IT Cost Transparency IT Budgeting Managing Costs of IT Services

It lets individual buyers set much more detailed search criteria, which gives them immediate access to even richer stores of information. The Internet is an exponentially greater threat to major brands and prices than private labels have been. The most prevalent form of information available on the Internet is about prices.

An effective cost and profitability model allows finance to partner with the business and answer a host of questions without the need for complex and manual data manipulation. Armed with better tools, such as visual analytic portals, the company will have the information it needs to make better strategic decisions and generate more value from its costing data. Despite many companies’ desires to improve their cost systems, it can be a challenge to find the resources needed in the face of competing priorities.

[Datasheet] Advanced Cost Transparency

This is primarily because they need to make changes to how costs are captured and then harmonize both data and allocation models across the organization. Complex supply chains that necessitate ongoing transfer pricing activities can also make it very difficult for companies to get an accurate view of true profitability. IT cost transparency is currently more integral to business performance than it has ever been before. We are witnessing a new era of digital transformation with businesses expanding digital offerings to meet customer demands for online interaction, the inclusion of cloud strategies and the increasing trend of remote teams across the globe, to name a few. As industries evolve towards digital service-based economies, it is becoming more and more important for organisations to understand the total cost of ownership of these new digital services. If you take the cost of delivering an insurance claim, there is an IT ecosystem supporting this delivery service, such as support people, IT engineers and server costs.

In the past, buyers had relatively few sources for knowledge about a brand’s quality or about variations in quality from brand to brand. Commonly, they resorted to a friend or relative—the brother-in-law who was the family expert on digital cameras, for example. But actual brothers-in-law aren’t always available, and their knowledge can be a little sketchy.

• Investing in digital tools is only one option for management to consider when attempting to implement a new organizational culture.
• The office-supply giants have had to make difficult choices regarding their Internet pricing.
• Marketers seem to view the popularity of auction sites on the Web as proof that buyers enjoy on-line haggling.
• IT cost transparency is often implemented through a specialized tool that measures multiple factors, such as software utilization, cost upon purchase and return on investment .
• Driving down cost through efficient use and deployment of hardware and software was the order of the day.
• More enterprises are turning to dynamic investment for its ability to forge a new financial connection between IT spending and value, ultimately enabling rapid and continuous change in technology funding and implementation.
• This enables all members of the team to collaborate and support one another in their respective product cost optimization responsibilities.

But the argument fell short because we couldn’t explain why applications and business were consuming more storage. There was no correlation to business activity and storage consumed because the IT function had not mapped out the value chain between constituent IT offerings and business needs and value creation. Another business-to-business portal is Sesami.com, a joint venture of Singapore Telecom and National Computer Systems. After companies pay a modest fee to join, they have access to a proprietary intranet that lets them solicit bids and place orders over the Net.

Because cost is regularly reviewed and trended, executive partners can see how their teams and employees affect consumption and therefore costs. Fact-based conversations help prevent stonewalling because stakeholders have shared their understanding and belief in drivers of the relevant costs, so a more open and honest conversation can take place. While the idea of decreasing costs is a huge draw to undergoing it cost transparency, there are many other benefits to adopting a solid system, as well.

How does IT contribute to business outcomes and customer value, such as:

It starts with a sketch—also referred to as a “wireframe”—that maps out what an ideal portal or information dashboard might look like if it were designed to answer critical questions the organization has identified. Once the wireframes are finalized, improvement teams can build a rapid working prototype of the visual analytic portal with real data that can answer real questions. Many companies waste significant resources trying to fix their data before understanding what they want to do with it and why it’s not delivering what they want. Executives, therefore, should agree at the outset not just on the business questions costing data needs to answer, but also on how they will be able to use cost and profitability insights to impact business value. BMC works with 86% of the Forbes Global 50 and customers and partners around the world to create their future.

Further, product team members cannot waste time seeking access to several spreadsheets and combing through the files for relevant data. Management, for example, may think about adopting greater digitalization into its internal manufacturing operations, particularly in product cost management. According to a McKinsey study, companies that digitally transform their functions can increase revenues by 23% and productivity by 26%.

