by Mark Chillingworth

CIOs should think about smart billing

Feb 01, 2010
IT Leadership

There is a lot of pressure on individuals at present to cut down the amount of energy they use around the home. One suggestion is that we all adopt smart meters which will monitor how much each electrical device is used and alert the bank of dad how much each iPod charger and Nintendo Wii is costing him. As a result every mother and father in the land suddenly knows what it’s like to be a CIO. Demand is increasing as more and more devices digitise the living experience of the residents, but electricity bills continue to increase as fossil fuel costs increase. Smart billing demonstrates the costs by breaking the bill up between lights and appliances for example. That same demand for more and more technology, yet lower and lower costs is one CIOs face day in day out. Olof Soderblom is founder of Compass management consultingand he and his colleagues have created some research that demonstrates that CIOs should consider a similar approach to budget management and board level discussions. In the Compass report Demand Management of IT Services, there is a table that breaks down IT costs into two views, one of you the CIO and another of the CFO. The CIO view breaks into a further two panels, unit costs for devices and volumes. Unit costs, of course, breaks down into mainframe, server, storage and network costs. The CFO view has just one focus – total cost. Unit costs for the CIO have been decreasing, good news for the CIO. But here’s the rub, volume for servers, storage et al have been increasing. The net result, and therefore the CFO’s view, an increase in total costs. Soderblom says this table is the typical of the performance and budget discussions that take place between CIOs, CFOs and CEOs and it’s what is holding back the CIO. His solution is where we began, the itemised bill that breaks IT costs down in much the same way as a smart meter will for your household. The example Compass present is an IT bill that features volume, unit cost and total cost on one axis and new business, payment volumes, premium processing and HR and finance system costs. Söderblom goes further showing how the business processes of a life insurance organisation divide by product development, sales and marketing, underwriting, policy process and claims and how these need applications for managing contracts, payments and then the IT resources to support these. What all of this does is allow the CIO to break away from discussing MIPs and technical jargon and turn IT into an approachable subject that’s business costs and benefits are defined in a language all understand. It also makes sense to a layman like I. It’s not just the tree hugger in me that likes the idea of an itemised electricity meter; I’m genuinely interested to see what devices use the most power and then be able to judge how they benefit my family. Equally it’s in every businesses interest to know the true costs and benefits of IT.  Finally, Soderblom will be joining the Opinion roster on CIO UK, so there’s a good chance we’ll be returning to this subject.