1. Market Pulse
achieving It Cost Visibility:
today’s Challenges and Solutions
recent IDG research substantiates the need for far
greater visibility into It spending. at the same time,
a discipline that supports better It decision-making
is emerging.
Historically, IT spending has been viewed—fairly or unfairly—as little more than
a cost of doing business. Productivity and even profitability gains accrue from IT,
to be sure. But because no comprehensive, credible system has been in place to
accurately capture and analyze IT costs against the IT services they provide, it’s
been difficult for CIOs and their staffs to uncover the insights that support wise
decision-making aligned with business goals.
The situation has only become more daunting in recent Among the study’s key findings: A huge gap exists
years. As information technology has turned both ubiqui- between the crucial importance of getting better cost
tous and mission-critical, the need to support current visibility and respondents’ ability to achieve it. More
and future expenditures has risen dramatically. And as than eight in ten respondents (84%) said that having
recent economic cycles have proven, matters get even detailed visibility into IT cost and drivers—by service
more difficult during downturns. organization, geography, product or other dimension—
was important. Yet over half are less than happy with
It’s been estimated by leading analysts that with the
their current level of visibility, and almost 20% would
proper visibility into IT spending, 20 percent of the mil-
rate their level as “poor” or “terrible”.
lions of dollars spent by individual businesses each year
on IT could be invested more effectively. The question, Why is cost visibility so important? Seven in ten IT re-
therefore, on every executive’s mind is, How can I know spondents report the need for identifying inefficiencies,
how to better spend our organization’s IT dollars in sup- while nearly as many say they need to give their orga-
port of business goals? nization’s business units more information in order to
better control IT demand. Respondents cite IT projects
Folded into this question are other unknowns. How do I
(57%), business applications (52%), application develop-
know if there are inefficiencies in our spend? How do we
ment (47%), storage (44%), and servers (38%) as the top
compare to similar organizations? How can we better
five places where greater visibility is needed.
invest our limited resources in the future? How can we
reduce IT spend in ways that actually help our business? The challenge many IT cost managers face, however, is
the lack of an explicitly defined IT cost model—a prob-
lem cited by 49% of respondents. Other major factors
IT Cost Visibility: The Universal Concern include difficulties obtaining a detailed breakdown of
Recent research by IDG Research Services brings the costs by service, business unit or geography (47%); diffi-
drive for better IT visibility into sharp focus. culty mapping IT assets to services (46%) and overcom-
The study examined the needs and priorities for IT Cost ing data spread across multiple systems (46%).
Management among more than 130 respondents who
have direct involvement with the management of IT
costs at their organizations.

2. Market Pulse
The messages from respondents make it easy to many other complex business systems, it’s notoriously
understand the potential for improvement in cost difficult to achieve true visibility into the cost to deliver
visibility—as well as the frustrations that are present. IT services based on all the hardware, software, com-
Among the comments: munications, security and other services needed.
Many organizations mistakenly assume that if they
The challenge many IT cost managers face track their spending on hardware, software and related
is the lack of an explicitly defined IT cost direct expenses, they have the information they need
to make good IT decisions. Yet true visibility requires
model—a problem that was cited by 49% new activities and processes for assessing and ap-
portioning indirect or even hidden costs. Consulting
of survey respondents. fees, shared services, maintenance, server/storage
virtualization, security software, energy costs, com-
n “One area [where cost management is lacking] is in munications, as well as many other components, are all
predictability models for business software applica- relevant; these must be compiled and allocated to the
tions —so if we’re going to grow, what it will cost [in appropriate IT services.
software licensing, maintenance, consulting] in three
As the normal course of business occurs, visibility is fur-
years, five years, seven years out to upgrade versus
ther diminished by change. Products, services, business
buying new.”
units and even whole divisions get phased in or out; IT
—CIO of a major wines and spirits distribution company technology evolves; competitive pressures generate
abrupt new corporate opportunities or shifts in strategy;
n “I use a lot of Excel. I just take raw info out of our
and new governmental regulations are instituted. All
financial system as well as out of our time tracking
these factors, and many more, can suddenly re-define IT
system. I had to set up a number of processes with my
services and/or those who consume them, both inside
staff so they could track their activities by various levels
and outside the organization.
