IT Credibility Challenge #3: Costs and Benefits Transparency

Jan 18, 2008

Patty Azzarello

One of the biggest credibility issues IT organizations face is the lack of cost/benefit visibility into IT spending. CIO’s tell me this is the main reason they feel like there’s a target on their back—the business needs to understand how they are spending the money and often it’s hard to say.

Most IT organizations grow up structured around areas of technology expertise which leads to presenting your services and spending sorted into categories of technology. Right off the bat the business can’t relate. To create the cost/benefit transparency you need to build your credibility, you need to redefine and regroup how you present IT spending, and specifically relate it to key business initiatives.

Here are three ways to get this done:

  • Ratify desired outcomes with the business;
  • Track profits not packets; and
  • Get financial management support.

    Ratify Desired Outcomes with the Business

    This straightforward and effective approach to gets your business counterparts on your side with regard to the IT priorities and spending. First you need to drive a discussion with them about the key business initiatives and what the desired outcome is for each. This is not an IT discussion. This is about getting an understanding about what is most critical to the business, and how the business initiatives are defined and prioritized. Leading this discussion alone will win you credibility points.

    Then you need to drive a discussion about what the specific desired outcomes are for IT as they relate to that business initiative. For example, think about an ERP rollout in a new geography. What is the desired business outcome is for that? Is it to reduce costs? Reach new markets? Enable new channels of distribution to grow revenue?

    You then need to get the business to establish specific associated desired outcomes for IT which enable the business outcome:

    IT/Business Initiative:

  • Support channel expansion in Eastern Europe.

    Business Desired Outcome:

  • 100 new channel partners are delivering $30M increased revenue in two years.

    IT Desired Outcomes:

  • Final partner interaction definitions complete by Dec. 1.
  • Top Five business-prioritized modules implemented beta tested by Jan. 15.
  • Support capability up and running by Feb. 8.
  • Live implementation on servers, desktops, and on laptops by Feb. 15.
  • Email marketing campaign to partners on March 1.

    Getting the IT Outcomes Ratified

    Once you have these discussions and document the priorities for IT as they are aligned with the business, go through a specific step of getting your desired outcomes for IT ratified. Get the business leaders to formally approve it—even think about creating a signoff document. This becomes the baseline for your plans, your budgets, and your measures, and all your communications about the project moving forward.

    That way, when later in the quarter someone questions how you are using the budget, or wants you to do more, you will at least have a committed baseline that you can remind people they agreed to, and start the discussion from there. You can ask if any of these outcomes are no longer relevant, and what new outcomes have taken priority. Sometimes simply having a tool to deflate the emotion in these types of discussions is the biggest saver of time, energy and credibility.

    Track Profits not Packets

    A typical IT term/service measure is network availability = 99.9%. Think about that measure in the context of the following example; an excerpt from Digital Transactions News, Jan. 6, 2005 with regard to the Visa network.

    “The busiest day by dollar volume was Dec. 23, with more than $4.8 billion in sales flowing through Visa's network. But the peak time for transaction traffic came on Dec. 24, when during a single hour the network processed 5,546 transactions per second.”

    Here’s the problem with an IT measure: A one hour outage over one year = 99.988% availability. Pretty good, right? It passes your network SLA of 99.9%. But do you really want to be in charge of the IT organization that says, “But we exceeded our network SLA of 99.9%” if it was that particular hour when the outage happened?

    Having the conversation with your business partners about when the IT services are most critical is an excellent example of relating IT services to business initiatives.

    When you then request extra budget to make sure that there is an increased service level to support peak usage needs, they can understand the benefit of that and support the spend for it, instead of budget being associated with something like network performance maintenance, which the business won’t and really shouldn’t know they should care about.

    Get Financial Management Support

    One thing that I have found to be vitally important is to have a very strong financial manager on your staff. This can't be someone "on loan" from finance. This needs to be your person. You need someone by your side, who is on your side, who can tell you everything you need to know about how you are spending money, before someone else inflicts this on you. A good financial manager will improve you alignment and creditability way more than a star DBA.

    As you step up to having more and more business discussions, having a strong financial partner can help you map your investments to specific support of business initiatives and give you the financial/presentation tools you need to communicate well with the business. The other good thing about this approach is that you will be able to assure yourself that you spending actually is in line with support and enable critical business priorities. Once you start tracking and measuring this way, you will likely find a lot of spending that doesn’t align.

    It’s critical that you find this before someone else does, and it gives you the chance to do what all executives must do: reduce year-on-year costs on the steady-state portions of the business to make room for new initiatives. Showing you are doing this will have a huge impact on your credibility, and help you focus your negotiations on budget for new and strategic initiatives.


    By starting with what the CEO and business units have agreed as desired outcomes for the business and showing how your IT initiatives and investments specifically support and enable them, you not only build your credibility, but also ensure that IT is indeed focused on what is most critical to the business.

    At age 33, Patty Azzarello became the youngest general manager at HP. At age 35 she was running a $1B software business. Patty is now the founder and CEO of Azzarello Group, which delivers practical, experience-based tools to CIO’s and other business leaders through products and services including articles, online programs, executive coaching, public speaking & workshops.

  • Tags: IT culture, IT Leadership, project costs,

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