1. TECHNOLOGY BUSINESS MANAGEMENT
WHITE PAPER
Technology Business Management
Managing the Cost, Quality and Value of IT Services
APPTIO | 1
Innovation is Your Business
EXECUTIVE SUMMARY
IT is once again in the eye of the perfect storm.
Enterprise CIO’s must manage IT budgets of hundreds of
millions of dollars and reduce operating expense 10
percent to 15 percent year over year. While doing this,
they must provide higher quality service that “aligns with
the business” and manage a service delivery stream that
is being turned on its head. Just another day in IT.
Luckily for them, this is a path that manufacturing went
down in the 1980s, and that industry can provide some
valuable lessons to IT. One lesson on the road to Lean
operations is that IT needs the systems and processes in
place to run a strategic business function.
Technology Business Management (TBM) enables IT
leadership to manage the business of IT. TBM provides IT
organizations with the software and methodology to
manage the cost, quality and value of their IT Services.
TBM solutions enable IT leaders to have ongoing and
credible discussions on the cost and value of IT with
business unit leaders and executive management. It
provides IT operations managers the insight and data to
reduce the cost of operations while improving service
quality. And it enables IT Finance to provide a fair and
accurate Bill of IT back to the business and simplify the
budgeting, forecasting and planning processes. TBM
solutions ensure that decision makers on both sides of
the IT fence have transparency into the cost and quality
of IT in order to drive better decisions and alignment on
the allocation of IT resources to business priorities.
Apptio is the leading provider of TBM solutions. Their
suite of applications and SaaS delivery model provide IT
organizations an efficient and cost effective approach to
quickly adopt and realize the ongoing benefits of TBM.
LIFE IN THE PRESSURE COOKER
I“Why does IT cost so much?”
“I can get email services online cheaper than this!”
“How much do we spend on eMail each year, fully loaded?”
“We just bought 24TB of storage! Where did it all go? Who’s
using it and how are we going to fund this?”
“What is the ROI on our server virtualization project?”
“I know we can save money in application rationalization, but
I don’t have the data to prove it.”
“We have to start the budgeting process in August to get it
all in by the end of the year, and it’s still never right.”
These questions and comments (or similar) are heard in
nearly every large enterprise IT shop around the world. IT has
grown so fast so quickly, it hasn’t had the time to build in
proper financial management systems or 21st century
business processes. Other business functions have
developed processes and systems to help them manage
their business. Finance has Corporate Performance
Management systems, Sales has Customer Relationship
Management, and Manufacturing has Enterprise Resource
Planning. You can be sure that most modern manufacturing
managers can tell you the cost to produce their widgets
down to the penny, including all material, labor, facilities and
operations costs.
“More than half of all capital spending by businesses
worldwide goes to IT. Yet most non-technical leaders
remain skeptical about whether their IT investments
are paying off. They are frustrated with their IT
departments - and they respond by putting pressure
on IT costs.”
-Richard Hunter, George Westerman. The Real Business of
IT. How CIOs Create and Communicate Value. Boston, MA:
Harvard Business Press, 2009.

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Manageing the Cost, Quality and Value of IT Services
However, IT has to deal with additional complexity as well.
They have a factory floor—IT operations—that changes on a
weekly basis due to new systems, new architectures and
new projects being deployed. Most IT shops also have a
significant amount of infrastructure that is virtualized, blurring
the lines of cost allocation. And finally, The Cloud provides
completely new, or possibly many new, supply lines for IT
service delivery that IT has to manage, provide cost
transparency and manage the cost and quality of IT service
delivery.
And all the while, IT’s customers (the business units) are
screaming “it costs too much,” “where’s my money going?”,
“why can’t I have 24x7 support service?”, and “I need more!”
IT leaders can no longer afford to calculate the cost of IT
services on spreadsheets. Nor can they put off implementing
real cost allocation systems (chargeback or “showback”) to
provide business users the proper financial reporting on
where they are spending their IT budgets. And they shouldn’t
settle for last-century processes for budgeting, forecasting
and planning while their business counterparts all have
better tools to do their jobs.
