Cost-cutting measures in 2009 forced companies to closely examine IT spending and transform opaque IT departments into financially transparent organizations. According to a survey by IT service management vendor Digital Fuel, many CIOs now recognize that returning to pre-recession spending is not realistic, and have prioritized projects like IT cost management in order to understand the true costs of supporting business services and enable more responsible consumption of IT resources. Digital Fuel found that IT organizations want to identify the value provided by different services, determine which are most used by business units, and optimize costs through tools like chargeback and virtualization.

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Cost-cutting measures in 2009 forced many companies to take a hard look at how they spend money on technology,
and that experience continues to drive several high-tech leaders to transform muddy IT departments into financially
transparent organizations.
Despite speculation that the economy will recover in 2010 and IT budgets will rebound, many high-tech executives
recognize they won’t be returning to business as usual. But the new economic reality has pushed technology projects
such as IT cost management, IT chargeback and IT financial management from the back burner to front and center for
many CIOs. That is, according to IT service management vendor Digital Fuel, which conducted surveys and roundtable
discussions with CIO-level executives throughout the latter part of 2009 to learn what would drive their IT budgets in
2010.
“When we surveyed our customers and IT executives, we saw that there is a big shift under way in how IT
organizations approach financial transparency,” says Yisrael Dancziger, president and CEO of Digital Fuel. “IT
organizations want to see what the costs are and find ways to reduce the cost of IT. Some have been doing this
manually, but now many are formalizing the process, using tools and presenting costs to business units.”
Part of the goal is to find where IT departments are delivering value and determine what services are most consumed
and in demand by business units. One approach to understanding what the business unit wants and how much it costs
to deliver that IT service could be to establish an IT service catalog, Dancziger says. IT leaders can also begin a cost
transparency project with an application such as SAP that is widely consumed by the business, dissecting how budget
dollars are devoted to keeping it running smoothly.
“It doesn’t make sense to see, for instance, the cost of a Wintel server. Instead companies need to focus on the type of
IT service that the business is actually consuming and really dig in to what the cost to IT and the company is to support
that business service. Then the idea of chargeback can begin to take form,” he says.
While IT chargeback practices could cause a cultural backlash, industry watchers say knowing how much IT services
truly cost will enable more responsible consumption and requests for services to the technology groups within a
company. Other benefits that can be derived from an IT cost management initiative is cost optimization, which means
ongoing improvements in the amount of budget dedicated to resources.
“Companies can get an understanding of the best candidates for virtualization or consolidation, for instance, and
further reduce the cost of resources. IT organizations consistently try to become more efficient, and this type of
detailed information enables visibility, billing and chargeback in the future,” Dancziger says. “Digital Fuel was
impressed with the consistency of opinion and priorities discovered in our IT Cost Visibility study. Clearly IT cost
management has become a high priority among senior IT executives.”
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