Technology Business Management Framework: Aligning IT with Business Goals

Technology Business Management Framework: Aligning IT with Business Goals

Technology permeates every aspect of modern business, from core operations to customer interactions. Yet many organizations struggle to align their tech investments with desired business outcomes. Enter the technology business management (TBM) framework—a set of best practices to help IT leaders communicate technology’s value and make data-driven decisions. Read on to understand the key components of TBM and how to apply them within your organization.

Introduction

Technology business management, or TBM, is a comprehensive framework to manage the business of IT. It provides financial transparency into how technology dollars are spent and connects technology investments to business results.

The core principles of TBM are centered around running IT like a business. This means applying financial rigor to technology decisions and speaking the language of business – dollars and cents – rather than tech jargon. When properly implemented, TBM gives executives and IT leaders the insights they need to drive innovation, improve services, and cut costs.

As technology grows increasingly central to business success, TBM has become a critical discipline. Research shows that companies applying TBM principles deliver better customer experiences, respond faster to market changes, and generate higher returns from their tech investments. Read on to understand the key components of the TBM framework.

Defining Technology Costs Through TBM Taxonomy

A foundational element of TBM is its taxonomy – a system to categorize technology costs and define shared language. The taxonomy creates a logical structure to group related expenditures based on IT towers, cost pools, applications, and services.

For example, instead of a single budget line for “infrastructure,” costs are divided into storage, network, data center, server, client device, and other infrastructure pools. This granular view allows for a detailed analysis of spending over time. Cost transparency is further enhanced by mapping applications and services to IT towers and cost pools.

Leading TBM standards include Apptio, the Technology Business Management Council (TBMC), and the IT Infrastructure Library (ITIL). While approaches differ, each taxonomy breaks down IT spending into categories such as:

• Infrastructure
• Applications
• IT management
• IT services

A narrow focus or custom taxonomy may suit the needs of some organizations. However, adopting an industry taxonomy makes it easier to benchmark against peers.

Moving from Tech Budgets to Total Cost of Ownership

Beyond categorizing costs, TBM takes a consumption-based approach using total cost of ownership (TCO). Rather than siloed technology budgets, TBM examines the true cost to deliver and support each application and service.

For example, the cost of a custom-built CRM solution includes more than just application development. It encompasses ongoing hosting, network usage, IT personnel, upgrades, maintenance, and so on. By considering the full lifetime TCO, leaders can make smarter investment decisions.

Transitioning to this model requires a detailed analysis of financial and operational data. Cost information is tied to consumption metrics to allocate shared IT resources. While challenging, viewing technology investments through a TCO lens provides transparency into the business value delivered.

Communicating Tech Value Through Business Metrics

TBM translates technology’s impact into the language of business: dollars, transactions, products delivered, and revenue generated. Instead of tech-centric metrics like server uptime or network throughput, TBM focuses on metrics like:

• IT cost per business transaction
• Revenue per dollar spent on IT infrastructure
• E-commerce conversion rates before and after application upgrades

This enables executives, finance leaders, and technology decision-makers to quantify the same outcomes. Business metrics are also easier to compare against competitors and industry benchmarks.

Another benefit is cost/benefit analysis for technology investments. Comparing TCO against business metrics shows return on tech investments – critical for justifying budgets. This also supports value-based IT decision-making.

Driving Better Decisions Through Benchmarking

A hallmark of TBM is using benchmarks to guide investments and service improvement. Comparing costs, utilization rates, quality metrics and more against peers often uncovers new efficiencies.

Common TBM benchmarks include:

• IT spending as % of revenue: Shows efficiency of IT investments and may indicate overspending or underspending if far above/below the industry average.
• Cost per business transaction: Measures overhead costs for supporting core business processes.
• Server utilization rates: Helps right-size infrastructure investments by comparing to peers.
• First call resolution rates: Key metric for end-user support services.

