BENCHMARKING AS AN OPTIMISATION APPROACH

IT Financial Management enables the cost and performance optimization of IT to be improved and benchmarking to be carried out.

In order to optimize costs and performance, the first step is to establish a target-oriented order in all relevant areas. In terms of performance optimization, this order is technology-driven in a best-practice approach – ordered by platforms, systems and software.

For cost optimization, a service overview is provided. It contains the business services of the services catalogue as well as the cumulative sub-services such as infrastructure services or licenses.

These two orders make IT expenditure comparable or more comprehensible for the service recipients. The goal is to translate the management of IT expenditures into a language that all parties involved understand:

• The technology providers for price negotiations
• The technology buyers in the company
• The own employees in charge

This increases transparency and thus the ability to analyze, optimize and compare costs and performance. IT controlling focuses on minimizing unit costs and total cost of ownership (TCO) for each technology domain. By ordering IT expenditures in this way the CIO and their management have full control over the cost structure and the optimization.

If the company pursues goals in the context of IT financial management, such as optimization efforts and uses benchmarking, the best-practice path described above is recommended. According to this, costs and additional personnel key figures can be compared with the values collected by independent institutions – such as Gartner.

Typical key figures are:

• The % of IT expenditure of the
  • total sales volume
  • total operating costs
• IT expenditure as part of “Run, Grow, Transform”
• OPEX by technology domain

Benchmarking with comparable or even at first glance non-comparable companies allows a deeper understanding of the own performance and cost efficiency and therefore reveals possible optimization potentials on a high level.

An IT financial management tool – such as CIO Cockpit – is used to present the views described above. The CIO and IT management can use it to answer ad hoc questions about relative costs, platform and application costs, network, storage and other resources. Successful ITFM enables this information to be bundled into business services that are essential to the stakeholder, so that the business can inquire about costs at any time. The comparison between different, yet comparable services along a time axis is also part of the analysis that the IT Financial Management should provide ad hoc.

IT thus becomes a content-related and now additional commercial partner for project planning. Changing- or Transforming-the-Business is therefore not just a lip service for IT, but a tangible part of the digitalization of business. New projects are made tangible and are directly optimized in terms of IT costs and performance.

For the CIO’s decisions, it is essential to identify the cost drivers of the IT on a technological level. It helps the CIO not only to integrate the diverse requirements of digitization into a performance and cost-oriented plan but also to take technology decisions on a comparative commercial basis and therefore incorporate make-or-buy decisions. The total cost of ownership for the different technology areas are displayed and can be separated according to consumed and purchased services or consumed provisioned services. Deviations and shortfalls offer the room for optimization.