I recently spent some time on the phone with Jeff Day, who serves as Director of Marketing at Apptio, a Pacific Northwest-based firm whose focus is on providing companies with insight into exactly what, where, and how they're spending in relation to IT. While most companies have at least some insight into sales, manufacturing, finance, and HR spending, many actually neglect the breakdown when it comes to IT. And current spend visibility solutions are falling short of providing this information, especially at the level required to better manage vendors and internal demand and usage.
Apptio actually recently published the findings of a survey they conducted with Worldwide Executive Council titled "Market Intelligence Report: CIO Survey on Total Cost of Ownership and Return on Investment for IT Services." According to the report, the "Results of the survey indicate an alarming disparity between dollars spent on IT, and how those costs should be allocated to the business." Consider that "Today, only 12 percent of IT costs are billed back based on modern accounting principles such as activity-based costing or consumption-based allocation," according to the report. Yet, according to Jeff, 78% want to be able to track the costs of IT and gain insight into that spend to see where savings can be made.
IT spend is as -- or more -- complex as any other: it has many levels above just purchasing base hardware, and it requires just as much attention as other spend areas. More often that not, companies seeking insight into their IT spend will hire analysts to come in once a year to make elaborate spreadsheets that are outdated as soon as they're printed and presented. Or they'll use spend visibility tools to get a macro-view into how much their spending with a single provider. Within this context, Apptio saw the need for a real-time spend management system for IT, and they've created one -- in "The Cloud."
Apptio's approach is focused on helping procurement and IT organizations get down to the line-item details around their IT spending. Within their SaaS system, all of the analytics and reporting are built-in, real-time, and stored in memory. The level of detail goes significantly deeper than that which most organizations track in existing spend visibility tools as well as offline, manual spreadsheets. By getting into what's actually used and inventoried -- and by whom -- versus looking just at invoice or A/P level information, IT spend becomes a new ballgame.
By offering the ability to take every aspect of spend into account, from the macro-level cost of staff members down to the Ethernet cord that plugs a computer into the wall, Apptio has not only developed a walk-crawl-run approach that examines spend both internally and externally. They've also offered the ability to then tailor planning, budgeting, and forecasting processes to each individual company and user needs. For example: does a company need 24-hour e-mail support, or just during business hours?
In a world where "aligning IT with business" is the buzz phrase of the hour, our cursory look suggests Apptio is embracing the fact that if you're able to accurately tell a company how much they''e actually spending on IT, then they'll be able to -- and more importantly, want to -- align their costs and look for savings. The appeal of flexible category-focused spend visibility solutions such as this is that they can appeal to businesses at all levels of procurement and IT sophistication, whether they're just beginning to examine IT spend or have been doing so for quite some time and are seeking to optimize usage, demand and vendor management for better results.
Even though Apptio's positioning as a cloud solution potentially confuses the broader business benefit of their capabilities (who cares about whether it is SaaS, cloud or what have you), it potentially breaks down barriers to procurement organizations needing to wait for technology resources to gain a handle on the level of detail required to create better overall IT and vendor spend management. Stay tuned for additional coverage of this subject as we tackle some of the broader challenges of addressing IT spend as well as looking at multiple providers in the market who can help with this issue.
Sheena Moore (with Jason Busch)