Leading TBM solutions like Apptio and ServiceNow provide access to broad benchmarking data sets. However, benchmarks should be customized to your business model, location, company size, and other factors. Benchmarking output helps leaders set targets, demonstrate value to stakeholders, and inform IT roadmaps.

Enhancing Services and Lowering Costs Fundamentally, TBM improves understanding of how technology delivers value. This knowledge drives better decision-making, service improvement and cost optimization:

Investment Planning TBM’s business metrics and benchmarking justify tech investments. Leaders can demonstrate how new capabilities will impact revenue, customer retention, or other outcomes.

Agile Services As business needs change, visibility from TBM helps adapt IT services accordingly. Metrics show where resources are lacking or overprovisioned.

Innovation By tying technology costs to business value, TBM helps leaders double down on innovations driving growth. At the same time, executives can curtail investments with unclear returns.

Cost Optimization Granular visibility into IT costs helps identify savings, like retiring unused software subscriptions, rightsizing infrastructure, and optimizing service agreements.

Transitioning to TBM Like any major operational shift, implementing TBM takes leadership, commitment, and a clear roadmap. Following leading practices will smooth the path:

Secure executive sponsorship A senior executive champion can clear roadblocks and reinforce changes across the business.

Take a phased approach Moving the full organization to TBM quickly is unlikely to succeed. Start with one or two IT domains, prove value, and expand from there.

Review and enrich data Assembling reliable and complete financial data is essential. Audit existing data and fill gaps through discovery and interviews.

Define taxonomy and metrics Work with leaders to define taxonomy categories and metrics tailored to your strategy and operations.

Embrace change management Support teams through the workflow, data, and toolset changes needed to adopt TBM. Celebrate quick wins to build engagement.

With a deliberate TBM rollout and sustained commitment from leaders, your organization can transform how IT investments deliver value and support competitiveness.

Frequently Asked Questions

Is TBM a one-time initiative or an ongoing program?

TBM should not be viewed as a time-bound initiative. To be effective, taxonomies, consumption models, reporting processes, and metrics must become ingrained into planning, investment, and service improvement efforts. TBM is a new way of managing IT with ongoing executive commitment required.

Will implement TBM lower our technology costs?

By providing granular visibility into spend and enabling benchmarking, TBM helps optimize costs and “do more with less.” But the biggest value is smarter investments aligned to business results, enhanced decision-making, and agility to support evolving needs.

Who owns and drives the adoption of TBM practices?

Successful TBM programs require a central team to coordinate taxonomy, data, and metrics efforts. But use cases span IT finance, service management, vendor management, and portfolio planning. A steering committee of executive sponsors and leaders throughout these groups will drive broad engagement.

What tools do we need to support TBM?

TBM capabilities are available across many IT management platforms like Apptio, ServiceNow, and BMC Helix. Some core requirements are automated data ingestion, taxonomy management, custom reporting, and benchmarks. Start simple then expand scope as the use cases and audience for TBM grow.

How much effort does TBM require compared to our existing IT management processes?

Implementing TBM does require upfront effort, with the heaviest lift around data collection, cost allocation, and adopting new metrics. But this lays the foundation for more efficient planning, vendor negotiations, and decision-making due to the visibility TBM provides. Integration with existing ITSM and DevOps tools can also smooth adoption.

Conclusion

With technology now powering competitive advantage, leading organizations take a business-driven approach to their IT investments. TBM provides the financial rigor, standardization, and business linkage needed to optimize technology’s role.

Key takeaways include:

• TBM brings financial transparency to technology via standard taxonomy and consumption-based planning
• Business-focused metrics are essential to quantify IT value and support decisions
• Detailed cost data combined with benchmarks highlight improvement opportunities
• Visibility from TBM ultimately drives more value, agility, and innovation from your tech investments

By implementing TBM over time, technology leaders can transform how their function is perceived and elevate their strategic influence. The rewards will be game-changing IT services, smarter investments, lower costs, and alignment with business growth.