Category Archives: cost

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Digital Planning and TBM in the strategic race

Category:cost,digital transformation,EA

The idea of digital planning is to harvest the benefits of Enterprise Architecture to capture the holistic perspectives of an organisation between strategy and planning, and how to set priorities for aligned responses to daily delivery. To avoid siloes of behaviour, it is important to set the right focus on ideation and investments to win the battle of future revenue and future delivery.

Digital planning embraces:

  • Strategic planning and enterprise architecture
  • Capital and cost planning
  • Resource planning
  • Knowledge planning
  • Program/Project portfolio management
  • Risk Management
  • Security and privacy management

The approach of Digital Planning aligns with the principles of understanding how investments support standardised processes for ensuring alignment and strategy to execution. A key ingredient is to understand the difference between cost and value. While value relates to goals and outcomes, cost represents a spending, typically limited budgets, so how to create more by improving the efficiencies.

People using only architecture frameworks like TOGAF, ArchiMate, etc. may overlook the financial perspective and financial sponsors; likewise, people only focusing on TBM and cost profiles may approve spending case-by-case ending up with approvals that represent “siloes” of interest and do not align to the holistic and end-to-end perspectives of an organisation.

TBM has been seen as the new de-facto framework for comparing cost and IT Cost Management to support a standardised IT investment business case process and support comparisons year-on-year, month-by-month of IT Cost.

The early introduction of TBM was introduced by the US Federal Government’s Office of Management and Budget in 2005 and aligning well principles of large international corporations, hence it has a background in the public sector across the fifty states with annual updates to support federal agencies with budget planning, and IT cost guidance.  In 2016 -2017 an revision introduced a name change to TBM, which is short for Technology Business Model.

An advantage of the TBM is that it provides an intersection between the CIO and the CFO interests, helping organisations to understand where in the architecture that cost exist, and how increase efficiencies on the planned IT Cost.

The TBM provides a standard taxonomy to help in reporting with a traditional focus on IT Towers that aligns well with how most companies structure their IT cost and easily can relate IT Towers to organisational cost centres. At the same time, it does remove the organisational differences as IT Cost is now expressed in terms of the IT Towers that are standardised across industries and corporations.

The TBM view also supports the traditional CFO perspective into financial allocations, and finally, it aligns also to standardise service catalogue that even though different organisations have different services, they can be expressed in a common taxonomy with the TBM services.

Hence, every cost item can be expressed as a triplet, helping to build smart cost models and improve efficiencies. This is something that is supported by a TBM council, and is clearly a benefit for Enterprise Architecture as the value of the architectural break-down aligns perfectly with the TBM cost break-down.

With next-insight there is a unique opportunity to align architecture (ArchiMate, BPMN, etc. ) with planning, resource forecasts, governance, risk and compliance with IT cost management (TBM) in a single portal.

We can advise you and help your to automate your governance – making it digital. We advise, guide and implement relevant support systems to master your IT Management, from strategy to execution.


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How to get started with TBM and cost transparency…

Category:cost,EA,Services Tags : 

Many organisations struggle to provide transparency to cost of IT. Even though it sounds simple, there is a number of challenges like:

  1. What is the border of IT? – Now that most of IT is used across the entire organisation and within services and products, then what is the IT budget?
  2. What is the best terminology to make cost models? If looking into computing servicers, maybe different types of computers; for servers maybe the sizing, for storage maybe the type of storage. How to get the right mathematical model to connect daily end-users through behaviour to something that generates cost?
  3. What does “cost” mean – if we pay upfront and depreciate, versus lease or annual subscriptions?
  4. Where do we get the data from? Most CMDB’s don’t provide the necessary information as cost is more information management than data management. How to re-use data-sources to make the proper information design?
  5. When digitalisation and digital transformation change the way we work, what is then the “reduction” in the IT spend?

These questions are all relevant and easily solved when properly addressed with our services.

We advise to adopt the main principles from the TBM Framework (Technology Business Model) to allow tracking of cost year on year, month by month and to support a common taxonomy to allow comparisons.