Track and manage spend

At AFORE AFTER we strongly believe that if fashion brands were required to be transparent about their costs, people would awaken to the true cost of making clothes, and we’d see clothing being properly valued again, like it was by previous generations. And while the industry has no such requirement, yet again we’ve taken it upon ourselves to be transparent and allow you to see our cost breakdown. Organizations that invest in the software have the technological means to eliminate silos and deliver highly transparent cost data internally.

QvidianRFP response and proposal management software to win new business faster. IT Cost Transparency and show-back to the business can sometimes do more harm than good. By showing constituent costs in ever increasing detail, only opens IT up to more scrutiny – and more pain for the CIO – or even worse, the accountants taking sweeping cuts at “unnecessary” IT costs. When IT is seen as a cost function, then the focus of business and the finance department is to reduce the cost of IT.

People soon realize that the prices they have been paying do not match up with the costs, and they effectively force the entrenched companies to lower their prices. Look at how Little Caesars altered the rules of the game for pizza chains. By offering two pizzas at a price equal to that of one pizza elsewhere, the company successfully changed consumers’ beliefs about how much it really costs to make and sell pizzas. As a result, Domino’s and Pizza Hut were compelled to drastically lower their prices.

Pillar 6: Demonstrate the Business Value of IT

Because cost transparency speeds up the traditional process of financial analysis, decision-makers spend less time waiting for data. One of the biggest benefits of IT cost transparency is that it provides a complete view of where money is actually being spent throughout the department. This information gives IT leaders and stakeholders the ability to make accurate decisions regarding current needs as well as future innovations.

But providing this transparency of IT costs can have unintended consequences. While it may provide a great view of the cost per component, it can open up IT to massive, unwelcome scrutiny if its not understood. Cost transparency is the new reality, and companies won’t be able to avoid it. That doesn’t mean, however, that companies should automatically cut their prices to the bone.

This can include a dedicated, highly experienced cost engineering department that spearheads all cost modeling and product cost management endeavors. Many companies effectively analyze revenue along such dimensions as product, service, and customer. This data is often poorly managed or not attributed to the right products, customers, or business units, which may lead to sub-optimal decisions.

How does the IT product or service contribute to profitability by:

Consumers know that they can often find lower prices for books, CDs, computers, and airfares by clicking on-line rather than by standing in line. But they can do much more than compare the prices of an Internet store against those of a traditional retailer. They can log on to price-comparison sites like Pricescan.com and shopping agents like Bottomdollar.com to readily compare the prices and features of more than 10,000 products available on the Web. And every time a customer takes advantage of a cheaper price from an on-line discounter like Buy.com or Onsale.com, she unlearns her long-held rules of thumb about how price and cost are related for the product she just purchased. This keeps buyers from seeing the cost of individual items in the bundle, and focuses them on benefits of the whole package.

What Does IT Cost Transparency Mean?

Traditionally, businesses have scoped digital transformation programmes as if they were an “IT” programme, but this approach is almost bound to fail. The ill-fated NHS National Programme for IT is an example of what can wrong when organisations are too wedded to a technology rather than a business outcome. In a drive for interoperability and data normalisation, the NHS tried to impose a common IT solution across its Trusts, at the same time as encouraging and rewarding them for innovation and efficiency.

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The optimal way of counteracting cost transparency is through innovation. Consumers will reward makers of new and distinctive products that improve their lives. The efficiencies of Internet-based searches are especially clear in the business-to-business context of industrial procurement.

IT cost transparency

The ability to have true cost transparency is a relatively new capability that IT divisions are striving to achieve. As the awareness of the benefits that businesses are achieving through IT Financial Management increases, the discipline and concept of Total Cost of Ownership will become a fundamental requirement in supporting the strategic objectives of the business. Thanks to sites like Priceline.com and eBay, consumers have started to believe that the prices of even the best-known brands are open to negotiation. Priceline requires that buyers name the price they are willing to pay for airline tickets, home financing, cars, hotel rooms, and now even groceries. A buyer whose price is accepted may be motivated to bid even lower the next time. Sooner or later, she will come to know the price floor—the lowest price for which a company is willing to sell a product or service.