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Do you know how much your IT costs?

Ann Bednarz | Jan. 26, 2011
Tight budgets and competition from cloud providers are forcing IT to focus on finances.


For years, enterprise IT departments could be fuzzy about the costs of individual IT services and applications, but tight budgets and the relative clarity of cloud computing costs have forced CIOs into sharp focus.

This need for specifics on IT costs has fueled a market for IT financial management software, which helps CIOs figure out how to budget for and assign dollar figures to services that span hardware, software and personnel.

While the economy has necessitated cost containment, the availability of on-demand computing capacity, storage and applications from cloud providers has intensified the pressure on internal IT to be more transparent - and more competitive - about costs.

"In the past, if you didn't have good visibility into your IT costs, it probably would be frustrating to business stakeholders. But what could they really do?" says Barbara Gomolski, managing vice president at Gartner. "Now, if you don't have good visibility into what it costs to provide storage or network connectivity or e-mail, the business stakeholders can easily go out to the external market and say, 'Well, so-and-so can provide it for $5 per month per mailbox, and I think we ought to do that.'"

With a better understanding of spending, IT teams can begin to satisfy increasingly tech-savvy business managers who want to know more than simply how much is spent on, say, desktops. Today's business managers want to know what it costs to provide enterprise mobility, for instance, and they want to see the big picture. They're asking for cost models that take into account hardware, software, labor and maintenance costs, plus distinguish between different service levels and deployment scope, Gomolski says.

At First Horizon National Corp., business leaders from the company's banking entities were hungry for more detailed IT cost data. "We were having a difficult time explaining to our business segments why their IT costs were growing," recalls Ann Fite, finance director at the Memphis, Tenn., financial services company. "Technology can sometimes seem like a black hole to people who aren't involved with it."

First Horizon invested in IT financial management software from Digital Fuel, which allows the bank's users to see a bottom-line tally of how much it costs to run a particular application, such as a deposit or loan application, plus a detailed breakdown of the expenses. This helps the business leaders understand the costs of requests for new features or regulatory changes, for instance, compared to hardware and software maintenance, Fite says.

First Horizon has only been using Digital Fuel's applications for a couple of months, but already "we've had a lot of success making application costs more transparent to the lines of business," Fite says. Going forward, First Horizon plans to use the software to identify redundant application development requests, for instance, and to run analyses of proposed IT initiatives to determine their cost effectiveness.

Smarter spending


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