or category. It took some development and training…If
I had the right tool I could really get down to each one Of course, many IT organizations use ad hoc approaches
of the business units because it’s their decisions that to help track IT expenses—and often with tools in-
drive my costs.” tended for other purposes. At one end of the spectrum
—Director/CIO for a large Canadian non-profit are general software tools like spreadsheets, project
management, and various general ledger accounting
n “Within this economic downturn and these market packages; at the other end are highly specialized IT sys-
conditions, [cost control] is an extremely high priority— tem management tools that include Business Service
connecting time, goals and budget! We’re always open Management (BSM), IT Asset Management (ITAM), and
to how we can better this process and make it more Project Portfolio Management (PPM).
real time. For example, it would be nice to have a red
These classes of software, and many others, are good
light, yellow light, green light heads-up display with a
at fulfilling their intended purposes. However none are
trending component.”
designed to capture, track, assess, allocate and analyze
—VP/Information Technology for an international all of the direct and indirect costs related to the full
child care and education company range of IT services.
Yet the data in these software tools, if leveraged ap-
What Has Been The Challenge? propriately, can indeed have enhanced value when
Almost since microprocessors generated their very first combined with other pertinent data by a dedicated IT
bit of business data, companies have sought to justify Cost Management solution. Such information can, in
their information technology expenditures. But as with effect, be liberated to provide the powerful insights
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3. Market Pulse
IT cost managers require to answer their toughest IT Yisrael Dancziger, President and CEO of IT Cost Manage-
spending questions. ment solution provider Digital Fuel, notes that IT Cost
Management can also give IT executives the tools they
need to rationalize the use of IT services. “You can be
IT Cost Management: Accurate, efficient at delivering services, but if a business unit is
Proven Visibility using more than it needs, you still end up spending more
When IT departments have the right facts and figures on IT than the business actually requires,” he said. “IT
at their fingertips, they can make much more informed Cost Management lets you collaborate meaningfully
spending decisions. This is the goal, and the value, of IT with business users to both reduce cost and optimize
Cost Management software. service delivery.”
IT Cost Management can offer the kind of accurate vis-
ibility into IT cost that drives better alignment, greater IT Cost Management software can offer
collaboration between departments, and maximum
cost reduction. Best of all, it has the potential to do
the kind of accurate visibility into IT cost
so very quickly, without significant investment, and that drives better alignment, greater
through the use of existing data in its current format.
collaboration between departments,
IT Cost Management is highly adept at advancing the
effectiveness of major IT business processes. Whether and maximum cost reduction.
pursuing proactive cost control, budgeting and plan-
ning, continuous cost reduction analysis, business unit As an organization’s use of IT Cost Management
cost visibility and chargeback, executive reporting, expands, it can achieve even greater returns. Manag-
“What ifs”, pricing or other disciplines, IT Cost Manage- ers can model and allocate service costs effectively
ment gives IT cost managers unprecedented power to between cost pools including general ledger, IT assets,
better manage their planning and operations. projects, technical and business services, as well as to
each business unit based on IT service consumption.
Time to insight is very quick. Within a matter of two
They can also prepare billing and chargeback strategies,
to four weeks, users can begin answering questions
including detailed breakdown of charges and identify-
about IT infrastructure and business application cat-
ing top spenders by geography and/or business unit.
egories that were identified in the IDG Research study
This capability leads to better decision making even if
as most critical to IT administrators. For example, users
formal chargeback is not yet applied to the P&L of each
can not only identify business applications that are
business unit.
overrunning budget, but also determine root causes.
