Survey Reveals that Majority of CIOs Have Minimal Insight into IT Service Costs and No Way to Communicate Costs to the Business
Seattle, Wash. – July 26, 2010 – Apptio, the leading provider of on-demand Technology Business Management (TBM) solutions, today announced the findings of a survey conducted in partnership with the Worldwide Executive Council (WEC), a research firm that facilitates dialogue between executives and Wall Street investors. The survey titled, “Market Intelligence Report: CIO Survey on Total Cost of Ownership and Return on Investment for IT Services,” provides insight into the capabilities and processes used by CIOs to calculate, manage and communicate the cost of IT services. The WEC interviewed CIOs at firms with at least $250 million in annual revenues, with most having over $1 billion in annual revenues.
Results of the survey indicate an alarming disparity between the ability to track and understand how much it costs to deliver IT services to the business, and the value that information provides. Today, only 12 percent of IT costs are billed back based on modern accounting principles such as activity-based costing or consumption-based allocation, and 56% of companies have no regular financial reporting process. Not surprisingly, this lack of transparency manifests itself in the way CIOs feel about reporting back to the CEO on how their department is investing in IT. Nearly 62 percent of respondents cited being “not-at-all confident” or only “somewhat confident” when asked if their IT departments could provide an accurate answer within 24 hours on specific, annual spending levels for IT services such as email, ERP, and desktop systems. As a result, the majority of CIOs (86 percent) believe they are only ‘somewhat’ or ‘fairly well’ equipped to make accurate cost-based or ROI-based decisions.
During an era when many of the world’s largest organizations are spending billions of dollars on information technology, IT cost management processes and capabilities are significantly behind those of manufacturing and supply chain functions. While many leading manufacturing companies have rigorous systems for tracking the cost of each good or service produced, understanding which services are profitable, and itemizing spending per product line, there is a significant gap between IT’s desire to offer greater transparency and the capabilities required to achieve this.
Other key survey findings include:
- When asked how well their CEO and line of business managers understand the cost per IT service, 72 percent of CIOs stated that there is only ‘minimal’ or ‘some’ knowledge of the cost per IT service within their senior management ranks.
- 56 percent of CIOs have no regular communication processes regarding IT service cost and no transparency on the breakdown of their budgets based on IT services.
- Only 12 percent of CIOs reported using a specific solution to track and allocate IT costs.
- Of those organizations that update their TCO for IT services calculations, only 12 percent do so on a monthly basis, with close to 50 percent conducting annual updates. None of the CIOs surveyed are conducting updates more than once per month.
- 78 percent believe it would be valuable to track the annual total cost to deliver and maintain each IT service and 44 percent believe it would be ‘extremely’ or ‘very’ valuable to do so.
- 74 percent of CIOs stated that showing line of business managers the cost and usage (frequency or volume of use) of each IT service as a way of discussing the demand for those services would be valuable. 54 percent believe it would be ‘extremely’ or ‘very’ valuable.
“This survey validates what we’ve known all along, alignment between IT and the business is seriously lacking,” said Sunny Gupta, co-founder, president and CEO at Apptio. “There is a huge gap between a company’s ability to measure and report on the cost of IT and the value those solutions provide. Apptio fills that gap. IT organizations that provide transparency into IT costs gain 10-15 percent in cost efficiency and are better aligned to the priorities of the business.”
The World Executive Council (WEC) interviewed 50 US CIOs from firms representing a broad range of vertical industries, including financial services, communications, business services, retail, manufacturing, healthcare, technology, media, engineering/construction, aerospace, oil and gas, wholesale/distribution, utilities, government, and entertainment.
Apptio is the leading independent provider of on-demand Technology Business Management (TBM) solutions for managing the business of IT. 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. Apptio’s TBM solutions play a critical role in helping companies understand and drive chargeback, virtualization, cloud and other key technology initiatives. Global enterprise customers such as Bank of America, Boeing, JPMorgan Chase, Microsoft, St. Luke’s Health System, and Swiss Re rely on Apptio® products and services to reduce costs and align IT with business priorities. For more information, visit the Apptio website or the Apptio blog.
Barokas PR for Apptio