TIME TO LOOK AT THING DIFFERENTLY
To effectively and accurately manage the technology
resources and new investments of enterprise IT, new
methods and solutions are required. IT must think about
running IT more like a business. They should focus on three
critical elements:
1. Customer value -- Providing high value products and
services to their customers (the right service at the right
price)
2. Operational excellence —Continuously driving down the
cost of operations while increasing service quality
3. Strategic relevance —Increase the value of IT’s role in the
business through tighter alignment with business
priorities and a more proactive role in driving company
initiatives
Many IT organizations are adopting ITIL best practices in
mapping out the services IT provides to the business units.
This is the first step in aligning to customer value. And
indeed, ITIL guidelines are written to help IT align around the
value they are providing to the business. If IT is a factory,
the services it provides are the economic unit of value for
the business. To align on customer value, IT needs to
understand the total cost it takes to deliver those services
on an annual basis, communicate the cost, consumption
and performance metrics to the business consumers, and
have regular discussions on how the business values those
services. By having an open discussion between the buyer
and seller of IT services with full transparency into the cost
and performance of those services, the true value of
services will be understood.
Every business organization must continually improve the
cost of operations. But most IT shops actually have pretty
poor data on the total annual cost to provide IT services.
They can’t identify key IT cost drivers nor where to find cost
inefficiencies. Nor do they have the specific tools to help
analyze ROI or provide justification for cost reduction
projects. Without this data, operation managers are ill
prepared to effectively improve cost efficiency.
Successful manufacturing organizations and supply chains
have rigorous processes and sophisticated tools to track
and analyze the cost of production or supply at every step
of the operation. Whole teams are organized around
squeezing pennies out of a manufacturing line. And this is
not a once a year or quarterly process, but a day-in and
day-out part of every manager’s responsibilities. The
difference between manufacturing and IT is that
manufacturing has the tools and processes in place for
every manager to individually make better decisions on
reducing the cost of operations. IT does not.
With respect to strategic alignment of IT to the business, it
is critical to the success of the CIO to show the value of IT
to the organization. In doing so, CIOs build credibility in their
ability to run a financially responsible organiza tion that is
“Unit cost per service is a far better metric. It
provides information that everyone can use and
assess across enterprises…Such measures also help
IT make the case that value-for-money performance
is improving.”
-Richard Hunter, George Westerman. The Real Business of
IT. How CIOs Create and Communicate Value. Boston, MA:
Harvard Business Press, 2009.

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Technology Business Management
Manageing the Cost, Quality and Value of IT Services
©2010 Apptio, Inc. All rights reserved.
aligned with the priorities of the business. But this is
something that is earned over time and as a response to
being successful in demonstrating customer value and
operational excellence. As any technology vendor to
enterprise IT organizations knows, you first have to prove
that you provide high quality product at prices better than
the competition, over and over again, before you gain the
trust, respect and credibility to become “strategic.” Beyond
that, the CIO must provide accurate and thorough financial
reporting. They need the ability to track business unit spend
on IT in order to manage a budget, plan accurately, track
common financial performance metrics like ROI, ROA,
CapEx vs. Opex blend, Fixed vs. Variable, and provide
proper transparency to all stakeholders. By running an
efficient organization, the CIO builds credibility and creates
the platform to drive more strategic initiatives.
For IT Operations, TBM provides insight into cost, quality
and utilization of IT services, at a granular level. This
empowers IT managers to make cost optimization decisions
and understand the impact of those decisions on the IT
services and users. Through greater insight, analysis, and
decision support tools, IT can reduce the cost of operations
by 10percent to 15 percent annually.
For IT Finance, TBM provides Service Costing and
Chargeback capabilities to drive better analysis of cost
drivers and financial reporting mechanisms. TBM also
delivers the Budgeting, Forecasting & Planning applications
to establish a system of record for budgeting and
forecasting, and to simplify the B&F processes for faster
cycle time and improved accuracy. Having a TBM system
of record automates the data acquisition and management
processes. This frees up IT Finance to provide more valuable
analysis, reporting, and recommendations.
For the business units —the owners of the IT budget--,
TBM provides transparency into IT spend. Finance leaders
can understand where their budget is going and influence
the future direction of their IT resources based on business
priorities.
For the CIO, TBM is a system to manage his or her business.