Candidates for reduced service levels, consolidation,
support reduction or end-of-life decisions can be Real-World Results
found, as well as those that are appropriate for SaaS Digital Fuel’s SaaS IT Cost Management solution
(Software-as-a-Service) or outsourcing. has been instrumental in achieving major financial
and performance gains at companies with budgets
Similar visibility and insights can be generated for
ranging from large to small. Nationwide Mutual Insur-
servers, storage systems, desktops, even service desk
ance, one of the nation’s largest full-service financial
operations. With IT Cost Management, it’s possible
services and insurance companies, has not only
to make highly informed decisions about licensing
realized more than $20 million yearly in savings, but
reduction or re-negotiation; virtualizing data services;
also reduced IT unit costs by at least 6% annually using
outsourcing service desk functions; instituting tiered
Digital Fuel IT Cost Management.
storage solutions; or identifying inefficiencies in server
support such as electricity, facilities, support or security. “By modeling IT costs and cost drivers by business ser-
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4. Market Pulse
CIOs Want Defined IT Cost Model to provide full visibility into the cost of IT services.
Digital Fuel’s ability to drive better IT cost alignment,
Lack of an explicitly defined IT
cost model 49% collaboration and reduction is enhanced by numerous
Difficulty getting detail breakdown
of IT costs 47% out-of-the-box processes, cost models, formulas, re-
Difficulty in mapping IT assets to 46% ports, metrics and dashboards for key IT solutions areas
IT services
Data is spread across such as storage, servers, and business applications. As
multiple systems 46%
Gaining IT cost visibility takes too
a SaaS application, Digital Fuel requires no software
many man hours 39%
installation. IT organizations simply subscribe to Digital
Prevalence of “shadow IT” projects 38% Fuel and begin using the Web-based application in
Difficulty in collecting service
usage/demand data 37% minutes. Simply point the application to the appropri-
Lack of well-defined list of IT services 34% ate general ledger and other cost data sources using
the pre-defined upload templates, and Digital Fuel will
Data quality is poor 30%
automatically provide insightful, actionable information
on a daily basis.
Source: IDG Research, Sept 2009
Digital Fuel’s SaaS IT Cost Management has received
an overwhelmingly positive response from industry
vice and then tying the cost of IT service back publications and analysts. According to Gartner, “By pro-
to the business units that consume them, we’ve viding real-time visibility into IT spend and cost drivers,
been able to systematically reduce IT costs each organizations can significantly reduce IT spend by 15%
year,” said William Miller, Associate Vice President or more.” Enterprise Management Associates (EMA)
of Finance for Nationwide. adds, “Digital Fuel is positioned well to help customers
with IT financial management and has proven to be
Cummins, Inc., the Indiana-based power systems
effective for many customers seeking to provide their
manufacturer, was able to reduce its IT service billing
organizations with cost transparency.”
by $10 million in its first year using Digital Fuel to
manage IT supply and demand with greater collabora-
tion between business units and the IT organization. Turning IT Cost into IT Investment
“Showing our end users the true cost of their technol- Nearly 60 years after the onset of the Information Age,
ogy requirements has been a significant step for- IT spending is no longer a vague, hard-to-defend topic.
ward,” commented Floyd Rutan, Executive Director of With IT Cost Management, information technology is
Cummins Business Services. Hard dollar savings using transformed from a cost of doing business into a true
Digital Fuel’s business unit visibility, chargeback and corporate investment—even a profit center—that
proactive cost control at Cummins now totals more builds business.
than $30 million.
As the need for wise IT decision-making only becomes
more consequential, IT Cost Management is emerg-
Software-as-a-Service is Easy to Deploy ing as a discipline that both reduces costs and aligns
Digital Fuel’s IT Cost Management is an affordable IT with an organization’s broader business objectives.
and proven SaaS solution that is enabling IT organiza- With rapid deployment, built-in processes for IT
tions to run their operations like a business. Currently cost visibility, data input, modeling and reporting,
used by many major enterprises including Cummins, and affordable cost among its strengths, IT Cost
Nationwide, ThermoFisher, Capital One, Independence Management is an alternative every IT organization
Blue Cross, Global Crossing, BASF, Capgemini, Deutsche should consider.
Bank, Nestle, P&G, Volkswagen and more, Digital Fuel
uniquely automates key IT cost management processes For more information, visit www.digitalfuel.com
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