This blog was created from a recent episode of Device42’s podcast, The Hitchhikers Guide to IT. You can find the latest episodes here.
This blog is for IT professionals considering setting up a technology business management (TBM) function or those who want to mature its processes to deliver more value.
Many enterprises are using technology business management (TBM) to align IT spending with IT and business strategies and drive more ROI. In a recent survey, 76% of practitioners said TBM had reduced their cost to serve customers. However, only 7% have fully mature functions that use TBM processes as an integral part of how their businesses plan, operate, and transform its technology. As a result, for most enterprises, there is room to grow in increasing TBM maturity and delivering more value back to the business.
To discuss this important topic, podcast host Michelle Dawn Mooney welcomed Andrew Pratt, Technology Business Manager for Teladoc Health to The Hitchhiker’s Guide to IT. Before joining Teladoc, an industry-leading telemedicine organization, Pratt worked in finance. Recruited into IT finance roles, Pratt has twice built a TBM function from the ground up.
“I found that individuals who excelled at understanding processes, being a business partner to the organizations they work with, and then also being very good with data in terms of interpreting data… excelled [in this role],” Pratt said.
Understanding What a Technology Business Management Team Does
The CIO.gov website defines TBM as “an IT management framework that implements a standard way to categorize IT costs, technologies, resources, applications, and services in order to disaggregate IT spending into consistent categories to provide CIOs with a detailed understanding of their organization’s IT costs. These categories include the finance view, IT view, and the business view.”
So, how does this work in practice? Pratt said that TBM teams are “internal customers” that ensure that the IT organization is aligned with both the IT and business strategy and goals, provide cost transparency, and drive innovation. To accomplish these aims, the TBM team interfaces with other functions that manage operational strategies or financial responsibilities, including finance, accounting, and procurement.
The TBM team works to understand what these other groups are doing and what best practices they use, interpreting that information back to IT, so that leaders can consume that information and incorporate it into their strategies. By doing so, TBM enables IT leaders to act on financial insights, without needing to be experts on terminologies or processes used outside of IT.
Setting Up Successful Technology Business Management Practices
Enterprises have enjoyed steady growth over the past decade, with some sectors experiencing demand spikes during the pandemic. However, in this current climate of economic uncertainty it’s harder to maintain that momentum, Pratt said. With revenues and profitability potentially at risk, TBM can help ensure that IT projects not only achieve their objectives, but also deliver planned ROI back to the organization.
Pratt offered strategies to set up or evolve a TBM function:
- Gain and maintain sponsorship: TBM needs to secure investment and commitment from senior leadership to establish and evolve operational and financial processes. In addition, TBM should find champions who are passionate about driving operational excellence within IT.
- Review TBM models: There are multiple models to choose amongst, said Pratt. TBM teams can choose the one that best fits their organizational structure and goals.
- Understand their current level of maturity: TBM can evaluate which processes are in place and which ones need to be developed to make sound financial decisions about IT projects.
- Capture low-hanging fruit: What are executives’ worst pain points? That’s where the TBM team should focus first to mature processes, said Pratt. For example, if executives are concerned about cloud spending waste, TBM can develop cloud FinOps capabilities to enforce disciplined spending, provide reporting, and maximize opportunities for cost savings. Another organization with less mature processes might just need data on whether its products are profitable.
- Commit to continuous improvement: TBR teams can set up objectives and key results (OKRs) that align stakeholder needs with their own and partner goals to drive continuous improvement. New teams can go segment by segment, working with internal partners to develop capabilities that solve the worst pain points and drive the most value. Established groups can work on improving key processes, such as understanding how the different business functions contribute to making IT decisions, improving how software is coded to provide more data for decision making, or evolving metrics and reporting.
- View innovation through a financial lens: TBM staff should ask other teams why new applications are needed and work with them to develop a business case for all new initiatives, determining whether they are delivering cost savings, reducing labor, or increasing innovation.
- Work with the business to deliver profit: At companies today, both IT and the business are developing new technology. As a result, teams need to coordinate efforts, ensuring that new initiatives don’t overlap other programs and tools, creating redundancy and waste.
- Creating feedback loops: TBM can play a vital role capturing and seeding best practices across the organization, across such areas as optimizing cloud and hardware spending and enhancing resource capacity planning.
Using Key Benchmarks to Measure Results
At Host Mooney’s request, Pratt recommended using a few key benchmarks to create baseline data and measure progress. These metrics include:
- Evaluating IT spend as a percentage of revenue: This commonly used industry metric enables TBM teams to compare their progress against competitors. For example, if a healthcare organization is spending eight percent when the norm is five percent, the TBM team will likely be developing strategies to reduce it.
- Looking at the application portfolio compared to revenue: Pratt says he uses an internal benchmark that compares his company’s total number of applications to the annual revenue that the company generates. His team then looks for ways to reduce the application portfolio to reduce costs, while still hitting revenue targets.
- Cloud spending as percentage of firm revenue: TBM teams can compare their total cloud spending against total revenue, to see if there are opportunities for reducing it.
- Cloud spending compared to product costs and revenues: Drilling down further, TBM can look at product costs and revenues, to understand how cloud spending supports these services and whether there are opportunities to decrease it. For example, products with low profitability likely don’t warrant substantial cloud investment.
Final Takeaways on Using TBM to Drive Results
Host Mooney asked Pratt to give listeners his final thoughts on maximizing the value of TBM. He said:
- TBM plays a vital role in enterprises today: Teams standing up TBM functions may be surprised by how much support they gain from partners. Pratt says that’s because individuals across the organization are regularly put in a position where they need to report profit and loss (P&L), yet don’t have all the data that they need to do so. As a result, they’ll welcome the opportunity to gain metrics and reporting that increase clarity.
- Set up appropriate metrics from the start: Pratt recommends setting up quarterly and yearly OKRs at the beginning and working towards them. By demonstrating progress, teams will increase leadership support and get the investment they need to grow their team and tools.