The TBM concept is not new; Large accounting companies have worked with the practice years before the TBM Council started, but the standardisation, the scale and the maturity of digital platforms offering the bill of IT is ramping up.

The TBM suggests three perspectives of the cost and it offers a taxonomy that helps for IT to in the IT perspective to track unit cost and cost drivers. The main objective of TBM is the increased transparency, the ability to track year-on-year and month-by-month, and finally to cross-companies, e.g. if you are a number of companies that do the same type of business, then the TBM offers the comparison option.

Over the last years TBM has become almost a cross-standard to the taxonomy of how to deal with this. There are hundreds of organisations that now move into the three-layered structure of the TBM to get a comparable measure of the bill of IT. What is the process of the TBM when implemented?

We can guide you through the implementation. If you are interested in getting a clear view of the Bill of IT, this is something that is hard to solve without technology and advice.

We can offer to you technology and advise – as one service. With Next-Insight you get a unified enterprise design of your business that includes the full TBM taxonomy. With role-based access to managers and ordinary end-users of your organisation, we help you to standardise IT costs. Next-Insight is a next-generation technology that is based on our experience with customers and architecture practices of how best to ensure an interactive behaviour-driven solution to IT Cost management.  With senior consultants, we can help you to outline the future processes, then start with the  information management to establish the digital governance.

We have seen too many project implementations that suffer from not aligning the governance early enough, creating poor data and too restrictive assumptions. This typically happens when financial tools are introduced without focus on digital governance and data quality. So to succeed you need to form a project charter with enterprise architecture and financial managers involved. It typically follow a three-steps approach:

  1. The TBM model should be implemented as a single service across finance and architecture, as most of the IT-related information should be managed and updated in the EA repository. This is where tools like Next-Insight is useful as it offers the full TBM support and the EA support all as one solution. However, the implementation of such a solution should be process-centric, what processes should be supported, to allow the customer solution to add value to the organisation. Our recommendation is not to buy another point-tool, but to integrate financial perspectives to strategy and planning.
  2. Once the processes are agreed, reconfigure Next-Insight tot he way numbers should be crunched to support the EA-stack to be connected with the financial system. This will require a design and implementation to get the chart of account setup up correctly to master the relationships. The best option is typically to formulate a project, and allow finance people and enterprise architects to work together. The integrations between an information management and a financial system like SAP or similar is required. The information management will manage the collaboration with end-users, IT managers, service managers helping to get meta-data correct. Then the SAP or similar financial system will provide the cost centres, the daily bookings. The rule book is carefully designed.
  3. Finally, the EA tool like Next-Insight is adjusted to provide the user screens for the intended processes. Once the solution is configured and set alive, the budget cycle will start as an ongoing process, relying on the master data from the information management system, typically, it is based on last year’s consumption providing input to the budgets and forecast numbers. The TBM is the model or taxonomy of this data crunching.

What is the basic concept of TBM? Irrespective of the digital platform, the bill of IT is simply structured into three layers, like almost three different architecture layers:

  1. Service layer: To describe the business processes and assets of the technology supported. This should provide an enterprise perspective of the business and future cost perspective. The logical grouping and allocation of cost should be mapped to business applications or business initiatives – using the language of the business.
  2. IT layer: To describe  IT towers and subtowers which is technology groupings of units and unit cost within functions. As evolving the solution, then also IT Dev as part of the layer.
  3. Financial layer: Describing services procured in some currency, by terms, depreciations, cost, to understand cash versus cost perspectives of the agreed bills.

The benefit of the TBM model is that it translates between the layers. Solutions typically can provide the what-drives-what view between the different perspectives, typically build on some degree of allocations or apportions, handshakes and cost agreement splits. However, without the assumptions and structures of TBM, no-one will be able to communicate clearly what the cost of a project or a service really is.

If you are interested in knowing more about TBM and cost models, please seek advice on how to implement this on a modern digital platform. You may contact us for our solution and services  to read more. We help to align long-term planning with short-term planning, which is an ongoing architectural process – and a digital process of information management.

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