TBM provides the reporting and dashboards necessary to
manage the business performance of IT. It empowers the IT
team to drive cost optimization efforts at a grass roots level
and forces business leaders to become accountable for their
impact on IT spend. And it gives them the data to prove their
success and drive more important initiatives.
HOW THINGS WORK TODAY
In today’s world of enterprise IT, accurately understanding
financial aspects of IT is extremely challenging. Typically, a
sea of spreadsheets is used to figure out the TCO of IT. The
cost of assets—hardware and software—may be kept in IT
Asset Management systems, procurement or General Ledger
(GL) systems. Service Desk systems track labor resources in
operations, but rarely have cost associated with them.
Project and Portfolio Management tracks labor in
development and “Change the Business” (CTB) operations.
Any outsourcing charges usually come in a lump sum and do
not reflect their allocation to IT services as defined by the
“For some businesses, government, and non-profit
organizations, the perceived lack of measurable
value from IT investments results from the IT
service provider’s ineffective business practices.
Business Practices include the methods, processes,
procedures and rules followed by an organization to
achieve its objectives.”
-Robert Ryan, Tm-Raducha-Grace. The Business of IT. How
to Improve Service and Lower Costs.
This is the era of “Lean IT” and better business alignment
through a new paradigm in managing IT like a business. To
drive that transformation successfully, CIOs need the tools
and processes that businesses use to manage their cost
efficiency and financial performance.
A BETTER WAY TO RUN IT
This category of business management solutions for IT is
called Technology Business Management (TBM) software.
TBM is a promising new software category intended to
facilitate CIOs and IT Leaders in their understanding of
the cost, quality, and value of IT services. With TBM,
IT leverages accepted best practices of financial and
performance management systems used by other business
units and then applies those to the complex environment of
IT. This creates a better, consistent approach for IT business
management and the business overall.

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Manageing the Cost, Quality and Value of IT Services
business. And facilities, administration and other costs are
lost in a myriad of spreadsheets.
To consolidate these costs and allocate indirect costs to
their respective IT services is a manual and painstaking
process undertaken each budgeting cycle. This process
results in IT and Finance regularly spending a ridiculous
amount of time to inventory and track IT assets. The
outcome at the end of this process is at best a point-in-time
understanding of the direct costs of IT Services with limited
ability to drive improvement decisions, provide proper
financial transparency or indicate quality or value. At worst, it
is only vaguely accurate, drives incorrect business behavior
based on unfair allocation policies and is out of date as soon
as it is complete. This drives financial reporting that is not
trusted, not widely distributed, and incapable of providing
the analysis capabilities to actually drive improvement
decisions.
MAJOR INEFFICIENCIES
Today’s existing methodologies for managing IT financial
costs are inefficient, expensive, and incomplete. IT Leaders
simply do not possess the data and tools necessary to make
good cost-based decisions, therefore leaving a lot of
inefficiency within IT. When TCO projects are undertaken
(usually on a yearly or greater basis), the data collection and
modeling take weeks to complete. The spreadsheet-based
cost models are overly complex and accessible to only a few
people, making them impractical for wide-spread data
analytics. This hampers individuals’ ability to understand and
cost optimize in their own domain.
Likewise, during the budgeting, forecasting and planning
process, the opportunity cost of labor is high. It is reported
that IT and Finance organizations can typically expend up to
10% of available staff hours on budget projects during
forecasting periods. Jack Welch, former CEO of GE, was
quoted as saying “The budgeting process at most
companies has to be the most ineffective practice in
management.” Again, due to the reliance on spreadsheet-
based, non-collaborative and manual-intensive processes,
the budgeting, forecasting and variance reporting times are
the bane of IT finance. And yet, why is it that IT is one of the
last groups to use these arcane processes and not take
advantage of 21st century technology?
INTRODUCING TECHNOLOGY BUSINESS
MANAGEMENT
The Technology Business Management class of software
represents a new concept and opportunity in enterprise IT
Financial Management and planning. TBM brings parity for
CIOs with their counterparts in other business units such as
Finance, Manufacturing, and Sales by providing financial and
performance management capabilities. It leverages the well
known and widely accepted best practices of financial and
performance management, used regularly by other functions
in the organization, and now applies them to the complexity
found in IT environments.
