Thanks to the results of a Technology Business Management (TBM) Council and KPMG survey conducted among European TBM practitioners at the Council’s inaugural TBM European Summit last June we get an interesting insight into the state of financial stewardship in corporate IT organizations. With the survey respondents coming from a wide spread of organisations representing 10 different industry sectors. And differing annual IT spending levels – ranging from less than £20m to over £3bn.
The pressures on IT for better financial stewardship
To lift a quote from the report:
“A perceived lack of IT transparency and delivered value has led executives to ask some challenging questions.CIOs want to know:
- How do my IT costs and performance compare to my competitors?
- How can I spend less on running the business and more on growing the business?
- How can I drive down service costs without sacrificing quality and stability?
CFOs want to know:
- Why does IT cost so much?
- Where can I get the most value for an incremental investment in IT?
- How can I get data to make informed decisions?
Business leaders want to know:
- Are IT investments aligned with the most strategic business need
- How can I accurately forecast my IT costs?
- What IT investments deliver the most value?”
And why shouldn’t they ask these questions? Each and every year the corporate IT organisation spends, or to be more precise “invests”, a significant amount of the business’ money. They deserve to see that it is spent wisely whether this is done via TBM or another route.
And the survey said…
Remember that these results are from people/organisations that know they need, and are actively seeking, to get better at TBM (they were at the TBM Council conference after all).
90% of companies do not believe their organisation is mature yet in terms of TBM.
Only 20% of respondents say they have effective IT/finance tools to drive the TBM agenda, and only 28% of companies believe they have the right skills to deliver it.
So, while the ambition is there, there is still much to be done by those already focused on improving financial stewardship, let alone those organisations still trying to grasp the nettle.
And, looking at two of the key objectives of TBM – to reduce operating cost and control IT spend, and to ensure that the business understands the value of IT – a quarter (24%) of respondents said that they met both criteria. This separation of successful organisations has allowed KPMG to look at the DNA of those organisations that have succeeded versus those that still have work to do with TBM.
The DNA of a TBM leader
The survey offered the following picture of successful organisations (in terms of TBM):
- They are three times more likely to have achieved cost transparency.
Organisations are six times more likely to be TBM leaders when the CIO is in charge of TBM.
- Organizations that outsource less than 40% of their IT budgets are three times more likely to be a TBM leader.
- TBM leaders are three times more likely to have effective tooling.
- Organizations that achieve TBM benefits are twice as likely to have the right skills and capabilities as those that don’t.
They are twice as likely to have regular review processes of key TBM data and drivers.
With success attributed to three key things:
- Having visibility of their IT spend and are able to drive insight.
- Ensuring IT costs are accurate and available.
- Articulating the business value of IT.
The report offers greater granularity and advice across all of these areas.
“Organisations are six times more likely to be TBM leaders when the CIO is in charge of TBM”
This surprised me. I guess I’ve seen and heard too many IT horror stories, plus it’s easy to assume that someone from the finance function might be a better fit for what is a financially-intensive discipline. But maybe success is more attributable to the ability to forge change within the organisation and particularly within IT?
Whatever the cause, the survey found that two-thirds of organisations with the CIO in charge of TBM reduced their IT costs. But it’s a team game. Dave Yip, Partner at KPMG, put this nicely by stating that:
“CIOs, CFOs, and business leaders need to work in alliance to balance business, financial, and technology objectives and the bedrock of joint success is transparency from each party.”
So the report is an interesting read, and not just for me as a qualified accountant. If you would like to learn more on what your organisation can do to improve its financial stewardship, please download the full report from here.