteries
Despite efforts to align IT with the business, many IT shops still struggle to understand how their costs and resources are allocated to the business. Many business stakeholders, meanwhile, still don’t understand what they’re getting for their IT investment. Today, budgets are tight., Knowing that, it's critical that IT clearly understand its costs, both for smarter technology investments and the ability to optimize IT costs (see side bar) for the business.

IT departments can better understand their costs and how they impact the business with an IT financial management strategy that creates information transparency in IT. Transparency clarifies IT spending, and makes prioritizing with the business easier. And when cuts in IT spending are necessary, it allows IT departments to optimize, or make the most of, those reductions.

The IT cost mystery

Big, one-time IT expenditures aren’t a mystery. The real challenge is breaking down ongoing IT costs by each business unit and getting a detailed accounting of how labor and assets are allocated.

This challenge often stems from a variety of underlying issues:

  • IT costs might only be forecast once a year and lack necessary rigor.
  • Support costs may not be calculated until after an IT investment is completed.
  • A business may not be as disciplined with IT investments as it is with non-IT investments.
  • IT investments may not have been properly vetted for business benefits in the first place.

Regardless of the root cause, the repercussions are often similar: IT workers can’t produce the information IT management needs to control costs and plan strategically, and the business doesn’t understand how its IT investment translates into value.

Create transparency, solve the IT cost mystery

For more detail on IT financial management, visit HP’s virtual boardroom and download the white paper, “IT Financial Management: cost transparency and effective IT governance.”
IT organizations can solve their cost mystery with an IT financial management strategy that builds information transparency into all aspects of IT operations and finance.

Information transparency helps IT departments control costs and make better technology investment decisions. It does this by mapping IT investments and resources to business priorities and IT asset tracking systems. Effective transparency includes three key components:

  1. Measuring IT labor and tracking IT assets: Assess how many internal and external employees are working in IT; what projects they’re dedicated to and for how many hours.
  2. Cost forecasting: Provide stakeholders with accurate IT budget estimates and variances.
  3. Demonstrating IT value: Show how IT reduces costs, improves customer service or creates new revenue opportunities.

A phased approach to IT financial management

A comprehensive IT financial management strategy with the right software can achieve quick wins and fast return on investment. The following are recommended phases and key components of IT financial management.

Some organizations may choose to focus on a specific phase based on their particular needs:

Phase 1

  • Strategic portfolio assessment: Aggregate IT demand and prioritize investments.
  • Asset tracking: Identify and track all IT assets and related costs.


Phase 2

  • Cost analysis: Consolidate all labor and non-labor costs (capital and operational expenses) to forecast budget variances and identify cost-saving opportunities.
  • Project and program management: Enforce project and program management across all IT and business units.
  • Resource and time tracking: Plan and track resource costs and utilization based on actual results.
  • Contract and software compliance: Reduce costs by enforcing hardware and software contract and lease compliance.

Phase 3

  • Value-based analytics: Analyze consolidated cost data in the context of business value so that the cost/value relationship is the basis for strategic planning and “what if” analysis.
  • Service-based accounting: Price IT assets and allocate costs to business based on actual asset use.

How HP can help

The HP IT financial management (ITFM) solution combines HP Project and Portfolio Management Center software, HP Asset Manager software and the new HP Financial Planning and Analysis software. The ITFM solution analyzes information from multiple sources and integrates easily with ERP and other third-party systems. HP Asset Manager and HP Project and Portfolio Management Center solutions are available through a software as a service (SaaS) model to accelerate time to value and reduce the total cost of ownership.

HP’s ITFM solution helps IT organizations better understand their costs and resource usage and can link that information to business decisions. HP also offers an ITFM maturity model and consulting services to help customers transform their organization. Learn more about HP’s ITFM offerings. And be sure to check back for subsequent articles that explore additional cost optimization initiatives, such as virtualization management, automation and management software consolidation.

  Your feedback is important to us. Was this article useful/informative?  
   
   Not at all(1) — Neutral(3) — Definitely(5)   
 

Follow the series

This article is part one of a four-part series on cost optimization. IT cost optimization can be achieved through four initiatives, including IT financial management (covered in this article), management software consolidation, virtualization management and automation (each to be discussed over the next few months). Continue to check back with HP Software and Solutions for more advice on how to optimize your IT costs.

IT cost optimization

How do you spend less during a downturn, while laying the groundwork to exit stronger, more efficient and competitive when the economy recovers? It’s a critical question facing many IT organizations today. IT cost optimization can help you overcome this challenge. By maintaining focus on an organization’s operational and financial health, IT cost optimization enables smart cost reductions that don’t undermine business performance or competitive edge.

While transformational cost optimization projects are a tough sell while budgets are tight, operational initiatives can produce results in six to 12 months while laying the groundwork for future endeavors. Operational initiatives include IT financial management (ITFM), virtualization management, automation and management software consolidation. Learn more about how HP’s IT cost optimization solutions can help you gain operational advantage .