TBM aims to help IT leaders manage the business of IT
through deep visibility into the cost of IT and improved
communication to the business units on the cost, quality and
value of IT. TBM allows for streamlined and more accurate
budgeting, forecasting and planning capabilities. TBM is
comprised of a complete suite of applications that provide
closed loop cost and performance management, cost
optimization, financial and performance reporting (i.e., IT
Cost Transparency), business demand-based budgeting and
forecasting, all within the construct of IT Services and the
ITIL framework.
IT SERVICES AS THE ECONOMIC UNTI OF IT VALUE
Central to the architecture of a TBM solution are the set of IT
Services delivered to the business. Organizing around IT
services provides a common language on which to align IT
with the Business and create a market for IT products. This
establishes a framework for IT to operate like a ‘business’
and manage the true costs and value of the services
delivered., IT can then make supply decisions based on
demand and weigh market alternatives (cloud, outsourcing)
on equal terms. In addition, IT can establish a credible
baseline unit cost of each service and acquire visibility into
“Techniques in this category (Reduce Resource
Costs) will usually pay back within a year, and have
the potential to reduce the IT budget by 10% to 20%
when combined.”
-A Checklist for Cost Optimization. Michael Smith, Richard
Hunter, Barbara Gomolski. Boston, MA: Gartner, May 2009.

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Technology Business Management
Manageing the Cost, Quality and Value of IT Services
the discrete cost drivers of each service. By tracking the cost
per business service, IT leaders can communicate with
business leaders in a language they understand, manage
demand for IT Services, and better align with business
priorities.
TBM gives the CIO the cost and quality data and system of
record to drive cost efficiency within the IT organization and
the reporting to drive alignment across business units. The
CIO now possesses the data and business case to drive the
strategic initiatives necessary to take the business where it
needs to go.
THE BENEFITS OF TECHNOLOGY BUSINESS
MANAGEMENT
Organizations realize benefits from implementing a TBM
solution in three main areas: IT Cost Transparency,
Communicating the Cost and Value of IT and Improved
Budgeting, Forecasting and Planning Processes.
ACHIEVE IT SERVICE COST TRANSPARENCY
IT Service Cost Transparency provides deep visibility into the
true costs and cost drivers of IT services. A clear
understanding of the unit cost drivers along with powerful data
analytics and “What If” scenario analysis enables IT managers
to root out cost inefficiencies and make cost optimization a
continuous and organization-wide effort. Cost data can be
input into the TBM system directly or via spreadsheets. For
true activity-based costing, TBM systems can be integrated
with existing IT management systems (Asset Management,
Service Desk, PPM, etc.). As a result, organizations will find it
possible to reduce the cost of IT operations by 10 percent to
15 percent year over year.
Fair and accurate service costing also becomes the basis for
proper chargeback policies. As most organizations move to a
shared service model to gain economies of scale, it becomes
increasingly important to understand the IT Service TCO in
order to charge the business units for their fair share of IT
resources. When IT departments leverage virtualization or
Cloud services, the ability to track service TCO becomes more
complex. But chargeback will only work if the allocation
policies are fair and accurate, thus driving the need for proper,
and preferably activity-based, IT service costing systems.
COMMUNICATING THE COST AND VALUE OF IT
There is likely not a CIO in the world today that hasn’t heard
“Why does IT cost so much? Where is my money going? I’m
sure I can get services from the Cloud cheaper!” To the
contrary, most enterprise IT shops can provide most services
at a cheaper rate and higher quality than outsiders due to
scale, lower overhead and no profit margin. However,
without proper IT Cost Transparency and financial reporting
systems, CIOs would never be able to show where the
money is going, how much it truly costs, and how they are
better than the alternative.
In the new era of TBM, where IT is run like a business with
transparency, IT needs to provide good reporting on the cost
and value of IT services. IT leaders cannot become strategic
partners with the business if the business doesn’t trust that
IT is handling their costs properly.
But beyond building trust and proving proper cost
management, TBM makes a business unit accountable for
managing the demand of IT Services and fulfilling their roll in
reducing cost. IT now has a framework for reporting the cost,
consumption and value of IT services, enabling the business
units to make decisions based on the consumption and
value of IT services.
