Over the past two years, Asian companies across the board pushed through with digital transformation faster than the rest of the world. According to the IDC, ICT spending grew in 2021 by more than 7.1% in APAC to US$950 billion, and is expected to reach US$1.1 trillion by 2025. Yet Gartner points out that only 1.8% increase of the global spend will occur in Southeast Asia. Which means that in our region, companies have limited resources and will need to do more with less, to continue on their path of digital transformation.
Technology Business Management (TBM) offers a solution that helps technology leaders identify redundancy and duplication in their spend by allowing them to track and even benchmark their fiscal performance, enabling them to do more with the resources they already have.
Fiscal responsibility is important because there is a widening performance gap between top IT organisations and the rest, with McKinsey highlighting that the best performing companies have technology leaders that have a strong say in the business’ strategy. When technology leaders work alongside business leaders to determine and achieve the businesses’ objectives, the outcome is far more successful than when IT leaders are not invited into the board room.
Technology Business Management – a framework to understand your business better
TBM is a framework and discipline to capture the technology investments in an organisation and connect them to business outcomes.
This methodology was developed by the TBM Council, a community of thousands of CIOs, CTOs, and CFOs, and is now adopted by enterprises in every industry, from banking to healthcare, manufacturing, government, and more.
TBM looks at a company’s performance through several broad KPIs. Cost-for-performance KPIs help IT continuously improve the cost efficiency of its services while maintaining quality. Business-aligned portfolio KPIs enable IT to focus its time and resources on the services and applications that drive the most value for the business.
Investment in innovation KPIs helps IT and its business partners to better govern and decide on the right level of project spending. Finally, enterprise agility KPIs facilitate the creation of a more agile cost structure for IT and accelerate effective decision-making.
It is important to note that TBM isn’t a checklist, but rather a business management process that grows as your organisation grows. It is a moving target that needs to be consciously monitored.
The other thing to be aware of is that TBM isn’t a “one size fits all” solution. Instead it is an implementation that needs good management practices to align key stakeholders, so that data then becomes easy to collect and analyse. Key success factors include identifying an executive to champion TBM across the organisation and to create a transparent organisational culture.
To help Asia’s business leaders understand what is required of them, the TBM Council APAC launched its presence in Singapore last October. The Council offers certification courses to senior IT leaders and finance managers who want to run a successful Technology Business Management (TBM) program.
Greater transparency and accountability leading to quick benefits
Even if companies have only just begun to use TBM, almost a quarter of them report that they have used it to optimise spending on vendor contracts. Institutions that have deployed TBM solutions have derived significant funding improvements within 90 days, and in some cases, as few as 30 days. As a result, globally, customers are likely to have achieved an eight-fold return on their investment, taking an average of 8 months to break even.
Another point to note is that companies discover that as their TBM maturity increases, it positively impacts the level of trust that business partners have with the company’s technology department. These benefits become most apparent when they have already developed advanced reporting and analytics, and TBM has become an integral part of how they plan and operate,
Sometimes TBM just turns what was previously a challenging morass into a natural process flow. In Singapore, an engineering group wanted to digitise their complex and manual IT chargeback process. They had to analyse the existing business structure and chargeback rules set for 20,000 global employees, working in 100 Subsidiaries and associated companies across 24 countries.
KPMG and Apptio worked with the company corporation to configure the conglomerate’s existing systems. They matched how consumption of services, budgeted consumption, trend reporting and variance analysis would be managed, before implementing a digital chargeback management system.
Using TBM to do this provided a framework for this matching, literally converting the dollars and cents of chargeback management to the value the service brought to the company, giving enough accountability for the IT division to be fiscally responsible.
Using data to make decisions and drive growth
Given the benefits, it may not be surprising that 60% of the Fortune 100 companies choose to use TBM solutions.
Unilever, one of the world’s best-known consumer goods companies, managed their technology costs centrally, and allocated them using a formula based on turnover. Unfortunately, an estimated 80% of their IT cost was considered a “black box” with no visibility of how cost was spent, and could not be related to the value returned.
Their decision to use TBM and Apptio helped Unilever create accountability through granular real-time reporting. The situation was flipped around so that now almost 80% of their costs were completely identifiable to an application or a service. In the process they gained Total Cost of Ownership (TCO) visibility into more than 70% of their services.
This has allowed them to gain greater confidence when deciding on future IT strategy. “We still own two big data centres but we are now looking to write those off as well, saving about €50 million,” said José Silva, Unilever VP, IT Shared Services. “We started that program two months ago and the only way to accelerate that was based on the data from Apptio.”
Done correctly, TBM helps CIOs ditch the guesswork and manual cost monitoring. It empowers CIOs to make business decisions alongside leaders who understand the company’s overall vision, by providing real-time insights in their IT spend against the context of a company’s overall KPIs.
This is exactly the kind of data-driven insight that companies need now in the short-term as they make IT purchasing decisions to build a solid base for the next few years of growth.