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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.

Overall, the trend toward greater visibility into IT costs is a good thing for the industry. It means businesses are getting smarter about technology investments, Gomolski says.

"Organizations that have made the investment [in IT financial management] are able to recognize areas where they're currently spending money but should not be - services that are underutilized or cost disproportionately more than the value they deliver," Gomolski says. "We're finally learning how to make our investments a little bit more intelligently."

Getting to full IT cost transparency is no easy feat, however.

For starters, IT managers are expected to pay more attention to budget and planning practices -- adjusting budgets according to actual costs and revised operational targets, for instance -- which isn't a traditional strength of the tech-centric IT professional.

"If you come to a storage line manager and tell him that he has to start doing budget re-forecasting every month, he's going to look for a tool that does it automatically," says Yisrael Dancziger, president and CEO of Digital Fuel.

With the right tools, IT budgets can become dynamic resources that reflect actual usage costs and allow for automated adjustments (as revenue targets and headcount change, for instance) rather than static documents that are quickly outdated. The ability to do fact-based budgeting, based both on the demand of the business units as well as historical metrics, makes a big difference, Dancziger says.

Digital Fuel makes such a tool - an entire suite of tools, delivered via a software-as-a-service model - as do other IT finance specialists such as Apptio and ClearCost. Larger IT management vendors also offer financial management software, including BMC (which acquired ITM Software in 2008), CA and HP.

The tools are designed to consolidate IT financial metrics and perform functions such as budgeting, cost modeling, chargeback and vendor management. They've been around since 2000, but early options were immature and didn't cover the breadth of IT functions required, says Gartner's Gomolski. Now they've matured. "Tools today are able to provide a more end-to-end view," she says.

For First Horizon, the SaaS model is a good fit, since it's a non-core application and the hosted model allowed for a fast deployment, Fite says. "The most cost-efficient avenue for us was to allow Digital Fuel to run this application and for us to piggyback off their expertise," she says.

Digital Fuel's Dancziger says potential customers are comfortable with the SaaS model, though they insist on getting the details about the company's security infrastructure.


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