“The only way to improve ROI estimates in new
projects is to increase visibility into the costs
associated with the existing approach, because if
you can’t measure what you are paying today, you
can’t estimate what you’ll save tomorrow. Therefore,
IT organizations must start to build cost models for
their existing infrastructure, which isn’t as easy it
sounds.”
-Counting the Cost of the Elephant in the Data Center.
Consider a “Bill of IT Services,” just like one might get from a
wireless phone company, that includes the various services
one subscribes to (voice, data, text, etc.), how much of those
services one consumes (minutes, kilobytes, etc.), the unit
rate for those services and the total bill. The subscriber then
is responsible for how much he or she spends, which
services are most important to him, and whether they want
to subscribe to more or less services. Through TBM it is
possible to create a Bill of IT for each business unit
consuming IT resources and create a process for managing

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the demand for IT. The Bill of IT also becomes the basis for
Chargeback policies—whether with direct bill back, or by
setting unit prices based on clear understanding of the IT
Service TCO.
BUDGETING, FORCASTING AND PLANNING
Improved budgeting processes based on the TBM solutions
results in a more collaborative and efficient experience for
the organization. Forecasting, budgeting, and planning can
now become joint exercises between IT and the Business
Unit teams. Together, they can leverage a single system of
record designed for IT, standardize workflow processes and
create a collaborative and streamlined process. This
eliminates the inefficiencies of today’s sea of static
spreadsheets and helps reduce the time and labor in the
overall budgeting process. Critically important to the TBM
process, and IT’s ability to communicate with the business,
is a budgeting and planning process built around IT Services.
Instead of the typical “General Ledger” line item view of the
past, TBM solutions transform the GL view into a services
view to align with Service TCO, Bill of IT and the language of
the business.
When IT leaders know with great certainty the annual cost to
deploy and maintain any IT service, they eliminate a great
funding challenge—the classic problem that IT never
receives adequate funding to maintain new IT projects or
services. With clarity on the TCO of services, IT can push
funding back to the business by saying “this is how much
this is going to cost IT to run for the next 3 years. I need
these dollars in the IT budget before I can support this
project.”
But more accurate planning and budget control is a huge
benefit to the business. With service costs being tracked
automatically (in real-time), IT finance can run variance
reports on an as needed basis, obtain “alerts” on budget
overruns, and determine the cause of unexpected cost
trends directly in the TBM system. The ability to provide
accurate rolling three-year forecasts enables the business to
operate much more efficiently. The CIO can then give the
CFO a plan to manage the fixed vs. variable cost, transfer
Keep-the-lights-on (KTLO) operational expense to Change
the Business (CTB) projects, and optimize Return on Assets
(ROA). This will earn the CIO many gold stars and the
latitude to pursue more strategic initiatives.
APPTIO’S TECHNOLOGY BUSINESS MANAGEMENT
SUITE
In reviewing solutions available today in the Technology
Business Management market, Seattle based Apptio is the
clear leader. Apptio’s modular and scalable enterprise
Software as a Service (SaaS) solution is successfully being
used by many Fortune 500 firms today.
Apptio’s suite of applications lends added flexibility for IT
organizations as they build a fully mature budgeting and
financial management lifecycle process. Apptio’s best-of-
breed portfolio approach eliminates the potential for the ‘boil
the ocean’ project mentality. Instead, specific Apptio
modules can be incrementally turned on to help customers
recognize quicker time to value on software investments
while establishing a modular, extensible TBM solution
architecture for their project.
Apptio’s portfolio is comprised of five separate SaaS-based
applications that leverage a common modeling, analytics
and data management platform.
IT SERVICE COSTING
This module enables the IT and Finance teams to work
together to appropriately model their fully-loaded costs of IT
services being delivered. It creates a single system of record
that helps automate the service costing processes, manage
and track any changes made over time, and contribute
validated data to cost allocation or Chargeback policies that
may be in effect for the organization. Apptio’s visual
modeling and allocation policies are easy to use and flexible
enough to get started fast with a simple services model and
mature into an activity based costing methodology. The
analytics available within Service Costing assist IT in
understanding cost drivers, identifying areas for potential
cost reductions, and offering “What If“ analysis to quantify
the financial impact of IT investments.
BILL OF IT
The Bill of IT module enables IT organizations to distribute
reports to the organization’s business units and other
significant departments on the financial costs of the IT
services they are consuming. The reports are similar in
concept to a cell phone statement. Reports detail the IT
services being consumed and associated costs. This module

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Technology Business Management
Manageing the Cost, Quality and Value of IT Services
helps articulate the actual value of IT services in a language
that the business units appreciate. It encourages ongoing
conversations between the business units and IT regarding
future demands for IT services and prioritization of
resources.
BENCHMARKING
The Benchmarking module offers a cost efficient and
long-term methodology to IT cost benchmarking that
supports Apptio’s concept of “Continual Cost Optimization.”
Apptio provides industry cost and performance
measurements side-by-side with the actual costs and
metrics from the customer’s model. Benchmark metrics are
collected from over 3,000 companies across more than 20
major industrial segments by an independent benchmarking
agency. Metrics are updated on a regular basis. The data
includes high level financial benchmarks, granular
infrastructure and support unit cost metrics, and application
service unit costs.
SERVICE QUALITY AND UTILIZATION
The Service Quality and Utilization module measures and
tracks metrics that map the value and usage of delivered IT
services. Calculating and reporting on these service levels
provides a measurement of the value of a service back to the
business units. These service levels can then also be used to
tier the pricing of otherwise similar services. Operational
metrics around usage of IT services provides insight into
capacity and helps identify underutilized services that are
targets for IT consolidation or virtualization. Actual usage
data can then drive true consumption-based chargeback
policies (i.e., activity based costing).
BUDGETING AND FORECASTING
The Budgeting and Forecasting module bridges the gap
between the corporation’s general ledger and the services
view IT requires to operate their business. Apptio’s
application streamlines planning processes and increases
productivity within the organization. Automated data
management can eliminate juggling of spreadsheets and
role-based access and versioning control enable group
collaboration.
NEVER A BETTER TIME TO GET STARTED
Technology Business Management is ushering in a new way
of running IT. TBM improves cost efficiency, tightens
alignment with business priorities, and increases the
productivity of the IT organization. TBM enables IT leaders to
gain control of and properly manage cost, quality, and value
of their IT Services. Through better visibility and analysis of
the costs of IT, the IT organization will make better decisions
to reduce costs and increase efficiency. With proper
reporting of the cost and value of IT services to the business
units, IT will drive a better working relationship aligned on
business priorities and properly managing the demand for IT
services. With TBM’s closed loop financial management
process, IT will be able to manage the financial performance
of the department more closely and with greater agility. IT
can then allocate more resources to higher priority, strategic
projects.
Apptio is a leader in delivering TBM solutions to enterprises.
Their best-of-breed suite of applications and SaaS delivery
model provide IT organizations with an efficient and cost
effective approach to quickly adopt and realize the ongoing
benefits of TBM. Global 2000 IT organizations have adopted
Apptio to provide credible ongoing budgeting, financial
reporting, forecasting, and strategic planning on the costs,
utilization, and value of IT services.
Just as companies in the 1980s improved operations by
adopting Lean practices and resource planning, IT
organizations adopting TBM today will become more cost
efficient and agile. The strategic advantage will make them
market leaders for decades to come. For more information,
please visit http://www.apptio.com.

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ABOUT APPTIO
Apptio is the leading provider of SaaS-based Technology
Business Management (TBM) solutions. Apptio enables IT
leaders to manage the cost, quality and value of IT Services
by providing deep visibility into the total cost of IT services,
communicating the value of IT to the business through an
interactive “Bill of IT,” and strategically aligning the planning,
budgeting and forecasting processes. Using Apptio, IT
leaders can drive cost reduction decisions, manage the
utilization and performance of IT services, and more
effectively run the business of IT. Apptio’s TBM solutions
play a critical role in helping companies understand and
drive chargeback, virtualization, cloud and other key
technology initiatives. Organizations such as Blue Cross Blue
Shield of Kansas, BNP Paribas, Cisco, EMD Chemical and
Starbucks use Apptio to reduce cost and align IT with
business priorities. For more information on Apptio, please
visit www.apptio.com or the Lean IT blog at apptio.com/
blog.
Corporate Headquarters USA (+1) 432 453 5861 Apptio Europe +44 (0) 207 608 5176 www.apptio.com